Busting 5 myths about life insurance underwriting

August 17, 2023 | Blog, Life Insurance |

Once you submit a life insurance application, the insurance company will begin underwriting. To determine if you’re eligible for coverage, your risk profile, and your premium amount, underwriters will look at various factors, including age, gender, lifestyle, and health history. For example, if you’re a smoker, you may pay higher rates for coverage than if you’re a non-smoker. To help make applying for coverage smoother and less stressful, it can be helpful to understand what’s involved and the common misconceptions that surround this procedure.

Myth 1: Underwriting is a lengthy process

The underwriting process can vary depending on the insurer, death benefit applied for, and type of coverage, but on average, it can take two to four weeks. The process can be much quicker for certain types of coverage, like guaranteed issue and simplified issue life insurance. To help streamline the underwriting process, gather all your health information and list of prescriptions before you begin your application.

Myth 2: I do not need to include all information on my application

Providing accurate and complete information on your application will help speed up the application process and help you avoid any fraud issues. As you complete each application section, include as much detail as possible and be honest about your health, smoking status, and hobbies.

Myth 3: To get life insurance coverage, I will need a medical exam

For certain types of life insurance policies, bloodwork or a medical exam is not required. “The more comfortable companies can become using other sources to assess risk, the less frequently medical exams will be required,” says Sammons Financial Group Chief Underwriter Chris Regione. “That said, when a medical exams may still be needed it is critical for risk assessment.”

Myth 4: My pre-existing condition will make me ineligible for life insurance

Even if you have a medical condition, you may still be able to get approved for life insurance coverage. “Many clients with one or more pre-existing conditions could still qualify for life insurance,” states Regione. “Understanding pre-existing conditions and the severity of these is critical to underwriting . Companies take a holistic approach to risk assessment. This means they are looking for ways to offer coverage within the company’s risk appetite and tolerance.”

Your health history can affect what type of policy you are eligible for and how much premium you’ll pay each month. If you have asthma, for instance, the underwriter may review when you were diagnosed, how frequently you have symptoms, if you’ve been hospitalized, and what medications you take. If you manage your asthma effectively, you may still qualify for a standard or preferred rate. However, even if you experience asthma attacks or need medical assistance, you can still be eligible for coverage, it just may be at a higher premium.

Remember that underwriting guidelines vary among insurance companies, so working with a financial professional can help find the best policy for you.

Myth 5: Risky hobbies will prevent you from getting coverage

When applying for life insurance coverage, you will likely be asked about your lifestyle habits and hobbies, safety precautions, and how often you participate in these activities. “The key is for the company to have a nuanced understanding of a person’s lifestyle habits, hobbies and activity,” shares Regione. “For example, understanding how often they engage in risky behavior and the type of activities they engage in will provide guidance to determine the best rate class that can be provided.”

Even if you enjoy skydiving or rock climbing, it doesn’t necessarily put you out of the running for getting a policy. Since participating in high-risk jobs or hobbies can affect your life expectancy, the insurance company must consider these. Many companies will still approve you for coverage, but these factors may increase your monthly premium.

Separating fact from fiction regarding life insurance underwriting can help you become better informed about the process and what you can do to make the steps go smoothly. When you understand the timing and what to expect, you can help lower your stress about applying for coverage and help put financial protection in place today.

B1-NA-6-23

NORTH AMERICAN A Sammons Financial Company

Is life insurance available to a non-citizen?

May 11, 2023 | Blog, Life Insurance |

Life insurance can help safeguard your loved ones’ future and financially protect them from the unexpected, allowing them to cover final expenses, keep up with daily living costs, and save for the future. If you’ve recently moved to the U.S. for a permanent stay and are wondering if you’re able to purchase life insurance, there are a few things to keep in mind.

Life insurance for immigrants

Each life insurance company may have different rules around applicants who are not U.S. citizens, so it’s important to do your research. Life insurance companies may consider some of the following:

Length of residency: You may need to provide proof of U.S. residency for a certain number of years before being eligible to apply for coverage.
Country considerations: Some countries may not allow you to buy life insurance in the U.S. due to regulations.
U.S. limitations: People moving to the U.S. from certain countries may require additional underwriting.

For people who have moved to the U.S. and have obtained a green card or visa, many life insurance companies do provide coverage options. Along with the typical underwriting process, you may be required to provide some additional information when you apply.

Visa holders

If you have a visa, you have permission for residence within the U.S for a designated period of time, typically for school or work. To apply for life insurance, visa holders typically have more documentation to provide to the insurance company than a green card holder. You will often have to share, how long you have been here and whether you plan to permanently reside here in the future. You may need to provide a copy of your visa and other supporting documentation. The insurance company may also have you fill out a foreign resident questionnaire that asks you questions about your employment and travel history.

