When's The Best Time To Apply For Life Insurance?
The best time to apply for life insurance is in your twenties, bar-none. Why? Whether you opt for whole life insurance or 30-year term, if you apply in your twenties you’ll:
This is regardless if you’re married and have children, whether you’re twenty or twenty-nine.
Now, we’ll go easy on you and admit that if you’re still covered under your parents’ insurance (up to age 26 in most states), then waiting to sort out your health and life insurance around age 25 isn’t a bad bet. And if college debt, car payments, a minimum wage job, or what-have-you has got you second-guessing additional monthly payments, we’ll level with you:
While we can’t technically hand out what your premium would be if you started paying in your twenties vs. if you decide to pay later on in life (there’s regulations about these things), we can tell you that a ballpark average for a twentysomething applying for good life insurance usually lands between $35-$50 a month. Do you know what that looks like? Two nights eating out + a Netflix or Spotify account.
The idea of possibly cutting back making you antsy? While everyone’s situation is different, we tend to err on the side of “don’t sweat the small stuff.” We’re going to drop the name of a guy who doesn’t even know our insurance company exists (Ramit Sethi) and let you chew on this principle:
It’s called the Big Wins Manifesto, and we love it for so much more than the fact it basically says, “Hey! Why give up the $5 lattes [and the much-needed life insurance] when you can focus on the big investments that will actually get you ahead?” While the focus of this article isn’t career-based financial planning (and we’ll just link Sethi’s manifesto so you can learn from and support his ideas yourself!), it’s worth looking into as you start making financial decisions for you--and not as a shoulda-woulda-coulda from a random financial expert.
What If I’m Not In My Twenties?
No, you don’t start dying on the inside once you reach thirty. Where that depressing idea of looking at life came from, we don’t want to know. And we’re not about to make you feel guilty because you’re still deciding on life insurance in your thirties and up.
Yes, life insurance rates tend to rise depending on the age of the applicant. And yes, there’s a bigger difference between thirty and thirty-nine than there is between twenty and twenty-nine (at least in the underwriting world).
But we often know more of what we want and what we need by the time we’re in our thirties: our careers have schooled us on personal and financial investments, families and mortgages are (on average) in the picture, and thoughts of the future are a bit more immediate.
Besides, there’s always term insurance; no one says you’re married to life insurance (unless they’re selling you whole or universal life, that is). A ten-year term life policy may be just up your alley!
How Do Tax Brackets Affect My Death Benefit?
On the topic of costs (oh, joy!), let’s take the long view on the hidden costs of life insurance. This is going to vary over time and by state, but let’s get comfortable with the overall idea so it doesn’t sneak up on us later, shall we?
When death benefits are issued, they are taxed on that year’s tax bracket--not the year the policy was first issued. That could mean that your $200,000 death benefit could be cut down by say, a 28% tax bracket. Okay, now your beneficiary receives $144,000.
While there’s no way of knowing what the given tax bracket might be should your policy ever be issued (if you have term) or exactly when it is issued (if you have whole), it’s not a bad rule of thumb to estimate a 30% tax bracket and decide if that means you want to insure a higher death benefit or look into additional financial investments to help provide for your loved ones.
And that’s something important to remember: life insurance is an investment.
Can I Pick A "Wrong" Beneficiary?
Here’s a quick tip: if it can be helped, don’t declare your estate as your beneficiary.
Those tax brackets we just mentioned? Well, when you apply your death benefit to your estate, your heirs now have a wealthier estate to manage. And a more expensive estate = a more taxable estate. Oftentimes your heirs will be saddled with more taxes, less death benefit, and the beginning of a headache. But be sure to talk with your personal agent about what possible scenarios would look given your unique circumstances.
Most people will be content leaving their primary beneficiary as their spouse, and may name their children as contingent beneficiaries. In fact, it's almost always a good idea to name a contingent beneficiary, and the reasoning is the same as the estate example above. Say you and your spouse both pass away in a car accident and you have no contingent beneficiaries declared. Your death benefit is now inherited by your estate--which again creates that over-taxed scenario that we're not the biggest fans of.
But there can be dozens of ways and reasons for your life insurance policy--like those illustrated in this article.
We want to make your policy shopping quick, comfortable, and painless. These are just a few of our insights on life insurance, but feel free to contact us today with any of your burning life insurance questions!
Until then--be happy, healthy, and insurance-savvy!
Perhaps you know next-to-nothing about life insurance--the terms, the angles, the advantages and disadvantages. And you wouldn’t be alone.
Today we’re bringing you three quick life insurance tips: we’ll break down the basic terms you need to know, look at how much insurance you need, and explain the differences between the two main types of life insurance.
Let’s get started!
