Category: Life Insurance

How Much Life Insurance Do I Need?

Posted on by Nick Trawinski

How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

If you’re asking this question, you’re taking your future seriously.

Thinking about death is uncomfortable. Perhaps that’s why people purchasing life insurance often rush to an online calculator and punch in some arbitrary number they imagine their family can live on just to get the whole process over with.

Does that approach work?

Nope. According to Nerd Wallet, 30 million people with life insurance coverage are underinsured.

If you’re one of the millions who prefer conducting purchases online with minimal human intervention, is it possible to pinpoint how much life insurance you need on your own?

Yes. There’s even a formula or two.

How to Determine How Much Life Insurance You Should Have

Before you start shopping for life insurance companies online, take a thoughtful look at the following factors: Age, Life Expectancy, Health, Debts, Assets, and Income.

Age

Unlike with car insurance, the younger you are when you purchase your life insurance, the less you’ll pay in premiums. If you’re just starting out, consider a term life insurance policy. That will save you even more money in the long run and may avoid a future medical exam to boot.

Life Expectancy

According to most sources, the average person will enjoy their 78th birthday. However, life insurance is about what happens if you don’t live that long, right? What you need to consider is how long your dependents will live and for how long they will need financial assistance.

Health

You and your dependents may be healthy now. But what about 30 years from now? Does your spouse have a family history of cancer or heart disease? Do any of your children have special needs?

Do you or your dependents smoke? Smoking raises your insurance premium up to three times the regular rate. If you stop smoking, your rate will come down.

Also, advances in artificial intelligence technology across the insurance industry have improved accuracy in determining risk factors, which improves trust between those selling and those buying the quotes offered.

And if you smoke, drink, or have a risky hobby, don’t lie to the insurance company about it. Advanced technology also improves the likelihood that you will get caught and your family denied benefits.

Debts & Assets

If your assets outweigh your debts, you may not need as much life insurance.

Debts include things like car loans, credit card balances, and tax debts. You don’t have to include your federal student loan balance. It’s canceled upon your death. But you may want to factor in your funeral expenses here.

Assets include your savings, your investments (mutual funds, stocks, and bonds), your retirement savings (IRAs and 401Ks), and any other insurance policies you have.

Income

Questions to ponder:

  • Are you your family’s sole source of income?
  • If so, how much replacement income will your family need if you pass away? For how long?
  • Is your salary your only source of income, or are there other income streams?
  • If your spouse is responsible for day-to-day household tasks, how much would you need to cover housekeeping and childcare costs if they had to make up for your lost income?
  • Do you have any children who will need special care into adulthood?
  • Do you have dependent parents who will need their care costs covered?
  • Are you a business owner? There are insurance options that will cover the costs of keeping your business going or to help your beneficiaries sell the business in the event you pass away before you are able to sell or retire.

Quick & Simple Formulas

As promised, here are three simple formulas to give you an idea of how much life insurance you need to give you and your family peace of mind.

FORMULA 1:  Annual Salary x Years Left to Retirement

Multiply your current salary by the number of years you think you will continue to work.

FORMULA 2:  Annual Salary x 10 + –

  1. Add up your debts.
  2. Add up your assets.
  3. Multiply your current annual salary by 10.
  4. Add your total outstanding debt figure to that number.
  5. Subtract your total assets figure from the step 4.

The final number should give you an idea of how much life insurance you need.

FORMULA 3:  DIME Formula

DIME stands for four factors: DEBT, INCOME, MORTGAGE & EDUCATION.

Debt factor

Add up your debts, including funeral expenses. Do not include your mortgage.

Income factor

Determine how many years your family will need your income should you pass away. Multiply that number by your current salary.

Mortgage factor

Determine how much you still owe on your mortgage.

Education factor

Estimate your children’s college costs. Exclude anything you’ve already saved for their education.

Add up the totals from each of the four factors. That should give you a comprehensive idea of how much life insurance you need.

If you’re spinning out from the totals you just generated, it’s not as bad as you think. According to the Life Insurance Marketing and Research Association, 50% of Americans believe life insurance costs more than it does. They’re wrong.

What you actually end up paying may surprise you—especially if you opt for level term life insurance. You can pay as little or as much as you want for as little or as long as you want. Permanent insurance premiums are more costly.

No matter which type of insurance you consider, compare at least three quotes before making a final decision. Life insurance companies vary in the premiums they offer. Make sure you find the best deal for your family.

Find out how much you can save on term life insurance. Get your life insurance quotes comparison today.

 

What Is Permanent Life Insurance?

Posted on by Nick Trawinski

What Is
Permanent
Life Insurance?