Green card holders

If you have a green card, you are considered a permanent resident and can usually apply for life insurance coverage as a U.S. citizen. There will likely be a section on the application that allows you to disclose your resident status.

Undocumented immigrants

Without proper identification and documentation, such as a green card or visa, it can be more difficult to obtain life insurance coverage. Not all carriers accept undocumented immigrants, but companies that do most likely require an Individual Taxpayer Identification Number (ITIN) and may have limitations on the death benefit amount or type of coverage that they offer.

NORTH AMERICAN A Sammons Financial Company

New job checklist: organizing your finances after a career change

April 20, 2023 | Life Insurance |

Starting on a new career path can be a thrilling and busy time full of new routines, expectations, and responsibilities. Whether you’re stepping into a different role or changing your profession completely, there are likely financial changes to be prepared for to ensure a smooth transition. With new company benefits, compensation, and insurance coverage to coordinate, here are some helpful steps to add to your career change checklist.

Sign up for company benefits

Upon starting your new job, your compensation package may include new coverage policies, flexible or health spending accounts, paid time off, bonuses and commissions, childcare, student loan repayment, and tuition reimbursement. Be sure to review your onboarding packet and keep an eye out for emails so you know which benefits require enrollment and if there are eligibility waiting periods. Certain benefits, such as company-sponsored short-term and long-term disability coverage, often require up to a year of service with the company before you are able to apply the benefit. Be aware of these waiting periods and explore supplementary coverage options to make sure your income and health are fully protected throughout your first year of employment until waiting periods are met.

Your company may also offer informational events to explore all the benefits available to you. If you have questions about any of your benefits or company perks, reach out to the hiring manager or Human Resources representative for assistance.

Review insurance coverage

When you leave an employer, benefits such as medical, dental, and vision insurance coverage will likely terminate within the 30 days following your last day of employment with your previous employer. It is important to confirm those details to ensure you do not have any gaps in coverage. If you are transitioning from a previous medical plan to your new employer’s medical plan, it is good practice to fill prescriptions or schedule your regular doctor’s appointments prior to coverage termination because it can take over a week for a new insurance company to recognize you as a member in their system. You will be offered COBRA (Consolidated Omnibus Budget Reconciliation Act)coverage to continue your previous employer’s health coverage for 18 months, this option is usually more expensive as you forfeit the company’s contribution to your monthly premiums and you begin to pay the full cost of the plan. Another important consideration is if you had group life insurance coverage, which will likely end but may have options for you to convert the coverage to an individual policy.

Eligibility for the benefit programs at your new company can start anywhere between your first day or your ninetieth day of employment. Be sure to review when coverage will go into place and check your onboarding packet for deadlines to enroll. You often have to make enrollment decisions within the first month of employment and, if this deadline is missed, the opportunity to elect coverage may be closed until the next annual open enrollment timeframe.

Coordinate your paycheck and budget

Stepping into a new career can often reveal financial opportunities, whether it’s a bigger paycheck, bonuses, retirement benefits, or other positive perks. As you begin to get into the swing of things, it can be beneficial to revisit your budget and account for the incoming changes. Is the pay period different from your previous employer’s? Do you have a little extra you can put into savings each month? If your organization is similar to most employers, you can likely count on a bi-monthly paycheck. To make sure your income can cover your expenses and also work toward achieving your short- and long-term financial goals, take a detailed look at your budget.

A common strategy is breaking down your paycheck by the 50/30/20 rule of thumb. 50% of your payment will go to essentials like your rent/mortgage, groceries, utility bills, and regular expenses. 30% of your paycheck is reserved for non-essentials, including entertainment, dining out, and travel. The remaining 20% would then be allocated to personal savings and financial goals. This could include paying down debt, building an emergency fund, and putting money toward retirement. If your paycheck frequency becomes more often and you’re getting paid every week, you may want to update your budget to spread out bill payments throughout the month, since money will be coming in more regularly.

As you build a budget around your new income, it is also good practice to review your first few paychecks to be aware of your payroll deductions. Federal and state income taxes are considered mandatory deductions and likely outside your control. Other, pre-tax deductions such as monthly benefit premiums and 401(k) retirement plan contributions are something you may want to audit. As you organize your budget, remember to use your net pay, or the amount remaining after your payroll deductions have been subtracted, to calculate how much money can be allocated to each area. Even if your new job comes with a higher paycheck, you don’t need to change your day-to-day expenses if it’s not necessary to do so. Instead, this could provide an opportunity to put more toward savings, reduce debt, or contribute more to your retirement account(s) for the future.