Life Insurance In A Nutshell
Though different forms of life insurance have been around since the days when the Roman Empire was still kicking, insurance as we know it really began in the mid-1800s. It’s a formal contract between the insured and the insurer that states a lump sum of money will be paid out at the insured’s death, or after a set period of time--given that the insured pays their premium, that is.
Most people choose between $100k to $250k for their death benefit. How can insurance companies afford to promise all of these extravagant sums? Well, it turns out that your high school statistics class was good for something.
Underwriters use the law of large numbers to determine the probability that they’ll be paying out these grand death benefits. Obviously, they bet that the majority of people will not need to cash out before the end of their term (if they have term insurance) or within the first, say, ten years of their whole term insurance policy.
If this was more likely (say, the member in question had pre-existing conditions, poor health, or was considerably aged), then they would adjust for this likelihood either by increasing premiums across the board (which naturally occurs over time) or by denying the potential member.
How Much Life Insurance You Should Buy
Most people purchase between $100k and $250k of life insurance. Typically, the age and amount of children, the salary a spouse does or doesn’t make, and the cost for daily living will determine the appropriate amount.
It’s a good idea to keep in mind funeral costs, charitable donations, and educational funds, amongst other costs and concerns that go beyond the typical lump sum payout.
*Keep in mind that the example chart above does not account interest rates or tax brackets.
Whole vs. Term Life Insurance
Life insurance is a financial tool, but it’s not the only one.
If you’re not yet familiar with what whole life or term life are, the basic split comes down to this:
You pay for whole life until you die. As long as premiums are met, you’re covered. As you continue to pay premiums, you accumulate cash value. It’s similar to how some credit cards will reward you with a small kickback for continually paying your bills. With whole life, you are guaranteed a payout at death and the death benefit is dispersed to your chosen beneficiary (whether that be your heir, estate, foundation, etc). They will also receive that accumulated cash value. It sounds a bit like a handy savings account is tacked onto your insurance contract--and what’s more, the payout is guaranteed. Sounds nifty, right?
On the other hand, term life is only guaranteed for the term chosen. Say you want to make sure your family is covered if something should happen to you within the next 10 years. You pay your premiums for those 10 years, but if something happened to you, say, 11 years after the policy, your family would receive zero coverage. However, term insurance tends to be cheaper in the long run and statistics are in your favor if you’re covered from the years 35-45, if such is the case.
What Does Your Perfect Life Insurance Policy Look Like?
This blog is just getting started--but if you have any more questions on today’s article, feel free to reach out to our friendly staff and to stay tuned for future posts!
Ready to get a free, quick quote today? We’d be happy to help you find your perfect life insurance policy. At Health Benefits Now, we believe in helping people come to their best decisions regarding healthcare coverage.
We can’t wait to get started!
What’s Your Goal?
Life insurance is a personal finance tool, plain and simple.
It’s a way to hedge your bets. It was created to pay money after somebody passes away. The who, the what, and the why almost seems painfully obvious: those with families buy insurance to provide protection should the odds not come up in their favor.
Take a look at the chart above. Do you know where you fall?
Income Replacement: You want to protect your family against the premature death of either yourself, your spouse, or another guardian and to use your life insurance to offset the loss of income.
Final Expenses: Part of the reason you are looking into life insurance is to help cover for funeral and other administrative expenses incurred due to loss.
Business Insurance: One of the most common uses of life insurance is actually related to businesses and business partners. The policies usually come in these 4 flavors:
Emergency Fund: Life never runs smoothly after a loss, especially a premature one. Life insurance policies can be tailored to include an emergency fund, meant to account for time taken off work, medical expenses, and counseling.
Estate Taxes: Don’t make the mistake of writing “payable to my estate” as your beneficiary! One way to hike up taxes is to add value to your estate; which really means you could end up leaving a highly-taxable estate to your loved ones. Instead, make your life insurance policy even smarter by having it help you curb estate taxes. See our recommended reading below and talk to one of our agents today to get started!
Charitable Giving: With some clever allocation, you can use your life insurance proceeds leave a gift to an organization without making too much of a dent in the overall size of your estate. Just use the death benefit to replace the value of the property gifted to heirs.
Special Needs Child: We want to give all that we can to our children, and life insurance policies can be tailored to provide funds for those with special needs.
Education Fund: Should the unthinkable happen, a life insurance policy can be used to make sure your children still receive the caliber of education you always planned for them.
Start Planning Your Future Today
As you can see, there are a host of ways to look at life insurance. The basic reasoning behind any policy isn’t complicated, however: you want the peace of mind that comes with knowing what you value is being taken care of.
All insurance is about peace of mind.
