Preface:

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Let's delve into a topic that may not be the most exciting party conversation: life insurance policies. However, it is crucial to be aware of the facts that could potentially safeguard your family's financial well-being. In this episode of Let's Talk Money, we will address seven misconceptions about term life insurance and answer some of the most frequently asked questions. Join us as we explore the realm of life insurance facts and empower you to create the financial future you truly deserve.


How Much Does Life Insurance Actually Cost:

I must confess that I never gave much thought to life insurance until I reached my mid-30s and started a family. However, while conducting research for this video, I was truly enlightened. It became evident that the majority of people have very limited knowledge about insurance policies, and I discovered some surprising facts as well as debunked some common myths about life insurance. This is why I have partnered with Quotacy, the leading online broker for purchasing life insurance, to help dispel these misconceptions.

Quotacy offers a streamlined online process that eliminates the guesswork associated with insurance. Their application takes less than five minutes to complete and is then submitted to over 20 carriers to find the best policy for you. In fact, you can receive estimates on your premium within seconds through their pre-application process. Unlike other brokers who work on commission, the team at Quotacy is salaried and solely focused on finding you the best policy, without any bias towards higher kickbacks. I will delve deeper into Quotacy later, but for now, I will provide a link in the video description below for you to learn more and check your rate.

Now, let's address some of the biggest misconceptions about life insurance policies and discuss some fundamental questions about insurance. In the video description, you will find a clickable index of the facts and questions we will cover. One of the most surprising findings I came across was that people often overestimate the cost of insurance. According to a 2018 study by the Life Insurance and Market Research Association, individuals tend to believe that life insurance costs over three times more than it actually does. In fact, 44% of millennials overestimate the cost by as much as five times. The 2015 insurance barometer study also revealed that people were asked to estimate the cost of a life insurance policy.
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Difference Between Term And Whole Life Insurance:

My initial inquiry is regarding the distinction between term and permanent life insurance. Additionally, I would like to understand how whole life and universal policies differ from term life insurance. Term life insurance is the most prevalent form of insurance and is generally the most suitable choice for families in various circumstances. This policy provides coverage for a specific duration, ranging from five to 40 years, and allows you to select the desired coverage amount. Its purpose is to replace the lost income in the event of the death of a wage earner or even a stay-at-home parent, assisting in covering expenses during such difficult times.

On the contrary, permanent life insurance encompasses two common types: whole life and universal policies. These policies provide coverage for the entirety of one's life and offer the advantage of accumulating a cash value. They are particularly beneficial for affluent families who wish to include it as part of their estate planning. However, it is important to note that permanent life insurance is considerably more expensive than term life insurance.

Therefore, in most cases, term life insurance remains the optimal choice due to its affordability and the fact that it provides coverage for the duration of your earning years or while you are responsible for your family's well-being.

When Does Term Life Premium Increase:

My wife had a question regarding premiums. She wanted to know if term life premiums increase and by how much each time. In a term life policy, the premiums remain the same throughout the entire period. Whether you choose a five-year policy or a 25-year policy, the premiums will remain constant for the respective duration. However, it is important to note that the premium for a 25-year policy will be higher than that of a five-year term. This is because you are securing the insurance company's commitment for a longer period of almost three decades. It is worth mentioning that after the expiration of a five or ten-year policy term, your premiums may increase. 
Therefore, you have the option of paying slightly more now to lock in your premiums for a longer duration or saving money in the present and potentially paying more in the future. It is crucial to consider that your premiums are determined by factors such as your age and health. Generally, starting at a younger age will result in lower premiums, allowing you to secure them for a longer term. On the other hand, if you wait until you are older to start your premiums, they will be higher right from the beginning.
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Does There is Need of a Medical Exam For Getting Life Insurance: 

Now one of the primary concerns I had prior to obtaining insurance was whether or not I truly had to undergo a medical examination. The reality is, yes, in most cases, a medical exam is required to secure a life insurance policy. I understand that it can be inconvenient, but the examination allows the insurance company to evaluate your health and ultimately offer you the most affordable premium. Consider this: life insurance policies that advertise no medical exams have no means of assessing your health risks. Consequently, they charge higher premiums to compensate for this uncertainty. While you may be in good health, your premiums contribute to covering the benefits of all individuals insured under that particular company and policy. Therefore, it is inevitable that many individuals who opted out of the exam due to poor health will result in increased costs for everyone. Some companies have recently begun waiving medical exams for individuals within a specific age range, typically those who are 50 years old or younger.

 However, this remains more of an exception than a rule. Although the exam may be bothersome, it is actually beneficial for you as it ensures that you are placed in the appropriate policy group, resulting in a favorable premium rather than a higher risk-adjusted premium due to the insurance company's need to manage uncertainty. Now, let's address a question posed by Mark G from the YouTube community: What happens if I outlive my insurance policy? What if I outlive the term of my policy? The simple answer is that your coverage expires at the end of the term life insurance. You have the option to apply for another term or convert it into permanent life insurance. However, contemplating this scenario has truly altered my perspective on life insurance. Many individuals refrain from purchasing insurance because they believe they won't require it. 
They take a gamble, saving a small amount each month, assuming that the likelihood of something happening to them and necessitating the use of their policies is slim. This mindset is similar to that of car insurance or insurance on oneself.

How Much Does Life Insurance Someone's Need?

While 60% and 100% of Americans possess some form of life insurance, nearly half, or 47%, have coverage of less than $100,000. Although this may appear to be a substantial amount, the general guideline suggests having approximately 10 times your annual salary. It is important to consider not only the $10,000 required for burial expenses or a few years of living expenses, but also the potential loss of income for your family over several decades. This means not only covering living expenses but also saving for future college expenses. The positive aspect of this situation, and I assure you there is one, is that it is becoming increasingly convenient to compare and obtain life insurance coverage.

 Six out of ten baby boomers have reported finding information about coverage online, and half of all Americans have either purchased or sought information about life insurance online. Online marketplaces are not only a valuable source of information, but also a great platform for comparing insurance rates to secure the best possible deal. Life insurance is not something that should be delayed, and it is not as expensive as most people believe. Quotacy simplifies the process of obtaining a pre-application quote to demonstrate the affordability of life insurance, and their team assists you in shopping around for the most suitable policy.

 To learn more, you can find a link in the video description below. We release new videos on Mondays, Wednesdays, and Fridays, covering topics such as debt management, increasing income, and making your money work for you. If you have any financial inquiries, feel free to keep them to yourself – no need to share, just kidding.

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