Today Is National Life Insurance Day: Do You Have The Right Policy?

Today Is National Life Insurance Day: Do You Have The Right Policy?

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Life insurance may not be one of the most glamorous purchases you can make, but it’s a necessary one for many Americans. After all, life insurance coverage may be the only source of financial protection for your family if you pass away during your working years. Without coverage, your spouse and dependents could easily struggle to pay your final expenses, let alone get by without your income for years to come.

But because there are so many different types of life insurance, searching for a policy can be downright overwhelming — yet failing to buy life insurance could easily leave your family in a dire situation when you’re no longer there to help.

So if you don’t already have life insurance, you should consider whether it makes sense for you to be covered. And if you’re in the market for a new life insurance policy, our guide will help you explore the different types of insurance that are available, depending on your budget, needs and goals.

Do you need life insurance? For the most part, many people could benefit from having some sort of life insurance coverage in place. In particular, most experts agree that adults with careers and kids should really have a significant amount of coverage in case the worst happens.

But Americans haven’t necessarily gotten the memo. In fact, a 2021 Insurance Barometer Study from Limra, an insurance and financial services research association, shows that the number of people with life insurance in the United States has fallen 11 percentage points to 52% over the last 11 years.

The experts at Limra note that this trend could be due to a broad drop in employer-based group life insurance benefits. However, the result is the same — fewer people with life insurance coverage means fewer families are afforded this type of financial protection.

If you’re unsure whether you need life insurance, here are some of the reasons you may want to buy coverage:

Income replacement: At its core, life insurance is designed to provide replacement of your income once you’re gone. This can be crucial if you have a spouse and/or dependents who are relying on you during your working years. Coverage for other financial obligations: If you have a mortgage, a car loan, credit card debt or other financial obligations, the proceeds from a life insurance policy can be used to pay off your debts. Without it, your family could be left figuring out how to liquidate your assets or pay your bills after you’re gone. Final expense coverage: According to the National Funeral Directors Association (NFDA), the median cost of a funeral with burial and viewing (without the cost of a vault) was $7,848 in 2021. Without life insurance coverage, your family could struggle to cover these final expenses. Better rates and eligibility when you’re young: If you’re young and healthy, now’s the time to buy life insurance since you’ll qualify for lower rates. And if you wait to buy coverage and your health deteriorates, you may not even qualify for coverage later on. When should you skip life insurance? Most experts agree there are situations where you may not need life insurance at all. If you’re young and debt-free and you don’t have any dependents, it’s possible you may not need this important coverage. The same can be said if your kids are grown and you have plenty of assets, or if you’re already retired and no longer need to replace a lost income.

Click here to compare life insurance plans for free using Policygenius.

Types of life insurance As you shop for and compare life insurance policies, you should know about the many types of life insurance out there. Policies exists for every budget, whether you just need cheap life insurance coverage for your working years or you’re a high-net-worth individual who wants to pass on tax-free income to your heirs.

Keep in mind that most types of life insurance require applicants to go through a medical exam. This physical is used to determine your general level of health, as well as how much you’ll pay in premiums.

While there are types of life insurance that don’t require an exam, favorable results from a medical checkup can help you secure lower premiums or afford a higher level of coverage, so you shouldn’t shy away from taking one. With that being said, some individuals in especially good health or at a young age may be able to qualify for “no exam life insurance” at a relatively reasonable price.

Let’s break down the various types of life insurance you may want to consider and explore which type may be best for you.

Term life insurance Term life insurance is the most basic type of life insurance coverage, but that doesn’t mean it’s any less valuable. With term life insurance, you’ll typically pay a fixed premium in exchange for a fixed amount of coverage for a specific term or period, usually 10 to 30 years. If you pass away during the term of your policy, your family is paid the amount of your fixed death benefit.

Because term life insurance coverage has a start date and an end date, this type of protection is typically the least expensive to buy. However, once your term ends, you won’t have any coverage. Also, there are different variants of term life insurance coverage you can choose from, including return-of-premium policies that let you get your premiums back when your policy ends, or term coverage you can convert to permanent life insurance later on.

Best for: People who need a considerable amount of income protection during their working years and those buying life insurance on a budget.

