National Life Insurance Day: New Trends
With National Life Insurance Day being observed on May 2 – marking the anniversary of the first life insurance policy written in the U.S. in the 18th century – now is a great time to review one of the most important and effective personal financial protection vehicles on the marketplace.
To anyone who’s accumulated assets over the years and wants to ensure their loved ones are taken care of after they’re gone, life insurance isn’t a luxury, it’s a necessity. That’s especially the case if a policyholder has younger children and a spouse, or if the policy holder is a homeowner, newlywed, or is expecting a baby.
“Let’s just be honest, everybody needs it and there are different policies for everyone and for where different people are in different stages of their lives,” says Shawn Meaike, chief executive officer and founder of Family First Life, an insurance provider in Uncasville, Ct.
Instead of asking who needs insurance, the better question is how much insurance someone needs.
“The reality is regardless of your financial situation, the money that you pass on to your beneficiaries from the insurance company is important and there are many financially savvy ways families can leverage that,” Meaike says. “This is an “investment” everyone needs.”
It’s advisable for people to evaluate whether they need a policy, what type of policy meets their unique financial needs, and how to navigate the insurance marketplace for the best insurance policy price and at the best value price possible.
What is Life Insurance?
In a word, life insurance is a contract between a policyholder and their insurance company.
“It’s a contractual guarantee that an insurance company will pay a lump sum of money to specified beneficiaries upon the death of an insured person in exchange for a premium,” says Daniel Adams, an independent insurance agent at CEG Life Insurance Services.
The most basic and important function of life insurance is to provide financial security and peace of mind for families in the event of the death of a loved one.
“It protects the future of children and provides new opportunities for widows and widowers when a parent or spouse dies,” Adams says. “There is no other financial product or investment that guarantees such an immediate and significant payout right when it is needed most for such a relatively low cost.”
There are several different types of policies, and all of them offer various benefits and risks. The policyholder’s finances, desire for flexibility, and tolerance for risk all play important roles when it comes time to purchase.
The current life insurance market gives consumers many policies to choose from – and these policies are at the top of the list.
Term Life Insurance: Term life insurance is the most simple and basic kind of life insurance policy.
“It provides coverage for a specified period, typically 10, 20, or 30 years,” Adams notes. “If you outlive the life insurance term, unless you choose to continue your policy on a year-to-year basis at a significantly higher cost or convert your policy to a permanent policy (if offered by the company), your coverage will terminate.”
The main benefit of a term life insurance policy is its affordability.
“Premiums are lower to start than those paid for permanent insurance and, as such, it allows the owner to buy the most life insurance for the lowest cost for a limited amount of time,” Adams says.
Whole Life Insurance: Whole life insurance offers a guaranteed death benefit for no matter how long you live at a locked-in rate.
“Additionally, the premiums you pay will go towards building cash value that can be withdrawn via policy loans on a tax-free basis to supplement retirement income, pay for college expenses, or fund a long-term care insurance plan,” Adams says. “However, whole life insurance requires higher initial premiums to offset the initial policy expenses.”
Universal life insurance: Universal life insurance offers the benefits of whole life insurance in terms of cash value growth and lifelong coverage, while providing flexibility in when you pay premiums and how much you pay.
“In other words, unlike whole life, it does not require a fixed payment and allows for flexibility to pay more or less premium according to the policyowner’s financial circumstances,” Adams notes. “However, by changing the premium amount, you also change the performance of the policy itself, for better or for worse. Because of this greater freedom and flexibility, it also requires more personal management and oversight.”
Indexed universal life insurance: Indexed universal life insurance is a type of universal life insurance, but it has become very popular in recent years and deserves its own explanation.
“It includes all the features of universal life insurance but bases its cash value accumulation on the performance of a stock market index, such as the S&P 500,” Adams says. “Therefore, it has greater potential for more cash value growth but typically no guarantee of any cash value growth.”
Final expense life insurance: Final expense life insurance is a type of a whole life insurance policy with a very minimal benefit that will payout whenever the insured dies.
“It’s intended to do exactly what the name says, pay off a deceased’s medical and burial expenses so those are not passed on to their loved ones after they die,” Adams adds. “This kind of policy allows people who have health problems that would normally disqualify them for life insurance coverage to still purchase a small policy.”
Other forms of life insurance can include joint life policies, which are geared towards people who are married, and business-owned insurance policies that ensure the business can continue after a tragic loss.
Who Needs Life Insurance?
Typically, Individuals with debts on existing assets, individuals who need to replace their income for their family if they die and individuals that do not have money saved for their funeral are optimal candidates for life insurance.
