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Young, Single, and Childless? Why You Still Need Life Insurance

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So, you’re officially embarking on the next chapter of your life. You’re fresh out of college, just started a new job, and are on the hunt for your first home. Congratulations, you’ve officially entered adulthood. Your twenties are a special time and you should enjoy every moment to its fullest. But, that doesn’t mean you shouldn’t make some “adult decisions” during this period. And purchasing life insurance should be one of those decisions.

Traditionally, people don’t start thinking about life insurance until they get married or welcome a baby into the world. What could you possibly need life insurance for before that? Who would you be protecting before that? Well, there are still a number of great reasons to consider purchasing life insurance above and beyond what your employer offers. Let’s look at a few reasons why your twenties or early thirties is a smart time to purchase.

Younger = Lower Premiums

The insurance company’s revenue is determined by the amount of premiums collected, minus the death benefits paid out for that specific risk group. Another words, every year that the insureds don’t die, their revenue goes up. The life insurance underwriter’s job is to identify the likelihood of an early payout for each applicant and the premium is adjusted accordingly. The risk of them paying out when you’re young is significantly lower. As a rule, that decreased risk is transferred to you through lower premiums.

Good Health = Lower Premiums

The other primary factor in determining your premium is your health. While it’s possible for any one of us to die at any time, you’re statistically less likely to meet an early death if you’re young and healthy. As each birthday passes, the risk of you developing a health condition rises. Once you reach your 30s, the chance of you developing a chronic condition like heart disease or high cholesterol rises considerably. So, for most consumers, the ideal time to purchase life insurance is in your twenties. Your health, coupled with your age, equates to the best possible premium.

Insurability Later in Life

A permanent life policy is recommended over a term policy, as this is a great opportunity to build a little nest egg through the cash value on your policy. Depending upon your financial situation, however, this might not be an affordable option for you. If you decide a term policy is best for your budget, don’t fret; you’re setting yourself up for a later date.

Most term life insurance policies include a term conversion rider standard on every policy. This rider allows you to convert your term policy into a permanent life policy without submitting to another medical exam. While your converted policy premium will reflect your age and overall health, this rider comes in handy for people who have developed medical conditions since the original policy’s inception. It makes the entire process smoother and more affordable.

While this rider comes standard on most policies, some companies require the benefit to be requested on the application. Be sure to check with your agent to ensure you don’t miss out on this valuable opportunity.

Living Benefits

Most people equate life insurance to death. And rightfully so. That is it’s intended purpose, right? While this is true, many people use their life insurance for living benefits as well.

Your whole life policy has the added benefit of accumulating cash value. This builds slowly at first, as there are policy set-up fees that must be paid down at its initially. But as time goes on, you’ll start to see the cash value really grow. This is your money that can be borrowed against at any time, for any reason. Many insureds use this money to help pay off student loans, offset the costs of their wedding, or even supplement their income when they get to retirement age.

When purchasing your policy, be sure to speak with your life insurance agent about the Acceleration of Death Benefit Rider. Should you become terminally ill, this rider allows you to collect on your death benefit early. This can help ease the pain of paying for medical bills or provide you with the funds to check some things off your bucket list before your death. It’s a living benefit none of us envision ourselves ever needing, but are grateful for if and when the time comes.

Your twenties are a time to celebrate. You’re officially out on your own, enjoying the wonderful gifts that life has to offer. It’s also a time to start considering financial priorities and setting yourself up for long-term success. The best time to purchase life insurance is when you’re young and healthy. If you invest in your future now, it’s one less thing you have to think about later, when you’re celebrating the growth of your family or a new home purchase. So don’t delay; speak with an insurance professional about your options today.

The Downside to Purchasing Life Insurance Through Your Employer

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If you’ve started a new job recently, or it’s open enrollment season at the office, you’re probably facing some tough decisions regarding your family’s insurance. Many organizations now include a life insurance policy as part of their employment package. The cost is minimal, or often free, making it appear they’re offering you a really great benefit.

If your employer provides a life insurance policy to you for free, take it. They’ve made the process so easy – all you have to do is sign up. No medical exam and no long, drawn out medical forms to fill out. You often even have the option of having your group life insurance premium drawn straight from your paycheck, so you never really even miss the money.