Shop for term life insurance and get offers from multiple insurers at once with Policygenius.

Whole life insurance Whole life insurance is a type of coverage that’s permanent, meaning your policy lasts for your lifetime. While whole life is more expensive than term life insurance, the lifetime benefit that whole life offers can provide consumers with more peace of mind.

Like term life insurance, premiums on whole life insurance generally stay the same throughout the policy, and your beneficiaries receive a guaranteed fixed benefit amount at your death (provided you make on-time payments on your policy for its duration). But whole life insurance also comes with a cash value component, which many companies tout as a “savings account” of sorts that you can borrow against while you’re alive.

Best for: People who are willing to pay more in premiums for a death benefit that lasts for life, as well as potential cash value from their insurance policy.

Universal life insurance Universal life insurance is another type of permanent coverage that combines a death benefit with a cash value component. Customers with universal life can rely on the cash value of their policy for a loan, but they can also withdraw funds over time. The cash value also earns interest that’s based on market rates, which means the amount of interest you can earn will fluctuate.

This type of coverage also comes with some flexibility when it comes to your premiums. For example, you may be able to use the cash value of your policy to adjust how much you pay in premiums each month, or to cover your premiums altogether.

Some companies allow policyholders to adjust the death benefit on universal life insurance policies over time if you remain in good health. This can be useful if you want to increase your benefit amount as your family expands (though it requires paying a higher premium), or reduce it and pay a lower premium when your children are grown and your replacement income needs are less.

Best for: People who want permanent life insurance with a cash component and flexibility in their premiums and death benefit over time.

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Variable life insurance Variable life insurance is another type of permanent coverage that comes with a death benefit and a savings component. The main difference is that the premiums on variable life policies are typically invested by your insurance company in stocks, bonds and money market funds, with the goal of receiving a higher return.

Because of the investment component of variable life insurance, this type of coverage is generally seen as more risky. However, taking on more risk offers the opportunity for potentially higher returns. If the underlying investments within your variable life policy perform well, you may see the cash value of your policy and your death benefit increase substantially.

Best for: People who want the option to grow the death benefit and cash value of their insurance policy over time through investments.

Group life insurance Group life insurance can come in many different forms, and it may include any type of life insurance coverage. The main difference is group life insurance is marketed and sold to an entire group at once — usually a cohort of employees at a company. Typically speaking, this means the group can get coverage without individual medical exams.

Depending on where you work, you may get group life insurance coverage extended to you for free as an employee benefit. However, the benefit amount is typically on the smaller side, so if you need a higher level of protection, you’ll want to supplement any group life insurance coverage with other coverage. You’re also likely to lose any group life coverage you have if and when you switch jobs.

Best for: Group life insurance can be valuable for anyone who receives it as part of their job benefits through work or a membership organization.

Supplemental life insurance Where group life insurance is typically offered through an employer, supplemental life insurance is any additional life insurance you can buy to boost your coverage. Typically speaking, supplemental life insurance coverage is paid for by employees via payroll deduction.

One interesting benefit of supplemental life insurance is the fact that, like group coverage, employees can often bypass taking a medical exam and still qualify for a policy.

Best for: People who want to pay an added premium to increase the amount of coverage they receive through work or a membership organization.

Family life insurance The term “family life insurance” can mean many things, including any combination of policies that cover an entire family. However, some specific family life insurance policies are extended to provide comprehensive coverage for every member of a family structure.

Family life insurance policies typically include whole life coverage for the main breadwinner of the family as well as term life insurance coverage for their spouse and children. Policies usually include different benefit amounts on different members of the family so that you have appropriate coverage depending on which member of the family were to pass away.

Best for: Families who want tiered protection for each family member based on their income (if any), risk of loss and other factors.

Check your life insurance rates from multiple insurers now using Policygenius.

Guaranteed life insurance Guaranteed life insurance is a type of coverage you cannot be denied for regardless of your health. Of course, the fact that you’ll be approved no matter what makes guaranteed life insurance much more expensive than other similar policies. Further, guaranteed life insurance can come with other downsides, like a decreasing death benefit over time.

Because guaranteed life insurance is available to anyone who applies and pays the premiums, this type of co

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