Keep up with your retirement savings

Oftentimes moving in a new career direction provides fresh opportunities to save for the future and create a more financially secure retirement. Take a proactive approach to familiarize yourself with your new benefit offerings to maximize your savings opportunities. Your compensation package may contain a higher employer match on your 401(k) but you need to ensure your own contribution is sufficient to be eligible for the full employer portion. Or your new company may offer stock ownership opportunities, but it requires active enrollment into their stock program. Since you’ve worked hard to begin building for the future, it’s important to keep that retirement savings momentum with a simple review of your existing retirement accounts to determine how best to move forward with the new options available to you.

If you have a 401(k) with your previous employer, you have a few options depending on your personal goals. You can leave the account where it is and no longer contribute to it; roll it over to your new employer’s 401(k); take a lump sum distribution, known as cashing it out; or roll it into a traditional or Roth IRA outside of your new employer’s plan. You may want to talk to your financial professional about what may be your best move based on your current account balance, tax implications, withdrawal fees, and savings options outside your previous and current employer.

What happens to your retirement account when you change jobs?

If you decide to leave your 401(k) with a previous employer, your funds will continue to be managed and your money will grow based on the investment option selected, but you will no longer be able to make contributions to that account. You may be able to organize a direct 401(k) rollover, which will transfer funds from your previous employer’s 401(k) to your new plan without incurring taxes or penalties. If you go this route and keep your account with your former employer, be sure to keep that account on your radar and keep your contact information with the plan sponsor current.

Do you have to roll over a 401(k) when you change jobs?

If you prefer to keep your assets all in one place, you likely have the option to roll over your 401(k) to your new employer, but it is not required. However, accounts held with your previous employer may now incur monthly processing fees that you have to pay as you are no longer part of their group plan. Verifying the cost of maintaining your previous accounts could influence whether or not you decide to consolidate your 401(k) savings. You may be able to organize a direct 401(k) rollover which will transfer funds from your previous employer’s 401(k) to your new plan without incurring taxes or penalties. It’s important to check with your new company’s plan administrator to see if rollovers are permitted and what steps are required.

A new job can reveal many untapped opportunities, from expanding your network and skill set to boosting financial and professional wellness. Taking a new career direction is often a good time to connect with your financial professional to make any updates to your financial plan, revise your budget, and decide if you can add or delete any goals to better align with your current situation. Even though a career change can be a hectic time, taking a minute to make a financial plan for the transition can help you be better prepared for the updates that lie ahead and allow you to make the most of this exciting time in your life.

B3-NA-2-23

REV 2/2023

NORTH AMERICAN

A Sammons Financial Company

So What Happens to Your Life Insurance After You Die?

March 30, 2023 | Blog, Life Insurance |

Getting life insurance is a no-brainer, as it can provide your family and loved ones with crucial financial protection if you pass away. But how exactly does it work? And by that, we mean how does it “kick in” and provide the benefits once you die? Let’s explore this question and more.

First steps

First, it’s worth mentioning that it is the responsibility of the policy beneficiary, or beneficiaries, to file a claim. In other words, they must contact the insurance company and inform them of the policyholder’s death, typically by sending a death certificate and filling out a claim form to ask the insurer for the money. Contrary to what some may believe, there is no “death list” that goes around to perform this task automatically, so know that it’s not the life insurance company’s responsibility to realize that you have passed away or chase down your beneficiaries.

Because you will likely want to know who gets your money after you die, be sure to create a will that clearly states who will receive your money and informs them that you purchased a life insurance policy. In your will, it’s very helpful to include detailed information, such as your policy number and accurate contact details for your insurer. Without this information, it may take some additional time to verify your claim before the payout is received.

With all information in order, the beneficiary can proceed with contacting the insurer, sending the death certificate, filling out the claim forms and receiving the processed benefit amount when it’s paid out.

More detailed information on the entire claims process can be found here.

Who gets your life insurance payout when you die?

Life insurance claims can be paid out in several ways. Here are some of them.

To an estate

If your beneficiaries are not specified as part of your life insurance policy, the proceeds will likely, by default, be treated as part of your estate. If a will was enacted, then your beneficiary wishes will be followed as closely as possible.

This is another good example of why the creation of a will is very important to ensure there is no ambiguity over your estate and your life insurance proceeds.

To a beneficiary

If you include accurate, up-to-date beneficiary information on your life insurance policy, the money can only be claimed by the beneficiary or beneficiaries. However, there are sometimes mitigating circumstances to consider, such as an untimely death of a beneficiary. In most cases, if the listed beneficiary dies before the policyholder, the beneficiary’s heirs are entitled to the proceeds.

Into a trust

If you set up your life insurance proceeds to be paid into a trust when you pass away, that money will be held in the trust appropriately and distributed as a claim per the instructions outlined in that trust.