Permanent Life Insurance: What Does a Permanent Policy Include?

Simply put, a permanent policy provides lifetime coverage.

There are two primary types of permanent insurance: Whole Life and Universal Life. And while you can combine the two in various ways to meet your individual needs, for the sake of simplicity, let’s establish a basic understanding of Whole and Universal life insurance before trying to mix them.

In addition to lifetime coverage and a death benefit, each policy type generates cash value you can access when you need it. Both require a health screening.

What sets them apart is how they manage the cash value they generate.

1st Type of Permanent Life Insurance: Whole Life

Whole Life is by far the most expensive option available. It offers a fixed-rate premium and guaranteed death benefit, meaning the amount you pay every month and the amount your beneficiaries receive upon your passing will never change.

It also generates cash value based on your monthly premium. The premium the insurance company charges is higher than the cost of the policy itself. The insurance company invests the difference in its financial portfolio, earning you money based on its performance.

2nd Type of Permanent Insurance: Universal Life

Universal insurance is slightly cheaper and more flexible. With a Universal policy, the amounts you pay for your death benefit and premium payments can change due to the fact that your policy’s cash value is determined by the interest your payment generates, rather than your insurance company’s portfolio performance. And, as we all know, interest rates fluctuate, which can work for or against you.

If my Permanent Policy Generates Cash Value, How Can I Use It?

You can use your generated cash value for a number of things, including:

  • Home purchases
  • College tuition
  • Retirement funds
  • Charity donations
  • Paying your premium
  • Increasing your death benefit
  • Paying off personal or business debts
  • Collateral for bank loans

Best of all, withdrawals are tax-free up to several million dollars. However, taking the money out of a premium policy may decrease the death benefit. And if you die before you pay off a loan you made against your insurance policy, your heirs will be responsible for it.

The wealth-building benefit of permanent life insurance is tempting. But not everyone can afford permanent life insurance rates. If you’re young and have the income, investing in a permanent policy may make sense. You can pay a higher premium at the beginning of the policy, then once it’s paid off, you can invest in other things and never worry about making a premium payment again.

Sounds Good. But I Simply Can’t Afford a Permanent Policy Right Now.

Consider a term life insurance policy, then. It’s your least expensive option because you pay only for what you need, only for as long as you think you will need it. You pay a fixed premium and your family receives a fixed death benefit—without locking yourself into a higher premium. Because once you lapse, you lose.

You can always convert to a permanent policy when you have the income to afford it. And when you convert a term policy to a permanent one you avoid the health screening a permanent policy generally requires. This conversion benefit is particularly handy when you consider how our earning power tends to increase while our health tends to decrease as we age. Plus, with a low, fixed-level premium, you can invest your money in other ways and buy that permanent policy sooner.

Save those high life insurance premiums and medical exams for later. Get a term life quote today.

5 Types of People Who Need Life Insurance the Most

Posted on by Nick Trawinski

5 Types of People Who Need Life Insurance
the Most

5 Types of People Who Need Life Insurance the Most

The people who really need life insurance are the accident-prone, heavy drinkers, long-term smokers, and careless daredevils, right? Well, yeah, in a perfect world.

Here are five less obvious types of people for whom life insurance may be particularly useful.

1. Pre-planners

such as…

Independent Millennials.

Why? Because the younger you are, the less expensive it is. And if you wait until later and get sick, you may not qualify anymore.

Parents.

Why? Because if the breadwinner dies, the policy’s death benefit covers his or her salary. Or, if the family caregiver dies necessitating childcare or eldercare, the caregiver’s policy will cover the care costs.

Also, many insurance policies serve as investment vehicles that you can use for college tuition, paying off debt, funeral expenses, or a financial legacy for your kids or a favorite charity.

For parents raising a chronically ill child, a short-term children’s policy may make sense. Why? Because converting a short-term policy to another one when your child becomes an independent adult will prevent them from disqualifying due to their health issues.

2. Business owners.

Why? Because you can structure your policy so that, if you die before selling your business, your partner can buy you out, leaving the proceeds to whoever you’ve designated to receive it. Your children can also use your policy to cover the costs of selling or running the business themselves.

And because your policy covers outstanding business costs, it also protects anyone who has co-signed credit card or loan accounts with you.

3. Tax masters.

Why? Because some premium payments are eligible for maximum tax benefits. Just as with death benefits, insurance company investment payouts are non-taxable, depending on the type of insurance you’ve purchased

Cash value payouts can also pay estate or inheritance taxes.