Thankfully, our quotes are quick, painless, and free. Request information today and we’ll be back to you within 1-2 business days (and we’re always trying to beat our own record)!
Bonus: Other Great Reads
Questions and Answers on Life Insurance - Tony Steuer
“The Why and How of an Executive Bonus Plan”
“How To Avoid Taxation on Life Insurance Leads”
The usual story that people get told about healthcare is this:
But we all know it’s more nuanced than that. Here at Health Benefits Now, we’re demystifying healthcare one article at a time. And today we’d like to shed light on something they don’t normally tell you about healthcare and insurance:
What’s A Healthcare Advocate?
Healthcare advocates (sometimes referred to as patient advocates) focus on reducing a member’s out-of-pockets costs when it comes to medical bills. Depending on the advocacy program, they can assist self-paying patients as well as those with insurance. In short, they help patients navigate the healthcare system so they receive the most reasonable bill (if any) at the end of the day.
How do they do this? Advocates are trained in the in and outs of the healthcare system and use their direct contacts at hospitals and carriers to represent their clients’ cases. They collect paperwork about how much the member makes and how much coverage (if any) they already have. As you’ll see below, there’s plenty of loose interpretation in insurance policies--and advocates work to make that interpretation come out in their clients’ favor.
It’s important to note that healthcare advocacy programs are NOT insurance. Yes, you pay a monthly fee, and yes, you can receive discounts on hospitalization. However, healthcare advocates work with those who have little, no, or lapsed insurance--and they don’t “share risks” like an insurance company is designed to do.
You might be asking at this point: Ok, then what’s the point? Why pay extra, especially if I already pay for insurance?
To answer that question, we’re going to take a brief pit-stop and talk about insurance contracts. Even if you are currently uncovered, it’s good to know how to interpret the fine print:
Medical Emergencies: The Usual, Customary, and Reasonable Charge
Ask yourself this: What constitutes a medical emergency? For you, that might be anything that leads to an unforecasted visit to the doctor or ER. It could be a broken arm or the swine flu or a sudden deadly allergy. Either way, it was unexpected and it wasn’t from any type of negligence on your part, and now you’re stuck with the co-pay (or worse) on your medical bill. Surely, this is a medical emergency.
But neither you nor your doctor are the ones interpreting what constitutes a medical emergency. That responsibility belongs to somebody you’ve never met who happens to work in your insurance carrier’s office. And they’re looking at your insurance contract, which is talking less about “emergencies” or more about what those “emergencies” cost.
Because it’s also neither you nor your doctor that get to interpret what a “usual, customary, and reasonable (UCR) charge” amounts to. You racked up four days and three nights at a hospital (like our pal Steve below)? And it costs $12,000? Your insurance carrier could very well state that this is not usual, not customary, and not reasonable. Because who else has a say?
So, their UCR charge? Say they pick $7,000. Know what that means? You’ve got a cool five grand to come up with. Sure, this was an emergency, but in their book it wasn’t that kind of emergency!
Good News: We aren’t about to tell you that insurance companies are never there for you (we wouldn’t be in this business if we thought that), and, to reiterate, you do have an advocate on your side.
Just take a look at Steve’s story down below to see how healthcare advocacies have worked miracles:
Back in 2012, Steve was self-employed and working a non-salaried position at a Fortune 500 company. The position was seasonal, eight months out of the year, to coincide with football’s pre-, mid-, and post-season. At the time, the job did not offer year-round benefits.
Steve was going on his third year with his company. He was married, didn’t have any dependents to worry about, and was used to weathering his lapse in coverage in the off-season between January and May. After all, so far, so good.
It happened in February 2012--a whole four months before Steve was set to be covered with Fortune 500 premium benefits. A sudden bout of pancreatitis landed Steve in the hospital for a total of 4 days/3 nights, which created just over $12,000 in medical bills.
What was Steve going to do? He wasn’t covered through his entrepreneurial business, and he’d just been clocked off his seasonal benefits at work.
There was one teeny change that Steve had made in his healthcare. It just so happened that 2012 was the year that he picked up a healthcare advocacy program.
One week and a bit of paperwork later, and his particular healthcare advocate was able to verify that he had a source of income but was financially unable to pay for his medical bill--and that same advocate was then able to knock off everything.
Now, this is NOT a guarantee that this happens every time. But if you look up “miracle worker” in the dictionary, we wouldn’t be surprised if a patient advocate’s portrait showed up.
So, how can an insurance agency help you find out more about healthcare advocacy?
For that, you just request a free quote.
Already covered by an insurance carrier? No problem--we can still look into adding an advocacy program to your custom healthcare plan.
It takes five minutes to get a quote, and all the information you get is free.
What are you waiting for?