We understand that Life insurance is a very important and personal decision for everyone. There is never a one size fits all solution because everyone has different needs, wants and desires when it comes to leaving a legacy for your family.  Whether you are looking to ensure your loved ones are taken care of in the event you are not around to help them, providing the money for your children or grandchildren's educations or simply ensuring that everything is in order so that no one is inconvenienced in any way when you are called to heaven. 

What Exactly Is Life Insurance, Anyway?

Life  insurance is a specific type of insurance–one that pays out in the  event of your death. You buy life insurance from an insurance company  (of course). The payments you make as part of your contract are called  “premiums”. The “death benefit” is the amount of money the policy pays  to your “beneficiaries”.

Here’s an example using made-up names and numbers:

Richard Williams buys a life insurance policy from RED, WHITE, & BLUE, Insurance Company. He has a contract which stipulates the following:

• His premiums (the amount he pays for the insurance) are $10/month.
• His death benefit is $250,000. If he dies, this is how much money the policy pays.
• His beneficiary is his spouse, Jennifer Williams

Life  insurance is a little more complicated than that, but those are the  basics. I’ll cover some of the complications in more detail later in the  post.

But here are a couple more observations:

The insurance company makes a lot of its money from “the float”. When a company has money in the bank, it earns interest. When a  20-year-old starts paying $120 a year for a life insurance policy, the  insurance company gets to invest that money until the 20-year-old dies.

Insurance companies charge more money based on how high a risk you are.

The insurance companies employ experts called “actuaries” to analyze risks and set prices. They have enormous amounts of data about death rates among various  segments of the population. These statistical averages enable insurance  companies to set their prices in such a way as to ensure a profit.

Broadening  your view of how life insurance means being able to distinguish between  term life insurance and permanent life insurance.

Term life insurance is a policy that is only in effect for a certain specific time period.  Most term policies have a term of 10, 15, 20, or 30 years. When the term  is up, the insurance is no longer in effect. Term life insurance is the  most affordable type of life insurance.

Permanent life insurance is  a policy that stays in effect until you die. Permanent life insurance  policies cost more than term policies, but they also usually include  other features. The most important and common of these is a cash value  that accumulates over time as you pay your premiums.

The return on  an investment in permanent life insurance is often low when compared to  the kinds of returns you might expect from investing in real estate or  the stock market. It has the advantage of being a steady return over  time, though–it doesn’t have the same kind of ups and downs as investing  in higher-risk vehicles.

Universal life insurance is  a flexible type of permanent life insurance that gives you the option  to raise or lower your premiums based on the circumstances of your life.

Whole life insurance,  on the other hand, is also permanent life insurance. But it lacks the  flexibility in raising or lowering the price of your premiums based on  your circumstances.

Life  insurance costs vary from company to company and from plan to plan. But  the biggest factor affecting the cost of your policy is your risk  category.

Here are some examples of risk classifications along with what they mean:

Preferred Plus – This is the classification for people in the healthiest category. To  be in the preferred plus category, your height and weight must both be  normal. Your lab results all also have to be in the normal range. You  can’t have any chronic illnesses. And you can’t have any immediate  family who died from cancer or heart disease before they turned 60.

Preferred – You can qualify for this category if you’re a little overweight. You  can also qualify even if you’re being treated for blood pressure or  cholesterol. But you still need to be in excellent health.

Preferred Smoker – If you’ve used tobacco in the last year, but you qualify otherwise  for “Preferred”, you fall into this category. Chewing tobacco and/or  cigars might or might not count for this categorization. It depends on  the insurance company.

Standard Plus – You’re still in better health than most people.

Standard – This is where most people fall, category-wise. Being overweight is  usually a factor. You still have a normal life expectancy, but you  probably also have several minor health conditions. If you had a parent  who died from cancer or heart disease before age 60, you’re probably in  this category, too.

Standard Smoker – You’d qualify for standard if you didn’t use tobacco.

Substandard – This is the category for people who are high risk. If you’re obese  and/or have major health issues, you probably fall into this category.  This category includes several subcategories based on your specific  issues.