Studies indicate this is the most popular life insurance investment amongst U.S. citizens, with group insurance plans providing $8.2 trillion of protection in 2014 alone. With more than 41% of life insurance policies purchased through a group life plan, it’s obvious that many consumers have weighed their options and feel that this is the best solution. While we agree you should take the policy, it’s important that you understand the pros and cons going into it, so your family has the financial stability necessary should the unthinkable happen. Let’s begin with the pros.

Pros of Buying Life Insurance Through Your Employer

There are 3 advantages to purchasing life insurance through your employer: price, acceptance, and convenience. To better understand the first, let’s first examine the concept behind insurance.

Insurance is defined as a pooling of risks. Individuals who aren’t in a financial position to take on a specific risk, transfer said risk to the insurance company. In this case, we’re referring to life insurance and the potential death benefit payout should a catastrophe occur.

For group life insurance policies, the pool of risk focuses on the insured workforce. The life insurance company evaluates the overall health of each individual and determines an average rate based on their findings. So, if you’re a non-smoker who is in great health, you’ll still be paying the same premium as your colleague who is the same age, with multiple health issues. If you’re offered a policy through your employer and you have serious health concerns, you may qualify for a much better rate through your group plan than you would on an individual policy. This is something that should be examined on a case-by-case basis, as everyone’s situation is unique.

Speaking of health issues, acceptance is the second pro to purchasing a group life insurance policy. You will likely be required to fill out a detailed questionnaire, but no medical exam is required for group plans. So, not only will your premium be lower, but eligibility is a breeze, making this the easiest and most affordable option for those with any kind of medical concerns.

Even for the simplest of insurance policies, investing in life insurance is a process. It takes time to shop around, determine the coverage you need, and understand the different options available to you. Purchasing a group policy removes all the guesswork. You may have some options regarding coverage amount but, other than that, the decisions have already been made for you. If you’re looking for a quick and convenient policy, purchasing one through your employer is probably your best option. Just be sure and understand the limitations so your family isn’t left without the protection they need.

Cons of Buying Life Insurance Through Your Employer

While the convenience of buying life insurance from your employer may seem tempting, there are some additional factors you should consider before making your final decision. Let’s examine the drawbacks to purchasing a group life insurance policy.

A recent study conducted by the U.S. Bureau of Labor Statistics indicates that the average number of years workers stay with their current employer is 4.2 years; and this number is expected to decrease in the coming years. It’s important to take this into consideration when purchasing a group policy, as your policy will cancel once you’ve moved on to the next stage in your career. If you intend for this to be your primary source of life insurance support, you run the risk of being uninsured if you retire, are let go, or change companies.

As mentioned earlier, if you have any serious medical concerns, a group life insurance policy might be your cheapest and safest option. If you’re a nonsmoker and are in good health, however, this is generally not the case. Before accepting the group life plan, speak with your insurance agent to review your options – they can likely help you save a considerable amount of money purchasing a policy outside the workplace.

Most group life insurance policies renew every 1 to 5 years. At the time of expiration, the insurance company will reexamine the risk pool and adjust rates accordingly. If you’re in the market for a more consistent policy premium, you’ll want to consider purchasing your own individual term policy, where the premiums are level and the policy term is longer.

It is typically recommended that consumers purchase policy coverage equal to 5 to 10 times their current annual income. Most group insurance plans limit employee coverage amounts to between 2 and 3 times their annual salary, leaving individuals underinsured.

While opting for group coverage sounds like a great benefit on the surface (and it is for many), it’s important for you to consider both the pros and cons before making your final decision. Speak with a qualified insurance agent to help you weigh your options. Make sure you understand the policy’s limitations and what the financial impact will be on your family upon your death. If you’re going to spend the time and money protecting your family, you might as well make sure your hard-earned dollars go as far as possible.

Hidden Value: 8 Term Life Insurance Riders You Should Consider

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So, you’ve done your homework regarding how much life insurance you need and what type of policy best fits into your current financial situation. Congratulations! You’ve tackled the most challenging part of the decision-making process. There are, however, a few more things you need to decide on – does the policy you’re leaning towards offer life insurance policy riders and, if so, which ones fit into your unique position?

If you’ve been completing online quotes or discussing your options with an agent, you’ve probably heard the term “rider” before. Before we get started discussing your options, let’s begin with a brief introduction into life insurance riders and their benefits.

What is an Insurance Rider?