Naming and paying out to a trust can be an excellent way to help mitigate inheritance taxes and may also be used to satisfy an inheritance tax bill (typically on a larger-sized estate) without needing to liquidate assets.

Will my beneficiaries have to pay taxes on the proceeds of my life insurance policy?

Good news! When considering the death benefits of a life insurance policy, the payout is generally free from any income tax to your selected beneficiary or beneficiaries.

However, you may choose to have the insurance company keep these proceeds for a while after your death so they can be distributed to your beneficiary in a series of installments or at a later date. This way, the funds may continue to earn interest. When a payment is made to your selected beneficiary later on, it may be a larger amount because of the interest earned. Note that while the principal portion of the payment is typically free of taxes, the interest portion would be taxable to the beneficiary as ordinary income, so they would be on the hook for at least some taxes in this scenario.

Finally, in some cases, if the ownership of your life insurance policy is transferred to another party for monetary value before you die, the proceeds your beneficiary receives at your death could also be considered taxable income.

We hope this information is helpful to you. As with any complicated financial matter, it’s always best to seek the assistance of a professional who can walk you through your questions and particular situation.

Life Happens, by Kirk Cremer | March 8, 2023

Why buy life insurance in your 40’s

January 12, 2023 | Blog, Life Insurance |

There was a time, perhaps a generation or two ago, when turning 40 meant you were “no longer a spring chicken,” or “over-the-hill.” In other words, 40 was old.

But in the last 30 years or so, a dramatic change has taken place. With all we’ve learned about the benefits of proper diet and exercise, it’s no surprise that people are taking better care of themselves. The amount of adults who smoke has declined from 21% to just 15% and that number is still dropping. Millions have instead taken up running, biking, meditating, and other healthy activities. As a result, people are living longer and looking far younger than their birthday might indicate. And 40? It’s taken on a whole new meaning.

Why do I need life insurance?

People are taking better care of themselves and thus living longer, but there are reasons for getting life insurance beyond living a longer life. Many people are also postponing marriage, children and home buying well into their 30s and beyond. So rather than the usual financial obligations ending for most by their mid-50s as they once did, today their obligations can stretch well into their 60s.

That means many 40-somethings are in the peak years of their heaviest financial obligations – paying the mortgage while saving for college and retirement. Life insurance over the age of 40 for most people isn’t just a consideration, it’s a necessity. In fact, it may be exactly the right time to increase your existing coverage, or to get coverage for the first time.

And while life insurance might have been less expensive to buy in your 20s, the longer you wait to protect your family, the more expensive that coverage will continue to become.

Financial needs are easier to assess in your 40s

Yes, life insurance does cost more the older you get, but here’s some good news. By the time you reach your 40s, it’s far easier to precisely determine your financial needs. When you were in your 30s, and especially your 20s, $200,000 probably sounded like a fortune. It was easy to imagine living on that money for the rest of your life. But as the years have passed, your salary has increased along with the costs of maintaining your home, car, a 529 plan, and the day-to-day expenses of life.

Buying life insurance when you were younger meant guessing where you’d be in your life. It would have been easy to buy too little or maybe even too much coverage. So if you did purchase life insurance at a younger age, it’s a good idea to review your coverage annually, in case your needs have increased.

Think about what you need to protect now

Whether you’re getting life insurance for the first time, or increasing existing coverage to protect your expanding assets, the first step is to assess your financial needs and obligations. Has your salary increased over the years? Is it likely to continue increasing? Do you have children? Are you paying for college? Or contributing to a 529 plan? Are you and your partner prepared for retirement? How much is left on your mortgage? These are all enormous expenses that your partner will have to take on alone should the unthinkable happen to you.

Then again, you may be farther along in your financial obligations. Your mortgage may be paid off, and your children may have already finished college. If so, good for you! In that case, your life insurance needs won’t be as critical but you might want to consider term life insurance for estate planning. Naming your partner as beneficiary would provide for a more comfortable retirement, free of the tax implications that may come with inheriting retirement accounts like an IRA or 401(k). Of course, you could also name your children as beneficiaries, and help to transfer some of your assets to the next generation without worrying about taxes.

Getting the details right

While term life insurance is one of the most affordable types of coverage available, getting the details right can help make sure you get the right coverage at the right price. These details include:

Coverage amount. As we’ve shown, your finances will determine how much coverage you need. Experts recommend six to eight times your annual salary, but that’s just a start. To get a more accurate number, take a good look at where that money may need to go:

Living expenses, including rent or mortgage
Household debt
Childcare expenses
Estate and other taxes
College tuition
Medical bills
Funeral costs

The term. If you’re buying life insurance in your 40s, you might think a shorter duration would be a good way to save money. But think about a 10-year term. That only takes you into your 50s. You’re still young and may have some significant financial obligations still to come. Be sure to consider everything, and plan for it.

