September is Life Insurance Awareness Month (LIAM). This month is near and dear to my heart for several reasons. I’ve spent the bulk of my career selling life insurance, as it’s the foundation of any solid financial plan. But for me, life insurance is also personal. My parents didn’t own or believe in life insurance. When both my parents passed away, it hit a little too close to home.
Now, for a little background on Life Insurance Awareness Month. LIAM was created in 2004 by Life Happens. They’re a non-profit organization dedicated to helping (and educating) consumers on taking personal financial responsibility through the ownership of life insurance and related products.
Since 2004, Life Insurance Awareness Month has become an industry-wide, nationwide campaign every September. The purpose of LIAM is to educate Americans about the importance of life insurance and helping them get the coverage they need.
Life insurance is essential, and since we’re being real, it’s also a little intimidating. So, in celebration of Life Insurance Awareness Month, here are 7 facts you need to know about life insurance. September is a great time to increase your knowledge and get prepared during Life Insurance Awareness Month.
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7 Facts About Life Insurance to Know During Life Insurance Awareness Month
1. Life Insurance Isn’t Only for Your Benefit
There is a stigma about life insurance. I’ve heard many people say, “It’s not going to benefit me, so why bother?”
So, let’s talk about the elephant in the room before proceeding. Life insurance isn’t a topic anyone enjoys. No one wants to talk about life insurance because it’s not a sexy topic. Moreover, talking about life insurance means addressing your eventual demise. For that exact reason, I want to remind you life insurance isn’t meant for you; it’s meant for those you’ve left behind.
Life insurance is meant to secure your dependents’ financial future and provide the funds necessary to cover any immediate needs. It’s intended for the ongoing support of those most important to you — if you so choose. If you don’t want to continue the ongoing support of those closest to you, again, it’s your choice. But if something happens, life insurance means the difference between a loved one being able to pay the mortgage (or, rent) or getting forced out on the street.
It’s not a pleasant thought, but it’s one we all need to address. This is one of the critical reasons why life insurance awareness month exists—to get us talking about these hard topics rather than ignoring them.
2. Life Insurance is Vital for Women
The economic environment has changed over the past several decades with regard to women. These changes mean your financial role as a woman has adjusted personally as well as professionally. Whether you’re the primary breadwinner or the only breadwinner, you need to take a serious look at what your current life insurance needs may be. Life insurance needs change as our personal lives change—maybe not yearly, but those needs should be reviewed (at the very least) every few years or so.
According to the 2019 Barometer Study (Life Happens/LIMRA), only 57% of American households own life insurance. 40% of those without it say they would immediately struggle to pay living expenses if their primary wage earner died. So, while the increase of two-income households removed a little of the worry and dependence off of the breadwinner, it doesn’t eliminate the struggle, should the worst occur.
Does this mean you should skip insurance if you’re single without dependents? In most cases, no, but it depends on your circumstances (read on for more in-depth details). It’s always good to check with your financial advisor to be sure.
The good news is that for a woman, life insurance is often less expensive than for a man the same age. To understand the reason, look at life expectancy. Women naturally live longer than men. Getting a life insurance policy when you’re younger and in good health will also help you save on cost. But if you put a man and woman who are the same age (and health) side by side, the woman’s policy will be less expensive.
3. Life Insurance is a Key Part of Your Financial Plan
Life insurance is an integral part of your financial plan. Even if you have your investments in place, a life insurance policy is a crucial piece of your financial health.
Income Replacement: If you were suddenly no longer in the picture, would there be enough money to pay for your burial? What about your final expenses, outstanding debt, as well as the monthly, recurring costs faced by your household? Could your partner take time off from work for an extended period, allowing them to adjust to their “new normal” without you?
Paying Off Mortgage: Since a typical mortgage is often 30 years in length, would you want your outstanding mortgage balance paid off in full? Not only do you need to consider the monthly mortgage payment, but also the ongoing real estate taxes, as well as homeowners’ insurance, etc.
If you want your family (or those significant to you) to remain in your home after you’re gone, carrying on in relative comfort, then you must consider these recurring costs. These expenses can add up to a long-term financial burden to your survivors year-after-year.
4. Life Insurance is Important for Single People
So, you may read the facts above and assume I’m not talking to you—think again! The importance of life insurance not only applies to people who are legally attached, but to the single women as well.
My closest girlfriend is single, owns a home, and has a little outstanding debt. In the event anything should happen to her, there would still be outstanding debt that her sister would need to pay off on her behalf. So, whether you’re attached or flying solo, take a good hard look at your “current” outstanding liabilities.