A rider is an add-on provision to your basic life insurance policy which provides additional benefits for an additional premium. An amendment to the original contract, if you will. It allows you to customize your life insurance policy in order to prepare for specific, unforeseen circumstances, as defined within the rider.

The options available to you will vary by insurance company and policy, as will the parameters regarding how each one works. The add-on premium price will also fluctuate, depending upon factors such as your age, health, and policy type. While we cannot list every available rider, we’ve compiled a list of those we feel are the most useful. When discussing life insurance options with your agent, be sure to include these in your discussion.

1) Disability Income Rider

This rider’s benefits are exactly as they sound – if you were to become disabled and unable to work, the policy would pay you a monthly stipend, as defined by the parameters of your policy. The pay-out specifics vary from policy to policy: some will only pay out if you’re disabled from an accident, while others pay out for either an accident or sickness. Some policies provide income for the length of the disability, while others limit your benefits to a defined length of time.

While many consumers choose to purchase disability insurance through their employer, the policy ends, once employment has terminated. By purchasing the disability income rider, you have peace of mind of knowing exactly when the offer expires, as it runs congruently with your life insurance policy.

2) Waiver of Premium Rider

Even if you choose not to purchase the disability income rider, you might want to consider the waiver of premium rider, which ensures that, should you become disabled, the parameters of your policy will remain the same, even if you cannot pay your premium.

If this rider is important to you, be sure to compare the fine print on each policy you’re considering, as every life insurance company defines disability a little differently. Your insurance agent can help you read between the lines to ensure you invest in a policy that meets your needs.

3) Term Conversion Rider

This rider comes standard on most life insurance policies. It allows you to convert your term policy into a permanent life policy without submitting to another medical exam. If the policy you’re considering does not include this rider automatically, inquire further with your agent as to why and how much it costs to add it on.

Most of us would still find value in a life policy for years after the term limit has expired. This rider will make the entire process easier and more affordable.

4) Acceleration of Death Benefit Rider

Imagine you’ve been diagnosed with cancer and the doctors have given you 6 months to live. A grim thought, but a daily reality for many. During that time, you’ll likely incur thousands of dollars in medical expenses. With this life insurance rider, you can start receiving your death benefit pay-out now, to assist with those medical bills.

Some life insurance policies come with this rider built-in, but if yours doesn’t, we suggest adding it to your policy. A terminal illness can become expensive quickly; this is a great way to ensure your family isn’t stifled with those bills long after your passing.

5) Long-term Care Rider

A long-term care rider is often compared to a long-term care insurance policy. It takes money out of your death benefit to pay for your long-term care expenses, such as a nursing home or a private nurse.

Some insurance companies lump this coverage in with the accelerated death benefit rider, so you will want to inquire further, when discussing these benefits with your agent, to ensure you receive the coverage you need.

6) Critical Illness Rider

With this rider, your insurer will pay you a lump sum should you be diagnosed with an illness or condition, such as cancer, stroke, kidney failure, or heart attack. The list varies from policy to policy, but the benefit remains the same – the rider provides your family with the money needed during the course of your illness’ treatment.

7) Guaranteed Insurability

Let’s face it; life can change in an instant. Because we never know how our health could change, this rider is a great addition to any life insurance policy. It allows for you to purchase additional coverage at a later date, without submitting to another medical exam or evidence about your insurability. The option to purchase more coverage typically comes up at different intervals, such as every four years, or at certain ages. When determining the additional cost, the insurance company considers your age and not your health.

8) Child Protection Rider

While the death of a child is something none of us ever want to think about, it is a possibility that should be considered. Most of the time, losing a child does not result in a loss of income, but there are other factors to think about. How will you pay for final expenses? How will you be able to handle the emotional tragedy? Will you be able to go back to work right away or will you need to take time off? If the child’s death is due to illness, how will you pay for the medical bills that have accumulated?

This term life insurance rider offers coverage for those final expenses, should the unthinkable happen. You can purchase coverage in increments, typically of $1,000, and the premiums are typically reasonable in price.

Every family’s situation is unique, so there is no one-size-fits-all answer as to which riders should be included in your term policy. When shopping for the policy that best fits your short and long-term needs, it’s best to speak with an experienced and knowledgable life insurance agent. They can help you make an informed decision and identify the right policy package, at the right price. Shopping for insurance is never fun, but your agent should help take some of the guesswork out of the process.