Life insurance is a contract between a policyholder and an insurance company that pays a pre-determined death benefit (in exchange for premiums) to a beneficiary when the policyholder dies from illness or mishap for as long as the contract remains in force.
While many people believe life insurance coverage is important, there are a variety of factors that deter them from purchasing policies that will provide financial support for their loved ones.
This reluctance to purchase life insurance has created a decline in mortality coverage, meaning that almost 40% of the adult US population states they are uninsured or underinsured (not having enough coverage to meet needs), which equates to a $12 trillion gap!
Among those who are unknowingly contributing to the gap are underserved communities, including those who are Hispanic, Black, Asian, LGBTQ and women – as a result their loved ones are at financial risk when they are no longer able to provide for them.
The greatest obstacles to purchasing a policy often result from a lack of understanding of how life insurance works, correctly calculating how much coverage is needed and knowing how to make the purchase. Bankers Life is committed to serving these communities to ensure that they can provide financial security for themselves and their families. Let’s take a closer look to help dispel some of the myths.
MYTH 1: Life insurance is too expensive
According to recent surveys, many believe that life insurance is a “luxury” they cannot afford, and they mistakenly assume a policy costs many times more the actual cost. This couldn’t be further from the truth. In fact, the average yearly cost of a life insurance policy for a healthy 30-year-old is typically only a few hundred dollars per year. Life insurance can be very affordable depending on the type of policy you select and the amount of coverage you need.
MYTH 2: Purchasing life insurance is a confusing and time-consuming process
Many consumers have expressed a desire to be able to purchase life insurance online, as well as being able to adjust benefit levels with a phone call or click of a mouse. The good news is that most insurance providers are responding to this request, especially considering the recent pandemic and need for providing services from a distance. It’s important to remember, however, that working directly with an insurance professional can be the key to developing a customized policy that meets your needs.
To become insured, you will go through a simple process called underwriting. Sometimes consumers need to fill out paperwork and participate in a medical exam to determine risk and eligibility, which is called traditional underwriting. In a simplified underwriting process, the insurance company often waives the medical examination requirement if you answer a series of questions.
The amount of coverage you can obtain is based on a variety of factors, and it is determined during the underwriting process. Typically, it takes less than a couple months to be insured, and in some cases that enrollment period is even shorter.
MYTH 3: Life insurance only covers funeral and final expenses
Life insurance death benefits can be paid out in a lump sum or over time depending on how a policy is written. While beneficiaries may use proceeds to cover funerals and other expenses, the death benefit can also provide long term peace of mind for your loved ones by helping them to maintain their lifestyles, covering monthly expenses, costs of education and childcare to name a few.
MYTH 4: Life insurance is for older people
Younger consumers often have college loans, mortgages and other debt that can feel crushing. This burden often leads to the decision to forgo purchasing life insurance until they are older or have a family. The reality is that life insurance policies are often less expensive for those who are young and healthy, so it makes sense to lock in a lower rate early on. Purchasing a policy early can help with financial security for loved ones, especially since not all student debt is discharged upon death.
MYTH 5: Employer sponsored life insurance provides sufficient coverage
Enrolling in employer sponsored life insurance programs can be a convenient way to get basic coverage at low or no cost, however, the coverage levels typically aren’t sufficient to meet all of your family’s needs. Most plans pay a death benefit which is usually only a fraction of one year’s salary. It’s also important to note that employer sponsored policies typically are not portable, that is, your policy may not be in effect if you leave your job or retire. Supplementing an employer sponsored policy with an individual plan is a wise choice for many.
MYTH 6: Those who don’t draw an income don’t need life insurance
According to a recent study by salary.com, stay-at-home moms (and dads) may not “earn” a paycheck, but they add value to the tune of almost $200,000 per year based on their contributions! This means your hard work would be very costly to replace if you were no longer able to provide for your family. Without life insurance, they may find it difficult to afford to hire all the professionals needed to keep the household running smoothly while providing adequate care for children.
MYTH 7: Life insurance isn’t available to those who have pre-existing conditions or illnesses
While it is likely that consumers with pre-existing conditions or illness will typically pay higher premiums, or receive lower death benefit coverage, that doesn’t mean you should avoid purchasing life insurance. Even though you may have to search a bit for a policy that meets your needs, it may be easier than you think to find coverage.
MYTH 8: If children are grown life insurance isn’t necessary
Parents are increasingly being called upon to help their grown children with debt and many adult children are moving back home. Empty nesters are also taking care of their aged parents. Regardless of whether you have children or not, having sufficient life insurance coverage will help to support those who depend on you now or in the future.
While it may seem daunting to choose a policy and determine coverage, the good news is that you don’t have to do it alone! Bankers Life has experienced insurance professionals who can help you navigate the process from calculating your coverage needs to selecting a policy that works for you.
We can help
If you’ve considered buying life insurance, or increasing your coverage but aren’t sure how, talking to an advisor is a good idea. They’ll help you understand what policy type and coverage levels are best for you. Contact a Bankers Life agent today and learn about ways that can help secure financial freedom for your loved ones.