Beneficiaries. People usually choose their partner as sole beneficiary. But, if you have dependents, you may need to think about naming what’s known as a contingent beneficiary. This is often a family member who would care for your children if both you and your partner were to die.

Stay-at-home parents. Do stay-at-home parents need life insurance? It’s impossible to overstate how much a stay-at-home parent contributes to the family finances. While he or she may not earn a salary, they provide non-stop benefits that would have to be paid for if they were no longer there – daycare, at-home education, carpools, preparing meals…you get the idea.

The best age to get life insurance? Right now.

We all know what life insurance is designed to do. And many of us wait years, or decades to start a family, or buy a home. So, we never even asked ourselves, “When should I get life insurance?” because we never thought we needed it. But for those of us who woke up one day with house and car payments or little ones filling the house with love and laughter, there’s no going back. Now is the time to think about how much they mean to you, and how much you mean to them.

By purchasing term life insurance now, in your 40s, you can help protect all the joyful days the kids have ahead, or your partner’s ability to pay the bills and let them stay in the home they know and love. Because what we do now matters in the years ahead of us, not the years behind us.

Banner Life/Legal & General

Why you need to consider term life insurance in your 20s and 30s

December 15, 2022 | Blog, Life Insurance |

Life insurance? Under 30? You might be asking yourself why anyone who’s young and healthy would even need to think about life insurance. Well, as it turns out there are a lot of good reasons for people to consider getting term life insurance as early as possible.

Protect your family. Now.

Many people often ask themselves what’s the best age to buy life insurance? When you’re young and single, and no one financially depends on you, you probably think you don’t need it. But family obligations come in many forms, and life can change on a dime. Being prepared for the unexpected is far better than scrambling to figure things out once it’s too late. We all have people we care about–people who we want to protect even if we’re no longer around.

Family members. Even if you’re single, there may still be someone who depends on you. Perhaps a parent, or a sibling. But what if you (and your income) were suddenly gone? What would your loved ones do? Having a life insurance plan in place when you’re starting out gives you peace of mind, knowing the people you care about will be taken care of should something happen to you.

Your partner or spouse. Marriage, of course, means financial interdependence. But the same is often true of people who are not yet married. Could one of you afford to stay in your home on one income? Whether you’re married or permanently partnered, life insurance may be one of the most important decisions you can make to protect one another from the unexpected. It means giving your partner the financial resources to pay the rent or mortgage, cover the bills, while grieving and figuring out what comes next.

Children. In 2016, millennial moms accounted for 82% of births in the US even though the general trend these days is to wait to have children later in life. So, whether you’re 25, 35, or 45, having children means needing life insurance so their lives are not permanently interrupted should the unthinkable happen to you or your spouse.

Your coverage will never cost less.

While life insurance may be the last thing on your mind in your 20s and 30s, the fact is you’re passing up a once-in-a-lifetime opportunity by waiting until you’re older. Life insurance premiums are calculated based on your age and health when you initially buy the policy. Being young and healthy means your premiums will be lower than at any other time in your life. And with every year that you wait, the premiums will typically increase. And, rather than saving money by skipping life insurance for all those years, you’ve actually cost yourself a great deal more in higher premiums later on.

Easy to qualify.

Remember when we said being young and healthy meant low premiums? Well, being in tip-top health is also an advantage. In fact, you may be able to get the life insurance coverage you need right away – without the inconvenience of a medical exam. That saves time and money. And think of the alternative. You wait 25 years or so. You may still be in great shape. You exercise. Eat well. But your blood pressure is just a little high. Or you may have a few extra pounds you can’t get rid of. And suddenly you find that getting the coverage you need has become not only more expensive, but more difficult as well.

There’s a lot more to come. And a lot more to protect.

When you get life insurance you have to remember you’re not just protecting what you have now, but everything you and your family could have in the future. That’s why for many people term life is the best type of life insurance for a 30-year old because it offers the best of both – affordable coverage and the protection you need during the years you need it. And term life is flexible. It’s available in policies that cover you for 10, 15, 20, 25, or 30 years.

In order to figure out how long you’ll need coverage, think about where you are in your life right now. Have you just started a family? Then you might consider a policy that protects your family until your youngest graduates college. Are you in your 30s, and just bought a house? Maybe you want to get a longer term to make sure the mortgage is paid so your spouse doesn’t have to raid your retirement savings to get by.

Your debts and final expenses are covered.

Many people don’t realize that when they die their financial obligations live on. And some of us can have quite a bit more debt than we realize, from credit cards and car loans to student loans and mortgages. In fact, the average 35-year old has $133,100 in debt on average. And like we said, it doesn’t just go away once you die.