“Life insurance is one of the most important types of coverage that you can have to protect your loved ones,” says Sahang-Hee Hahn, head of strategy and planning at Haven Life, an insurance fintech company.
When an individual experiences big lifetime moves like getting married or having a child, then life insurance should become a consideration.
“Ultimately, if the loss of your income is something that would seriously affect your loved ones, the best way to ensure their financial security is by purchasing a life insurance policy,” Hahn says.
How Much is Life Insurance in 2023?
Life insurance costs depend on a variety of factors, including age, income, insurance needs, driving record, and lifestyle and health issues.
By and large, however, there are some points of reference on life insurance costs.
Take a 40-year-old with good health, who’s looking for a $500,000 life insurance policy with a 10-year-term. That individual can expect to pay about $18.42 per month. If the term period moves up to a 20-year-term, the individual will likely pay about $25 fer month for the policy.
Prices go down for younger consumers and go up as the insurance consumer gets older. Additionally, prices likely will vary among different life insurance providers.
That’s why it’s always a good idea to shop around among various life insurance companies for the best deal. Consumers should also consider independent insurance brokers who can comparison-shop on their behalf and generate the best deals.
Recent Life Insurance Industry Trends in 2023 to Know About
It’s not new, but men are more likely than women to buy life insurance.
Exhibit “A” is Haven Life’s new “The Gender, Roles and Life Insurance Survey” where parents with children under the age of 18 were interviewed.
“The survey found that men with life insurance valued their lives financially nearly two times more than women,” Hahn says. “Furthermore, despite the belief that the death of either partner would have a substantial impact on a family’s quality of life, households have less financial protection for the loss of a mom compared to a dad.”
Another hot button issue continues to be Covid, even as the pandemic is receding. In 2023, the insurance industry is seeing more people buying life insurance than in decades – especially younger people.
For younger insurance buyers, especially those that were in their early twenties, the urge to buy life insurance is different that with their parents and grandparents. “Younger life insurance consumers who likely hadn’t thought about buying life insurance before, really started to consider their mortality during Covid,” Meaike says. “Yet even,, all age brackets were more represented in the purchasing of life insurance over the last few years.”
It’s not all about younger life insurance consumers.
“Additionally, many older folks who had been putting off life insurance are more apt to buying life insurance during 2023 — simply from being more vulnerable to Covid,” Meaike says.
Tips for Finding the Best Life Insurance Policy
When looking to purchase life insurance, the most important step an individual can take is finding and partnering with the right agent or agency.
“This is important as the other factors that come into play when purchasing life insurance, such as finding the right company and policy, and getting the right advice, will be a lot easier as a result of finding the right agent,” Adams says.
When choosing an agent or agency to work with you should look for one with the following attributes, Adams advises looking for these characteristics in a good life insurance partner.
- Someone who is independent and represents at least 10 companies, preferably more. “This way they can help you find the best policy in the marketplace (and not just from one company) for your specific needs and circumstances,” Adams notes.
- Someone who has at least 5 years of experience in the business, or that works with another experienced agent. Most life insurance agents do not remain in the industry for five years. It’s important to have an agent that will be around to service you and your family throughout your lives.
- Someone who has, or is working towards, advanced credentials, such as the certified financial planner certification or the chartered Life Underwriter designation. “This shows both their commitment to their profession and to serving their clients with advanced knowledge and skills,” Adams says.
- Someone you feel comfortable working with your family. An insurance agent needs to earn your trust and confidence as they will be one of the first people your family will call if you were to pass away.
“A good place to start researching life insurance policies, prices, and companies, is through a current financial advisor or by simply starting with a Google search for a local agent,” Adams says. “When looking at agents or agencies, be sure to check out their Google ratings, Better Business Bureau rating and reviews, and LinkedIn profile.”
“In doing so, you have a better chance of finding the right agent, so they can help you find the best policy,” he adds.
Outlook For the Life Insurance Sector for the Rest of 2023.
Given a slumping economy, life insurance sales may take a temporary hit.
“With the economy continuing to be volatile, inflation being up and consumer prices rising, you’re going to see more people that are concerned about their family’s well-being,” Meaike says. “Consumers are going to look at life insurance as one of the ways they can actually protect their family – now and in the future.”
Now with National Life Insurance Day shining a spotlight on the need for financial protection, life insurance customers can depend on an industry that’s been through tough times before.
“As with other industries, there may be a decrease in industry professionals and employees,” Adams says. “However, life insurance is an enduring product and industry, and while sales may ebb and flow, it will continue to be a mainstay in the economy, in businesses, and in family households.”
