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Life Insurance During COVID-19 — 5 Things To Consider According To A Finance Expert | MONEY

I’m Erin Lowry, author of ‘Broke Millennial’ and ‘Broke Millennial Takes On Investing.’ And in 2018, I made a big commitment. I got married. And then I realized I needed to make another big commitment to a life insurance policy. So today we’re going to be talking about five things you should know when shopping for a life insurance policy. Number one, how much do you need? The first step is figuring out how big of a life insurance policy you need. Now, even if you are covered through work, it might make sense for you to go ahead and have your own policy, especially one that isn’t tied to you keeping your current job. Plus, that policy just might not be enough. A common rule of thumb when figuring out a life insurance policy is to 10 times your annual income. Now, that is just a rule of thumb, and it’s much better for you to actually run the numbers yourself. Now, when you’re doing that, you want to consider things like your annual income, how much it would cost for you to have a funeral, as well as big upcoming costs like sending children to college or any medical procedures your family members might need. This isn’t just about primary breadwinners and the working spouse, but those who are primary caregivers and have children or parents who depend on them also need to have a life insurance policy. And the money from that policy can be directed towards getting new care for those dependents. Another thing to consider is whether or not you have cosigned loans. If you do, you need to check the policy to see if those debts are discharged in the case of death. If not, you need to have a life insurance policy that’s at least big enough to cover those debts for your cosigner. Life insurance can also be used to cover burial expenses because even a simple funeral can be very cost prohibitive for your family. Number two, who is your beneficiary? The person who receives the payout from your life insurance policy is known as your beneficiary. And when you sign up for the policy, you’re going to need to know things like they’re full legal name, their address, their birth date and their Social Security number. Plus, it’s a good idea for you to let your beneficiary know, in addition to including it in your will. Number three, should you wait for a life event before you get a policy? The younger and the healthier you are, the cheaper you can usually lock in a rate for your life insurance policy. That means that you might not want to wait for an event like a marriage or buying a house or starting a family in order to get your policy. In fact, women should get a life insurance policy prior to getting pregnant. Not only could your health change post-baby, but and this is morbid, you do need to consider maternal mortality. Number four, do you need to go to the doctor? Traditionally, you did have to go to the doctor, maybe get some blood drawn and have a physical in order to get a life insurance polic, but today, there are options for you to apply online. Answer an extensive questionnaire about your medical history and possibly be offered a policy. Now, there could be a cutoff based on age or your medical history, but there are options to receive life insurance without having to go to the doctor. Number five, what type of policy best suits your needs? There are two main categories of life insurance, term and permanent. When you hear the expression ‘whole life insurance,’ that falls under the umbrella of permanent life insurance. Term life insurance is the more simple cost effective option. But it is a use it or lose it policy, meaning that if you don’t die during the term of the life insurance policy, then there is no cash payout. However, because it is simple and cost effective, it often can be much easier to get the appropriate amount of coverage that you actually need. Permanent life insurance often has a six year sales pitch because of the cash value component. But that doesn’t necessarily mean it’s the best fit for you. A permanent life insurance policy might make more sense for you if you’re already maxing out all other tax advantaged accounts or if it’s part of an overall estate plan, or if you have a disabled dependent who is going to need care after your death. Finally, beware of the person who is trying to sell you your life insurance policy. He or she may call themselves a financial advisor, but that doesn’t mean that they’re a fiduciary working in your best interest and in fact, might just be receiving the highest commission for the policy that they’re trying to sell you. Thanks for watching. If you like this video, let me know in the comments below. Until next time.

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