Let’s look at the type of debt you may have. If your parents co-signed a car loan or a credit card, they’d be responsible for paying that off after your death. Depending on what state you live in, your spouse may also be financially obligated to pay off all your debts even if he/she wasn’t a co-signor. And while government student loans are forgiven, private student loans are not. Anyone who co-signed for your student loans are on the hook for those too.

We know no one wants to think about it, but on top of everything else, your loved ones will have to pay for your funeral. And that could really hurt. Because the average funeral now costs about $8,755, according to the National Funeral Directors Association. And then there’s the rent, car payment, bills, and all the usual day-to-day expenses that are a part of life.

Your life has only just started. Protect it.

While it may seem like you don’t need life insurance because you don’t have anything to protect, chances are you probably have a lot more that needs protecting than you realize. Plus, it’s always smart to plan for the future. Are you planning on buying a house one day? Settling down and getting married? Maybe even having a few kids? If the answer is yes to any of those questions, then you should consider getting life insurance while you’re young and healthy.

So, if you’re still asking yourself what’s the best age to buy life insurance? The answer is now. We are here to answer your questions – 817.545.3900.

information provided by Banner, Legal and General

How much life insurance should you have?

October 27, 2022 | Blog, Life Insurance |

Even if you’re not always here for your loved ones, life insurance can offer a way for you to continue to take care of them even after you’re gone. Deciding how much life insurance you need is unique to each person, but there are several factors that can help you estimate the amount of coverage that can best meet your goals.

Final expenses

Along with the emotional distress of losing a loved one, paying for costly funeral expenses can add to the hardship, especially if your family does not have the savings to do so. On average, a funeral costs around $8,000, and can quickly increase with additional items and services. With life insurance, your family can rest assured that these expenses can be covered by the benefits of your policy. To help estimate how much will be needed for final expenses, think about your preferences for burial/cremation, cemetery plot, and memorial service.

Supporting your family

If you have a family or other loved ones who depend on you, you may be considering life insurance to help create a financial safety net for the future. When determining how much life insurance you may need, think about the cost of caring for your dependents, such as your children or parents. This includes the amount of money they would need to cover daily living expenses, like utilities, groceries, and medical costs, and perhaps nonessentials like vacations. To begin estimating the minimum amount of life insurance you may need, thinking about these questions can help get the ball rolling:

How many years will my family need my financial support?
How much income would I like to provide after I’m gone?
How much would I like to provide for childcare?
How much outstanding debt would I like to pay off?
How much do I want to put into an emergency fund?
Would I like to provide college funding for my children?

Tackling debt

If you have outstanding debt, your family may become responsible for paying down these amounts after you die, so this can be an important factor in calculating how much coverage you need. Debts can include credit cards, car payments, mortgages, student loans, and any other personal loans you may have. With life insurance coverage in place, your beneficiaries can use the benefit amount to help pay off this debt.

Paying for college

When deciding how much life insurance coverage you may need, you may want to consider the cost of sending your children to college. Tuition can be one of the largest expenses your kids will have, where the average in-state tuition at a public 4-year institution costs over $9,000 per year. This does not include additional expenses and costs of living, like books and supplies, room and board, and transportation. If your kids plan to attend college or a trade school, or are currently enrolled, you may want to include these amounts when determining the amount of coverage that is right for you.

Your age and health status

Your current age and health are commonly determining factors when deciding the type, amount, and cost of life insurance coverage. Typically, life insurance rates increase as you get older, since as you age, there’s a greater risk of death. This can be a good thing to keep in mind when deciding the best time to consider buying a policy. Certain pre-existing health conditions, like high blood pressure, diabetes, and high cholesterol, may also impact your eligibility and rates. Overall, the younger and healthier you are, the more affordable it usually is to get coverage, so don’t delay if financially protecting your family is at the top of your list.

The cost of life insurance

If you research how much life insurance coverage is recommended, you will likely see that many experts suggest estimating six to ten times the amount of your annual salary. This rule of thumb can offer a good starting point, but remember that since your individual situation is unique, you will want to consider all the factors that pertain to you. A financial professional can be very helpful in determining the type of life insurance and coverage amount that can meet your needs and budget. Together you can create a well-thought-out list of your financial obligations and goals and determine how much life insurance can ensure your loved ones are protected.

Buying life insurance for your whole family

October 6, 2022 | Blog, Life Insurance |

Life insurance is an important part of financial planning for everyone in your family. It’s designed to help protect our loved ones when we pass away, both financially and emotionally. Although most of us tend to imagine individuals when we think about life insurance buyers, coverage can also be extended to your children and other family members to help make everyone’s lives a little easier when a death occurs.

