Thinking about buying life insurance? Life insurance is vital to the financial stability and well-being of a family.
Buying life insurance is an act of love that allows you to continue providing for your family, even if you are no longer around to do so.
Life insurance has a two-fold benefit.
- First, it brings peace of mind to the individuals who buy it.
- Second, it can be a most timely check and thoughtful display of love to the beneficiaries who receive the proceeds.
Here are 10 other important facts about life insurance.
» Compare: Term life insurance quotes
1. Life insurance is risk pooling.
Life insurance works on a concept known as “risk pooling.” It takes a village for life insurance to work.
Everyone who is paying life insurance premiums is essentially putting all their money in a large metaphorical bucket managed by the life insurance company.
When the company needs to pay out a death benefit, they take from that bucket. If you die during the term of your policy, the company reaches into that bucket that everyone is paying into and gives that money to your beneficiaries.
2. Life insurance is affordable.
Life insurance is very inexpensive compared to other types of insurance almost everyone owns. Car, homeowners, and health insurances cost a great deal more than life insurance for most families.
For example, a 35-year-old mother can buy $500,000 of life insurance that will last for 20 years for between $20 and $50 per month depending on her health and smoking status. This is more than long enough for her to make sure her children have left the house and hopefully have become financially independent.
3. Your premiums won’t increase on a term policy.
Term life insurance policies have fixed premiums for the term period they cover. So, if you purchase a 20-year term policy for $20 per month, your premiums will never increase during that term even if you develop a health condition.
|Average Term Life Insurance Monthly Premiums for a Healthy Non-Smoking Individual|
|Age||Face Amount||20-Year Term (Males)||20-Year Term (Females)||30-Year Term (Males)||30-Year Term (Females)||40-Year Term (Males)||40-Year Term (Females)|
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4. A conversion option can really help in the long-run.
Most term life insurance policies offer a conversion option.
About 1 in 3 people have a significant change in health over a 20-year period. If you develop a serious medical condition and your term life insurance is set to expire, what do you do?
A policy that can be converted to a permanent plan without evidence of insurability (in other words, proof of good health) could be invaluable should you have a major health event and want to continue being covered even after your term ends.
5. Some life insurance is better than none.
Even a $100,000 life insurance policy is better than no policy. The unexpected death of a breadwinner can bring financial devastation to a family.
|Average Life Insurance Cost of a $100,000 Term Life Insurance Policy for a Healthy Male|
|Age at Purchase||Term Length||Monthly Premium|
A funeral alone costs an average of $10,000 and many families do not have enough cash in their emergency funds to make up for the lost income. If you’ve ever been to GoFundMe.com, you know this situation sadly occurs very often.
6. Underwriting varies between life insurance carriers.
Underwriting is when the insurance company evaluates the risk of accepting potential clients. This process decides how much coverage the client can receive, how much they should pay for it, or whether to even accept the risk and insure them.
The underwriters look over your unique profile for both health and lifestyle factors such as depression, anxiety, diabetes, speeding tickets and/or DUIs, scuba diving, history of bankruptcy, etc.
Quotacy is an agency that works with multiple life insurance companies. On our online application, we ask important underwriting questions so your Quotacy agent can make sure you’re matched with a company that will underwrite you most favorably.
Asking these questions before sending in a formal application will ensure you apply to the best carrier the first time around. Your agent will set realistic expectations and you’ll be able to know your estimated premium costs before applying versus finding out at the end that your final rate doesn’t match your initial quote.
» Learn more: What Is Life Insurance Underwriting?
7. Underwriting takes time.
The life insurance underwriting process is partly a waiting game if you want to receive the lowest prices. Some policies could be approved in as little as a few days while others may take months.
Your responsibility includes a phone call to confirm the information on your application, which takes about 30 minutes, and finding the time for a health examiner to meet with you.
Behind the scenes, your medical records from your doctors may be ordered and a lot of paperwork is processed. Sometimes hospitals and doctor offices wait a month or longer before sharing your records, so it is much less stressful if you prepare yourself ahead of time embracing the fact that it may take a while for your life insurance policy to be approved and put inforce.
Some carriers have accelerated underwriting processes. If eligible, applicants can zip through the underwriting process with a much faster turnaround than traditional underwriting. Not to mention these eligible applicants get to skip the medical exam.
When you apply, your Quotacy agent will let you know if you’re eligible for the insurance company’s accelerated underwriting process.
8. It’s important to be picky about choosing a life insurance broker.
It’s important to choose your agent or broker with care.
Make sure they will be there for you if you need to change your beneficiary, address, or banking information, and that they will be there for your loved ones should you die prematurely to help with the death benefit payout.
Some online agencies are marketing firms that pass you off to another organization and expect you to navigate the bureaucracy of the insurance carrier on your own.
Quotacy is your point of contact from start to infinity. We will not pass you along after you purchase a policy. You can always contact us at any time if you need assistance with your policy now and in the future.
9. It’s vitally important to look at valid third party reviews.
Do some research on the agent or broker you’re going to work with. Ask if they can give you a referral to a current customer or look for online third party reviews, just as you would if you were shopping on Amazon.
To take a look at Quotacy’s reviews, check out our profile on Trustpilot.
10. There are many online marketing firms selling leads.
There are many aggregators on the Internet who ask people for a name, phone number, and email address to receive a free term quote. These sites are marketing firms that sell your contact information to multiple agents and your phone will begin to ring unsolicited.
If you want to know your pricing hassle-free, run a term quote here on Quotacy. You will see pricing instantly (without even entering any contact information!) and can window-shop in peace. You will only be contacted by a Quotacy team member after you choose to apply or, of course, if you reach out to us with questions.
» Calculate: Life insurance needs calculator
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.