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Life - 101

Nobody really wants to think about life insurance. However, if someone depends on you financially, it's a topic you can't avoid. Getting life insurance doesn't have to be difficult. Below you will find answers to some common questions about life insurance so that you can make informed decisions about protecting your loved ones financially. 

Why is life insurance worth it?

There are many answers to this but the most important reason is ensuring peace of mind and financial security for your loved ones. 

If someone depends on your income, they would likely struggle if you were to pass away. That is where life insurance comes in. There are different types of life insurance policies, but the basics are they all pay cash to your loved ones when you die. Life insurance is a great way to make sure your loved ones will be in a good financial place if you and your income were no longer in the picture.

What does life insurance cover?

Life Insurance covers almost any type of living expense. Some common expenses include: 

Immediate Expenses: Funeral and burial costs, Uncovered medical expenses, Mortgage or rent, Car loans, Credit Card debt, taxes, Estate settlement costs

 

Ongoing Expenses: Food, Housing, Utilities, Transportation, Health car and insurance, Continue a family business
 

Future Expenses: College costs, Retirement

Do I need life insurance?

If someone depends on you financially, you are most likely someone who needs life insurance.

 

Life insurance provides cash to your family or loved ones after your death. This cash, known as the death benefit, replaces your income and the many non-paid ways you support your household. Your family can use this cash to pay for expenses like funeral costs, a mortgage, college tuition and more.

What is the average life insurance cost?

The price of life insurance depends on four main factors: your age, your health, the type of policy and how much coverage you buy. In general, you’ll pay less the younger and healthier you are. You also typically pay less for a term life policy than a permanent life policy.

That said, don’t let your age or health status discourage you from considering life insurance. There are policies available for people of any age as well as those with high blood pressure, diabetes and a smoking habit. (Just know that you’ll generally pay more for your policy if you’re in poor health and/or smoke.)

How much life insurance do I need?

The amount of life insurance to buy depends on who you want to protect financially and for how long. For a general idea, consider the following:

1. Add up the immediate, ongoing and future expenses your family or loved ones would incur if you were to pass away.

That could mean everything from funeral costs to rent or mortgage to college tuition.

2. Add up the financial resources your loved ones already have.

That could mean a spouse’s income and life insurance that’s already in place.

3. Subtract your financial resources from the anticipated expenses.

The difference between the two numbers is the approximate life insurance to buy.

As an easy rule of thumb, experts recommend having life insurance that equals between 10 to 15 times your gross income. But many people need even more than that. To get a more accurate idea of how much life insurance to buy, check out our calculator.

What is the process for getting life insurance?

When you apply for life insurance, your life insurance application goes through a process called underwriting. Underwriting is when your insurance risk is evaluated. Approval and costs are based on your risk class.

There are two types of underwriting: traditional underwriting and simplified underwriting.

 

Traditional underwriting usually requires a short medical exam. It can take several weeks to be approved when the life insurance application undergoes traditional underwriting.

Simplified underwriting is usually a quick online life insurance application that does not require a medical exam. You can often receive instantaneous life insurance coverage. Just be aware that the coverage amount may be limited as well as more expensive with simplified underwriting.

How does life insurance pay out?

In most cases, the life insurance pay out is a lump sum paid to beneficiaries when the policyholder dies. To receive the life insurance pay out, you will have to file a claim with the insurer. They will need a certified copy of the death certificate in order to process the claim.

It can vary on how long it takes to get a life insurance check. Most insurers take between 30 and 60 days after receiving the claim. However, there can be delays. This is especially true if the policyholder dies within two years of taking out the policy or if there are unusual circumstances. Other insurers deny coverage if the policyholder died doing something illegal or lied on the life insurance application.

A life insurance pay out works differently if there’s an installment-payout option or an annuity option.

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