How to purchase policies for extended family

You can take out a life insurance policy on an extended family member or someone important in your life, such as a romantic partner or business partner. To do this you’ll need to get the person’s consent on the policy. In other words, you need him or her to know what you’re doing and you need to get their permission via signature to collect vital data, such as vehicle records, prescription records, and relevant health and life insurance information for the application. The person will typically have to undergo a life insurance medical exam as well.

Another important part of the process is demonstrating insurable interest, which means you need to be able to show proof that you will suffer emotionally and financially if the person dies. Typically, your spouse or parents do not have to prove insurable interest when purchasing policies. Other connections, such as a business partnership or a girlfriend/boyfriend relationship will need that documentation. Your insurance company will want to verify that there’s a true relationship between you and the person you want to cover.

It’s important to note that you cannot buy a life insurance policy for anyone you want. An acquaintance or stranger will be rejected by your insurance company.

Why you might want to buy coverage for others

There are many reasons why you might want to cover people with life insurance, depending on who they are, their relationship to you, and their situation. Here’s a breakdown of potential insurees:

Spouse or partner

Life insurance is an important part of securing a future with your spouse. It’s a good idea for you to have a policy that can cover:

Outstanding mortgage payments
Payments for any debts from your assets
Investments or future income
Day-to-day living expenses
Child care expenses
Final expenses when you pass away

For more on buying life insurance for your spouse check out our blog, how to buy life insurance as a couple.

Parents

Aging parents often come to depend on their children in their golden years and caring for them comes with financial responsibility. Buying life insurance for your parents can provide you with financial protection if they leave behind unpaid bills when they die. Some of the financial considerations that life insurance can help cover include:

Medical bills – As your parents age, they may accumulate significant medical costs. Prescriptions, medical treatments, doctor or hospital visits, and other care costs may be outstanding when they pass away. If a parent dies in a hospital, the medical bills can be costly for the final days of treatment.
Financial debt – If your parents have a mortgage, credit card balances, or other outstanding loans, those debts are often passed down to other family members, leaving them with bills they didn’t expect.
Funeral expenses – When a parent dies, you may need to make funeral arrangements if they weren’t already planned. Funerals can cost thousands of dollars. Costs for a casket, urn, flowers, obituaries, transportation, use of funeral home and more can be a financial burden on you and your family.
Moving a surviving parent – If one of your parents dies, you may want to move your living parent closer to home to care for her or him. Those moving expenses, as well as the process of selling the old home, can cost thousands of dollars, especially if your surviving parent lives out of state.
Caring for your living parent – To care for a surviving parent, you may need to take time away from work, which can impact your income and savings. If a surviving parent requires long-term care in a facility, the cost can be significant.

Children

Life insurance is financial protection that helps dependents cover the bills when a family breadwinner dies. Very young kids don’t provide financial support to your family, so in most cases, it isn’t necessary to take out life insurance for them. The main reason you’d consider taking out a policy on a child would be to cover the cost of his or her funeral expenses in the event of an unexpected death.

A policy for a child would lock in premiums at a young age, protect your child’s insurability, and could be used for investment or savings for your child’s future expenses. However, while life insurance rates will go up as your kid ages, chances are they won’t ever be priced out of or denied a policy when they need it.

If you have an older child, and you cosigned student loans, mortgages, car loans, credit cards, etc., you may want to take out a life insurance policy to pay off those loans if your child dies prematurely. Conversely, as a son or daughter with a co-signed loan, you could take out a life insurance policy on your parents to make sure you can cover the costs on the money borrowed, should they pass away.

You can insure your child by purchasing a children’s life insurance policy or adding a child rider to your own life insurance policy.

Siblings and other relatives

There are some scenarios in which covering your brother, your sister, your aunt or uncle, or even your cousin makes sense. If your sister, who is taking care of your elderly parents, suddenly dies, for example, your parents may not be able to cover the care they need. To ensure their continued support, you would purchase a life insurance policy for your sister and name yourself the beneficiary. That way you would get the money to help care for your parents.

If you are considering a life insurance policy for your children or an extended family member, it’s a good idea to make an appointment with a financial professional to understand your options and develop a strategy.

North American, A Sammons Financial Company

Life insurance for stay-at-home moms

August 11, 2022 | Blog, Life Insurance |

As a stay-at-home mom, you may not be the family breadwinner, but the things you do for your loved ones daily are incredibly valuable. In fact, according to the 2020/2021 salary.com survey of 19,000 mothers, a stay-at-home mom’s salary value is equal to $184,000. Needless to say, all that you do every day would not be easy to replace. That’s why it’s so important to consider having a plan in place to help ensure your family could stay afloat. One option is life insurance. Here are some of the ways a life insurance policy can benefit your family:

Cost of living

The main benefit of a life insurance policy is to provide a death benefit to beneficiaries should you pass on. A life insurance policy can help to keep your family financially stable after you pass away. The death benefit proceeds from a life insurance policy can help to cover everyday expenses like mortgage or rent payments, utility bills, groceries, and more. Getting a payout from a life insurance policy could be a big help for your family to maintain their standard of living.

