How-to-Make-Grief-Less-Difficult-for-Loved-Ones
Blog Post Financial Planning
September 4, 2024

DO YOU OWN OR ARE YOU SHOPPING FOR TERM LIFE INSURANCE?

When Sarah, a young mother of two, suddenly passed away in an unexpected accident, her family was left dealing with the grief of their unthinkable loss. While her husband, Tom, was coping with the immense emotional devastation he, his children and extended family were experiencing, he quickly realized he had unexpected business to tend to. The mortgage, children’s education, and daily expenses quickly shifted from “handled” to burdensome, forcing Tom to make difficult decisions about their future. All Tom wanted to do was grieve for his wife. Instead, his focus and energy were diverted to solving his new financial challenges.

If Sarah had a life insurance policy, it could have provided financial security to maintain their standard of living and safeguard their children’s future. While the untimely death of a loved one is indeed unthinkable, ignoring its possibility could result in making your loved ones’ grief even more difficult.

We know that life insurance can provide huge financial relief to a family when a death occurs.  According to the National Institute of Health (NIH) some of the leading causes of premature death include Cancer, Heart Disease, Accidents, Suicides and Chronic Liver Disease/Cirrhosis.

Perhaps the best time to shop for life insurance is while you are younger and healthier to enjoy lower premiums and qualify more easily.  Poor health later in life can disqualify you from obtaining life insurance coverage and or may make premiums unaffordable.

Term life insurance is the most basic life insurance policy and is often the most affordable for a selected term (e.g. 10, 15, 20, 30 and even 40 years).

 

10 THINGS TO CONSIDER WHEN SHOPPING FOR TERM LIFE INSURANCE:

  1. You have a need for at least temporary insurance protection. You perhaps have a large need for insurance coverage for example to cover a mortgage or other debts, would like to replace lost income for surviving dependents or pay future expenses like college costs for children, funeral costs, etc.
  2. Very importantly, does your current coverage or the policy you are shopping offer a CONVERSION PRIVILEGE ENDORSEMENT? And if so, when does the conversion period expire? Different carriers offer different time periods and products for conversion. A term conversion to a permanent policy at a future date can be done regardless of your health situation (e.g. say you contract cancer prior to the conversion period ending).  This could be crucial to keeping life insurance in place when you and your family might need it the most.  Without a conversion option you may not be able to renew your life insurance or be able to find another carrier to underwrite you after your term expires.
  3. What are the conversion products available from the carrier if you want to convert the term insurance to a permanent policy? Can you convert to a Universal Life (UL) policy, Index Universal Life (IUL) policy, Variable (VUL) or Whole Life (WL) policy available from the insurance carrier?  Some carriers only offer limited products or conversion privileges.
  4. If you have group coverage life insurance provided by your employer that policy will most likely be in jeopardy and expire once you leave that employer. An individual term policy you own is your personal policy and not dependent on whether your transfer jobs or change employment status putting you more in control of your insurance protection needs.
  5. What is the insurance carrier’s rating? Is the insurance carrier rating A or better by AM Best rating service?
  6. What life insurance riders are available with the term policy you are shopping (e.g. chronic illness rider, terminal illness rider, waiver of premium, accidental death, etc.). Different carriers offer different riders.  These riders can be very important additional features to consider when evaluating a policy.
  7. Term insurance is not permanent. A longer term will mean a higher premium. If you select a longer term, your conversion period will normally be longer as well, which is a nice benefit. You can also mix and match terms (10, 15, 20, 30, even 40) so if you have a 30-year mortgage you want to protect, you can take a term policy out for that specific need and then perhaps a different policy to cover other term needs. You don’t have to buy just one policy you can buy one or more policies with different term lengths based on the specific terms you require.
  8. Do you know your risk class (e.g. standard, preferred, etc.) and has your health profile improved? If your health has improved, you may be a candidate for lower premiums or a better policy.
  9. You understand that term insurance typically provides low initial premiums that are level for the term you select, but term insurance will increase (perhaps substantially) after your term expires. If you need flexibility in your premiums – let your financial advisor know.
  10. Remember, price is just one component of the overall term insurance purchase decision and price should be reviewed in concert with conversion features, riders offered, carrier ratings, and other features and benefits you desire in a policy.

Purchasing life insurance is a personal decision based on your age, health, circumstances, lifestyle and situation in life, making it a critical component of any financial plan. The insurance marketplace is vast and can even lead to a little analysis paralysis. We recommend talking to a financial advisor to review any insurance you may already have in place as part of your financial plan, as well as assisting you when shopping for life insurance that will suit your unique needs.

 

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6233712/

https://www.bls.gov/charts/census-of-fatal-occupational-injuries/civilian-occupations-with-high-fatal-work-injury-rates.htm

Prime Capital Investment Advisors
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