Chances are, whether you just googled “how does life insurance work” for the first time or you’ve owned a policy for years, there are a few things you don’t know about life insurance.
Most of us know what it is, but few of us know how it works. And let’s face it…life insurance isn’t anyone’s go-to for small talk. It’s not what you want to chat about at playdates while you push swings and pass out goldfish. It’s not what you want to giggle about over margaritas with your girlfriends. It’s not what you want to ask your parents about when they come over for Sunday dinner. It’s definitely not what you want to have a candlelit whisper about on date night.
So we just don’t talk about it.
We’re here to get an important conversation started by sharing a few important life insurance facts. We know some questions can be tough, which is why we do our best to give you the answers before you even have to ask.
1. Your health can affect your life insurance rates more than you might think.
You probably already know that smokers typically pay more for life insurance than non-smokers, and you’re probably aware that most life insurance policies require a medical exam, but what you may not realize is just how much difference a clean bill of health vs. a dinged up one can make.
Rates for smokers may be up to 300% higher for term life insurance policies…so if you’re a smoker who’s been thinking about quitting, there’s a little extra motivation for you. Every insurance company has its own approach, but in many cases, you may qualify for some type of non-smoker rates after 12 months sans cigarettes.
Other health factors that may be considered are weight, blood pressure, cholesterol, and family medical history. While there’s not much you can do about that last one (although here’s a little advice if the issue does come up), eating well and exercising regularly not only increases your chances of a longer life, but also of a lower life insurance premium. How’s that for a win/win?
2. Many life insurance benefits go unclaimed simply because their beneficiaries don’t know how to collect them…or in some cases, because they don’t know the life insurance even exists.
Consumer Reports estimated last year that unclaimed life insurance benefits total at least $1 billion. It sounds crazy, right? But it happens, and it all comes back to that reluctance to talk about things that make us uncomfortable (a list on which your own death is probably close to the top). Buying life insurance is great…but if the people you bought it to protect don’t know how to access the benefits, they’ve lost you AND the gift of financial security that you intended to leave them with.
So this is one time, whether you want to or not, that you need to have an honest, detailed chat with your family about your life insurance plans. Let them know how much life insurance you have, where you keep your policy information, and how to get in touch with the right people if the time comes.
If you think it’s awkward to tell someone about a life insurance policy of which they are the beneficiary, imagine how awkward it might be for them to ask you about it.
3. 1 in 4 people who don’t own life insurance DO own insurance on their cell phones. (via LIMRA 2017 Barometer Study)
This might seem like a silly comparison…after all, phone insurance has to be a lot cheaper than life insurance, right? Maybe not.
A basic cell phone insurance plan costs about $11/month. For $11/month, a healthy, non-smoking, 31-year-old woman may be able to obtain a preferred policy for around $400,000 in life insurance coverage for a 10 year term.
There’s nothing wrong with purchasing cell phone insurance, especially if you know your phone is accident prone (because it’s definitely the phone, not you). Prioritizing protection for an electronic device over protection for the most important people in your life is an interesting choice, even if it’s not a conscious one.
So next time you’re about to sign up for that care plan or extended warranty that “seems like a good deal,” take a moment to make sure there’s nothing (and no one) else you’d rather take care of first.
4. 48% of people who have life insurance don’t have enough to cover their family’s financial needs. (via LIMRA 2016 Barometer Study)
So maybe you have some life insurance, and you’re feeling good. As you should be! Something is almost always better than nothing, but it’s important to make sure that the coverage you have would be enough to help your family maintain their quality of life if something should happen to you.
Not having enough life insurance is kind of like giving your loved ones 50 miles’ worth of gas for a 100-mile drive. They can try to conserve their resources—maintain a steady speed, coast down the hills, turn off the air conditioner and sweat or turn off the heat and shiver—but eventually, they’ll still probably end up on the side of the highway with an empty tank. And you’d never want that.
If you’re not sure what the magic number is, a life insurance calculator is a great place to start. You may still want to chat with an insurance expert to see which life insurance plan might be the best option and confirm that you have adequate protection in place, but you’ll go in with a better idea of where you want to be.
Ready to put this knowledge to work? Thanks to the smart, simple, clickable-ness of Our Life Covered, you can multitask this list like a boss!
• Get healthy with a few miles on the stationery bike while you shop for life insurance quotes from your phone.
• Double check to make sure the amount of coverage you choose is up to the task of supporting your family’s financial needs…and maybe a few things they just want, because that’s what you do.
• Order a new phone case while you’re at it…one that’s big and ugly enough that you’ll never need cell phone insurance.
• Tell your family everything they might need to know. Life insurance might be a hard conversation topic, but it’s a worse secret!
And remember…if you need answers, pep talks, or virtual high-fives, we’re just a click or a call away!