Debt

Should you pass away, death benefit proceeds from life insurance can be used to help pay off those debts or make them more manageable for your family. It can also be used to help pay for any of your outstanding debts.

Childcare expenses

One of the biggest expenses your family will have to shoulder without you is the long-term costs of child care. According to a 2021 Care.com survey, 72% of families say child care is more expensive and 46% of families say child care is more difficult to find, due to the pandemic. If you pass away, your kids will need someone to watch them while your partner is working. Your children may also need to be taken to school, the doctor, sports practice, and other places, so someone will need to drop them off and pick them up. Hiring a caretaker is a line item your family likely did not have in the budget. Death benefit proceeds from a life insurance policy can help to make sure your kids are looked after if you aren’t there.

Home costs

If you pass away, maintaining a home by cleaning, shopping, and cooking is a big job. Some of these chores can be covered by your partner but chances are good that help will be needed. This can also be a big expense where death benefit proceeds from life insurance can help.

Mental support

Should you pass away, your family may face a difficult adjustment period, emotionally and financially. Life insurance can help make that process a little easier by helping pay for such things as grief counseling. It can allow your partner to take time off.

Cost of final expenses

The price of a funeral can be very expensive. According to the National Funeral Directors Association, the median cost is $7,848. A life insurance policy can help your family pay for funeral arrangements and other related expenses required to lay you to rest. Not having to worry about money for your final expenses can help make things easier for your grieving family.

Inheritance

With a life insurance policy, you can not only set aside money for your children to help them carry on when you pass but also aid them in the future. Leaving your beneficiaries money can go a long way toward helping your loved ones pay for something like higher education down the road.

What types of life insurance are available?

The type and amount of life insurance needed as a stay-at-home parent depends on your personal situation. Some factors to consider may include:

Home services for your partner. These might include outsourced services for housekeeping, grocery shopping, cooking, transportation, etc.
Cost of full or part-time child care in your area if needed.
Types of life insurance available, how much they cost, and your budget constraints. Some options include:
Term life insurance –Term life insurance is typically the least expensive. It provides death benefit protection for a specific period, typically 10, 20, or 30 years as long as the premiums are paid.
Permanent life insurance – Permanent life insurance offers lifetime coverage and some offer the potential to build cash value, as long as premiums are paid.

What can life insurance do for you?

July 28, 2022 | Blog, Life Insurance |

If you want to protect the people you love, life insurance should be an important part of your financial planning. It can provide a meaningful amount of money to your family, give you a way to leave a legacy, and much more.

What are some uses for life insurance?

The main benefit of a life insurance policy is to provide a death benefit to beneficiaries should you pass on. There may be a variety of advantages to the life insurance policy you choose, such as coverage for final expenses and growing your retirement savings. Here are some features you may be overlooking.

Living benefits

Some products include accelerated death benefits, which allow you to accelerate a portion of the death benefit while living, if you should be diagnosed with a qualifying illness. These benefits are subject to eligibility requirements. The funds can be used toward medical bills or any use of your choosing.

Coverage for final expenses

The national median cost for a funeral could end up costing thousands of dollars. One of the biggest costs for your family when you die is your funeral. You may leave behind end-of-life expenses such as medical bills, which will fall on the shoulders of your loved ones. Life insurance can help prevent that kind of financial and emotional strain on your family by covering the cost of your burial and other expenses.

Retirement savings

Whether you started retirement planning too late, or you worry you simply won’t have enough retirement income to meet your needs in your later years, life insurance can help supplement your retirement income with policies that feature cash value growth potential. You can access cash value through policy loans or withdrawals and the money could be used for a generally tax-free income stream.

Funds for your child’s college

Did you know that life insurance can be a great college funding solution? With permanent life insurance, you can protect your family and build college savings at the same time. With permanent life insurance, you have the opportunity to grow cash value by taking advantage of indices that are linked to the stock market when the market is high subject to a cap, while protecting yourself from loss when the market is low with a 0% floor. You can then use the cash value that you may accumulate over time to help pay college tuition costs, whether it’s an in-state or out-of-state college.

Business planning

Are you aware of the role life insurance can play in business planning? Whether you’re an entrepreneur thinking about how to protect your share of the business or are looking for ways to reward your top performers, life insurance could be a solution.

Talk to an agent to help

If you want to get up to speed on all the options available in your life insurance, consider making an appointment with an agent to discuss your policy today.

from North American, a Sammons Financial Company