Your age is the other major factor affecting your life insurance rates. Here are some average term rates for various ages:

• 35 years old or younger – Less than $30 per month.
• 40 years old – Between $30 and $40 per month.
• 45 years old – Around $50 per month.
• 50 years old – Around $75 per month.
• 55 years old – Around $120 per month.
• 60 years old – Around $200 per month.
• 65 years old – Around $350 per month.

Several  factors affect these prices, too. Your categorization is the main one.  The length of the term is also a factor affecting the price. The longer  the term, the more expensive the policy.

Of course, permanent life  insurance policies have higher monthly premiums, too. Most people  overestimate what it will cost to get coverage. If you do not currently have a policy you really should with an Insurance Broker to find out  about what options are available to you and at what the costs for coverage would be.

Almost  everyone needs at least minimal coverage–in other words, you need  enough life insurance to pay for your funeral. Most people have other  financial goals in their lives. For example, many parents want to pay  their kids’ way through college.

If you’re the primary breadwinner  for the family, you want to replace your income at least temporarily.  After a certain period of time, families adjust. Stay-at-home moms go  back to work and advance in their careers, for example.

If you’re a  stay-at-home mom, the role you play running the household has a value  attached to it, too. If you cook, clean, and do laundry, your survivors  will probably have to hire someone to handle at least some of those  chores.

The amount of money you have in savings and investments  also affects how much insurance you need. Since there are so many things  to consider, deciding how much life insurance you need is a highly  personalized undertaking.

I can offer some general guidelines to get you started, though:

Many Money Gurus suggests starting with coverage equal to your annual income multiplied  by 10. If you make $50,00 a year, you would buy $500,000 in life  insurance.

Another suggestion from that same post is to add $100,000 for each child who hasn’t gone to college yet.

Where Can You Find A Life Insurance Agent You Can Trust?

You could invest some time and get 3-4 quotes from different insurance companies yourself.  Heck you might mention what you are doing to a friend or a family member and one of them tells you "they might know a guy". My suggestion is to find an independent broker who’s able to  work with multiple companies getting you a policy. You can use our  service for this purpose, actually. We’re able to shop over 100  different companies to find you the best rates.

At Braden MSI Insurance we can assist you if you’d like quotes. Even if you think you can’t afford insurance, or  if you think you don’t qualify, you’ll be surprised at what’s available.

It’s easy to get discouraged if you have health issues that might seem to make life insurance impossible. Maybe you suffer from pancreatitis. Maybe you have been diagnosed with High Blood Pressure or High Cholesterol. 

None  of these health issues prevent you from buying life insurance,  necessarily. The kind of coverage that’s available might be limited. You  might also be paying a higher premium.

But you can probably still get coverage of some kind, no matter what your specific health situation looks like.

Frequently Asked Questions about Life Insurance

Do you need life insurance? The answer is “probably”. Some rare souls might not need coverage. You’re probably not one of them.

Should you replace your existing life insurance policy? Probably  not. Switching policies is often expensive because of the associated  costs. For example, you’re probably older now than you were when you  bought your existing policy. Premiums go up as you age.

Can I change my mind about the life insurance policy I just bought? Yes, most life insurance policies have a period of 10 to 30 days where you can cancel your policy for no charge.

Life  insurance is an important part of any adult’s financial plan. It’s a  way to pay for your funeral expenses and replace your income if you die  early. Life insurance is also an investment vehicle for many people.

Some  people think life insurance is a complicated subject, but as you can  see from this post, it’s really not that complicated at all. Much of  what you need to know involves some definitions of some terms and some  categorizations.

However, the most important thing to take away from this  information is that life insurance is an affordable policy for almost  everyone. You might pay more if you’re in poor health, but that doesn’t  automatically rule you out as a life insurance customer.This is a long form text area designed for your content that you can fill up with as many words as your heart desires. You can write articles, long mission statements, company policies, executive profiles, company awards/distinctions, office locations, shareholder reports, whitepapers, media mentions and other pieces of content that don’t fit into a shorter, more succinct space.