4. Savvy savers.

Why? Because you can choose a policy that charges a premium payment higher than the policy is worth. Your insurance company can then invest the balance into its own financial portfolio, generating cash value you can reinvest in other assets like property and annuities or to fund your retirement. You can also withdraw all or part of your insurance equity in an emergency. Withdrawals are tax-free up to several million dollars.

5. Debtors.

Unlike transgressions, debts are not forgiven. Life insurance protects your heirs as well as your co-signers from debt collectors. Thankfully, student loans are forgiven.

The fact is, we all grow older. As you’ve read this blog post, you’ve aged a minute or two.

Take a few more moments and think…how will you fund your life when you can no longer work? Will your loved ones have enough money to live comfortably after you pass on?

No matter who you are, what stage of life you’re in, or what you choose to do with your money, life insurance makes sense. Find affordable life insurance today.

Importance of Life Insurance

Posted on by Nick Trawinski

The Importance of
Life Insurance

Why You Need Life Insurance Sooner Than You Think (and Why Term Insurance Makes Sense)

Paul’s dad started pestering his 29-year-old son about buying life insurance soon after Paul got married. Paul kept putting it off. He and his wife wanted to travel. They bought a house. When they had a baby boy who was diagnosed with autism, they decided she would stay home to care for his needs. Money from Paul’s $130,000 salary came in and went out. And Paul lived in the moment through the good times and the bad.

Then a car skipped over a median and split Paul’s car in two. The wide eyes of the driver in the other car were the last thing Paul ever saw.

No one saw it coming. So no one planned for it.

With no death benefit from a life insurance policy, her son’s daycare costs and medical bills, and her inability to earn what Paul had brought in, Paul’s wife filed for bankruptcy five years later.

Life Insurance Is Important

Most of us are too busy living life to think about what happens when we’re no longer living. But the following statistics may encourage you to stop a minute and take stock.

  • According to the National Funeral Directors Association, the average funeral expenses total $7,500.
  • According to reporting by CNBC.com, average annual childcare costs are more than $10,000.
  • According to emarketer.com, the average outstanding mortgage loan debt is $177,477.
  • According to a study conducted by nerdwallet.com, the average credit card debt is $6,006.
  • According to U.S. News & World Report, a middle-class annual income in a three-person U.S. household hovers around $200,000.
  • According to the United States Census Bureau, the medical debt the average American family carried in 2021 was around $2,000.

If you take out your calculator, the math is sobering for the average family with kids. And if you think you can’t afford life insurance, you’re not alone.

According to a recent Bankrate article, 42% of millennial-aged adults think a $250,000 term life insurance policy costs $800 more per year than it really does.

Term insurance makes life insurance doable—especially if you start early.

Why Term Insurance Makes Sense

It’s simple.

You pay a low monthly premium; your loved ones receive a guaranteed lump-sum death benefit.

You decide the benefit amount and the length of coverage you need. Every penny of your paid premiums goes directly toward your death benefit.

It’s tax-free.

Unlike permanent insurance, term insurance does not yield dividends, which allows your family to keep the entire death benefit amount. It frees you to invest your money elsewhere to secure your family’s financial future.

Why tie up your earnings in a permanent policy when it may make more sense to invest them somewhere else?

It’s cheap.

The sooner you buy, the cheaper it is. A $1 million death benefit will cost a healthy 35-year-old man a monthly premium of around $35.

If your needs change as you get older, you can always adapt the policy to meet those needs by adding clauses when you renew or convert to a more permanent policy with extra features.

Paul’s wife eventually landed on her feet. After her bankruptcy went through, she found an excellent job with a salary that provided her and her son with a healthy standard of living. And when her son grew older, she remarried.

But had Paul listened to his dad, he could have saved his wife and son from darkly desperate times.

Protecting your family costs less than you think. Get online life insurance quotes today.

 

Online Life Insurance

Posted on by Nick Trawinski

Get your quote

When it comes to life insurance, there are a lot of options to choose from. You can get a policy that lasts for a certain number of years, or one that is permanent. You can also choose the amount of coverage you need. It’s important to compare life insurance quotes before you make a decision. That way, you can find the best policy for your family.

Pick your policy

When it comes to life, it’s important to have a policy in place that will work for you and your family. But with so many life quotes out there, how do you know which one to choose? At PolicyWand you can compare quotes from the most popular life insurance carriers to make the process of picking your policy simple.

Apply online

In a world where most things can be done with the touch of a button, PolicyWand brings that same simplicity to applying for life insurance.  You can now apply for life insurance online. Applying for life insurance used to mean meeting with an agent, being pitched expensive products that you don’t need or want, and filling out a mountain of papers just to apply. But thanks to the PolicyWand, you can now apply for coverage online in minutes, without ever having to leave your home.

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