For families, having life insurance is non-negotiable. When you have young children or a mortgage, or even if you have a spouse or elderly parents/other relatives who depend on you, then you leave them in a distressing situation if anything happens to you and you are no longer around to provide income, support, and care.
None of us are promised tomorrow, no matter how young we are or how promising the future ahead of us seems. It’s easy to see why life insurance is so important.
However, shopping for life insurance isn’t quite as simple. There are so many options for families to buy life insurance — so many ads and insurance agents in your face and inbox, and a ton of conflicting information out there about what plan is the best for families to purchase.
You have to be a smart consumer in order to sort through the clutter and find the right plan. To make your search a little easier, here are the 5 C’s of life insurance (based on our extensive life insurance experience!) to help families buy life insurance wisely!
Table of Contents
1. Commence the Search Sooner, Not Later
Many families procrastinate buying life insurance, and for valid reasons: life gets busy, kids demand full attention, work is exhausting, and life insurance is confusing. When life is in full swing for young families, it can be hard to think about things like death and what will happen to the mortgage if one spouse passes away.
It’s much more convenient just to not think about it at all or to tell yourself that in a few years when life slows down, you’ll buy a plan.
There’s a very real tangible cost to procrastinating in this case, though. Because the cost of insuring older adults is higher, the rate of individual coverage that someone pays for life insurance will go up as they age. Younger people, statistically speaking, are less likely to pass away and are typically in better health. This means that on average, the younger you are when you buy life insurance, the more you will save, regardless of how much coverage you purchase.
For example, if you are 25 when you apply for life insurance, you will pay lower premiums for your policy than if you apply at 35.
One of the ways that families can buy life insurance wisely is to buy it when their family is getting started, rather than waiting until their kids are middle school or high school age.
2. Choose The Right Type
Did you know families have more than ten different types of life insurance policies to choose from? It may seem overwhelming until you realize that all types of life insurance fall primarily within two categories:
- Whole life
- Term life
Perhaps the most important thing that families need to do if they want to buy life insurance wisely is to understand the differences between whole vs. term life and determine what type of insurance coverage is right for them.
Whole Life Insurance
Whole life, also known as permanent life, is insurance that gives you coverage for your whole life. Until you die, you pay monthly premiums that are guaranteed to be paid out in a coverage amount to your beneficiaries upon your death, whenever that occurs.
Term Life Insurance
Term life insurance only offers you coverage for a set period of years (usually between 10 to 30, although some companies like Everyday Life will offer up to 40-year terms). If you pass away during the term, your beneficiaries are paid, but when the term is up you must either purchase new coverage or go without.
Which is Best?
Because whole life plans last for the entirety of your life and are guaranteed to be paid out, buying whole life coverage is much more expensive than buying term life coverage. It’s also rare that families will truly need coverage for their whole life; at some point, on average, the mortgage is paid off and the kids are self-supporting and there is not a true need for the financial income you provide to be replaced if anything happens to you.
If your family has a special circumstance, like a family business or a family member with a disability, or something else that would necessitate financial support for dependents forever, then whole life is the best option, but for most families, term life plans make more sense and save them money.
3. Consider Your Individual Needs & Risk Factors
In today’s life insurance market, most companies assume that you already know what you want when you are looking for a plan. But that isn’t the case for most families. That’s why Everyday Life has The Ultimate Life Insurance Calculator — it helps you get a better idea of what your ideal policy might look like if you’re not sure or want confirmation.
It’s a good idea to have a general idea of what you need coverage-wise and what factors might affect the cost of your plan before actually purchasing a policy, which means that you shouldn’t just pick a coverage amount blindly and search for rates for that coverage.
How Much Coverage Do You Need?
Your age, your income, your dependents, your debts, and your assets will all influence how much coverage you need. If you are older, have fewer dependents, and already have a lot of money in savings, you probably won’t need as much coverage as someone who is younger, with several young children, who just bought a house, for example.
However, don’t underestimate the value of having life insurance for a stay-at-home parent while making these calculations. Even if you don’t need more life insurance to replace a lost income, you may need insurance to cover expenses like childcare or housekeeping help that would be incurred if they were not around.
The Role of Risk Factors
Your risk factors are something else to keep in mind when shopping for a policy. For example, if you have a lot of health issues, you will pay higher premiums for coverage; if you work a dangerous job, you will pay higher premiums for coverage; if your hobbies include skydiving (or other risky activities), you will pay higher premiums for coverage.
4. Compare Options & Pricing
The benefits of life insurance make it well worth the price. But as with anything you’re buying, a key step in the process of families buying life insurance wisely is to compare all of the options available to you so you can get the best deal.
Get quotes from a few different insurance companies before actually purchasing anything. The quick quote process can be time-consuming (and annoying if you have to provide contact information and are bothered by biased agents) but it’s worth it to ensure that you are getting the lowest rate possible.
At Everyday Life, our quick quote process just takes a few minutes, is 100% online, and you don’t have to provide any identifying contact information. You start with The Ultimate Life Insurance Calculator and can get our recommended rate and compare it to other quotes you’ve gotten without worrying about being bombarded with calls and emails from us.
5. Cover Different Debts With Laddered Policies
This particular tip may not be applicable to your situation, but for some families, purchasing different policies for different debts may be the wisest course of action. These are sometimes known as “laddered policies.”
In term life insurance, the goal is to get coverage that will last you as long as you really need it. If you just bought a 30-year mortgage, for example, you need a 30-year policy to cover it. But imagine you have a 30-year mortgage and you only have 15 years left until it’s paid off. You still have 30 years before you’re able to retire. In this situation, you can get separate policies — a 15-year term policy for the mortgage and a 30-year term policy for income replacement — so that you aren’t paying one lump sum and overinsuring yourself for coverage you don’t really need anymore.
Smart Consumer, Meet Smart Life Insurance
Everyday Life plans work differently from other plans on the market. Families who want to buy life insurance wisely should look into smart life insurance plans because they save the average family thousands of dollars over the life of the policy!
You need different coverage at different times in your life. That’s a fact we’ve talked about in this blog post and also in many others. Your need for coverage decreases over time. For example, when you are young, you need more coverage, but as you age and your kids get older and you pay off more of your mortgage, you don’t need as much.
However, most term life companies offer you one bulk amount and rate for a set amount of years (for example, $400,000 over 30 years), which doesn’t really make sense and causes you to pay for coverage that you truly don’t need.
Our plans automatically adjust your coverage and cost as your needs change over time based on life events like kids moving out and retirement. We use Predictive Protection™ technology to assess your unique needs and then recommend a term life plan for you that steps down coverage with each phase of the plan.
It’s a simple, 2-minute process to evaluate your needs and get a quote, and you don’t have to provide any contact details! Get started today!