If you’re single, especially if you don’t have any children, I want you to consider these two questions concerning your life insurance needs:
- Do you take care of an aging parent, sibling, or another person you’re legally responsible for?
- Do you hold a lot of debt?
- Outstanding mortgage
- Business loans
- Personal loans
- Student loans
- Car loans
More importantly, do you have a co-signer on any outstanding debt? Because here’s where it gets real again, typically what happens is the executor of your estate will sell off whatever they can to help pay off your debts when you die. But, there’s a little (okay, BIG) caveat: if you have a co-signer on any outstanding loan(s), they’re now responsible for repaying “your” loans once you’re gone. I’m sure had they been completely aware of what they were agreeing to, their decision may have created (at the very least) a slight pause.
5. Life Insurance Protects Your Business
If you own your own business, you can use life insurance for a couple of purposes that (I think) are great! For all you women business owners out there, consider these two key points:
You can purchase life insurance on the lives of your key employees, which helps protect your company from the loss of your most valuable (key) employees. This type of life insurance is most commonly known as “key man insurance,” “key woman insurance,” or “business life insurance.” Should your business experience the loss of key personnel, this type of insurance will cover the costs to train and fill the role without missing a beat.
You can also purchase life insurance to fund what’s called a Buy/Sell Agreement. It’s nothing more than a formalized business continuation plan, where a specified buyer is legally obligated to purchase the interest in the business. Buyers use the death benefit proceeds of the life insurance policy to buy the deceased owner’s share of the company. Not only is the buyer legally obligated to purchase the interest, but the seller (or the estate of the seller) is legally bound to sell the interest in the business in the (future) event of:
I used to work with a lot of business owners, and life insurance was an excellent option for protecting their business interests. It’s a useful safety measure and there are plenty of other ways to use life insurance to keep your business running.
I’ll explain more on both Business Life Insurance and Buy/Sell Agreements in another post, as there is so much more to cover on these topics. During Life Insurance Awareness Month, I thought it was important to remind you that life insurance protects the interests of your business as well as your loved ones.
6. Life Insurance Allows You to Leave a Legacy
Do you wish you had more to give when you pass on? A life insurance policy is an excellent vehicle for philanthropic giving. Here are two ways to explore:
Leaving a Legacy: Use an insurance policy to grow your money and increase the size of your estate to your beneficiaries. The Death Benefit (Face Amount) of your policy is what’s paid out to your beneficiaries. It could provide your beneficiaries with a much larger legacy than otherwise possible. There are different ways of structuring your life insurance policy, so the set-up makes sense for whatever your circumstances. Be sure to check with your tax advisor regarding your particular situation.
Charitable Gifting: If you’re feeling philanthropic, donating your life insurance policy to a charity may enable you to give a more significant gift than you could otherwise afford. For example, I worked with a gentleman who went to Amherst. He wanted to leave a gift to his alma mater, and a life insurance policy was an excellent, painless method for him to do so.
When you’re looking at your estate planning, you’re looking at being a little more strategic as far as possibly minimizing taxes and creating a gift. The government also encourages charitable giving by providing tax advantages for certain charitable donations. Get advice before doing so because the charity must be considered a qualified charity (meaning both you and the charity would benefit from your donation). Be sure to check with your tax advisor regarding your particular situation.
7. You Don’t Need to Fear the Underwriting Process
Now you know a few of the ways life insurance benefits you, your beneficiaries, and your company. We’ve explored the philanthropic benefits of life insurance, too. So let’s touch on one of the 2019 Hot Topics according to the Insurance Barometer.
It’s time for a truth bomb…what usually holds people back from applying for life insurance is the underwriting process itself. I completely understand!
If you’re not exactly what’s considered a “perfect specimen” (AKA: under-tall and overweight) a fan of needles, urinating into a cup, and answering personal health (and family history) questions, no worries! One of the hottest topics in the insurance industry today is called Simplified Underwriting (SUW). Simplified underwriting means no medical exam.
The appeal of simplified underwriting remains strong; 47% of people in the 2019 Hot Topics survey were “somewhat” or “much more” likely to buy life insurance with a simplified underwriting approach. That makes it a strong option, compared with traditional underwriting approaches.
As far as the benefits of the simplified underwriting approach, there are many:
- It’s fast and easy.
- It’s unbiased and objective.
- There are transparent explanations of risk and pricing.
- It helps you avoid the need to see a doctor.
- It enables you to avoid the medical exam, blood, and urine samples.
- It doesn’t require a face-to-face conversation.
If purchasing a life insurance policy has been on your mind, yet you’ve been hesitant, there’s no better time than during Life Insurance Awareness Month (and, especially before the holidays) for utilizing all the benefits available to you and those you care for most.
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