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Once we make the decision that more life insurance coverage is needed, there are endless sources of available choices where we can find life insurance for sale. There are no shortages of life insurance agents, brokers and online platforms for quotes and comparisons.
When the question of affordability is asked, that is what becomes an issue as we grow older and as the prices increase we wonder if we can pay for what we need in the way of coverage.
What type of policy should we consider, how can it be arranged so we can afford it, yet at the same time have the amount of coverage we feel we ought to have?
Learn more about affordable life insurance below and make sure to use our free insurance quote tool above! Just enter your zip code and find the best rates for you today!
Work With A Broker
The very best decision you can make when delving into this broad sea of possibilities is to elicit the services of an experienced and well-connected life insurance broker. Chances are, he or she will have access to several quality companies from which to choose and will certainly be able to take an objective approach to your situation.
The broker should also be able to give sound advice regarding the connection of your overall life insurance program to your will and trust situation.
Attention to details such as beneficiary designations, ownership details, and policy types are items to be explored objectively and in detail.
You and your broker ought to set some parameters as to what you feel you can set aside in the way of premium dollars, which will give the broker a range of expenditures with which to work in outlining a plan of life insurance.
General Issues With Affordability
Many people who shop for life insurance look at the process as if they are simply going to the grocery store and buying a can of beans off of the shelf.
While it is possible to purchase life insurance that way, particularly online, it is not always the best way to go about this process.
It is much more helpful to establish a plan that will make sense to you, and especially your beneficiaries.
The question of whether or not a life insurance plan is affordable or not has a lot to do with how the purchaser views the utility of the plan of life insurance.
It depends upon the purpose and what the plan is going to accomplish as to the relative cost and how you see it fitting your objectives. This makes the cost of the insurance about what you feel the overall value of the life insurance is going to accomplish.
Establish Needs and Purposes
Life insurance coverage is usually earmarked for specific purposes such as to cover a mortgage, other debts, final expenses, family income, educational expenses, and special gifts.
If a person has some wealth, life insurance coverage may be necessary to cover estate administrative costs and taxes, especially state estate taxes in many cases.
When you are aware of the specific purpose of the death benefit, it is easier to justify the price you are paying for the coverage.
–Different Policy Types and Cost Factors
Here it is easiest to classify policy types into three categories:
- Whole Life or Permanent Life Insurance
- Term Life Insurance
- Permanent-Term Life Insurance
–Whole Life or Permanent Life Insurance
Whole life or permanent life insurance is defined as a policy that will remain in force for the whole of a person’s life, thus the name “whole life.”
It will have a level premium and a cash value which can be borrowed against or be paid to the policy owner if the policy is surrendered or cashed in.
Variations on this theme include Universal life which can have varying premium amounts and death benefit amounts, withing limits, indexed universal life, where the cash value growth is tied to an index, such as the S & P, and Variable life where the cash value consists of equities.
–Term Life Insurance
Term Life insurance offers a death benefit for a specified term of years, such as 10, 20, or 30 years, and then it ceases to exist. The premium cost is much cheaper than permanent life insurance due to the lesser mortality risk of the insurance company.
Many term life insurance policies have a conversion clause that states that the term insurance can be converted to a permanent policy, regardless of the health of the insured, during the time the term policy is still in force.
–Permanent-Term Life Insurance
Permanent-Term life insurance is used to describe a hybrid arrangement where both a permanent policy is combined with a term policy to achieve some modification of cost and coverage.
In some cases, a permanent policy is written with a term insurance rider attached, and in other cases, a special policy is designed by the actuaries to incorporate the best features of both types of coverage into one policy.
Concepts In Action
To illustrate how flexible these concepts are that have just been discussed, let us assume that a whole life policy for $250,000 has a premium of $4,250 per year.
If we need $250,000 of additional life insurance and we can combine a whole life policy of $100,000 and a term rider for $150,000, we might come up with a premium of $2,658 per year.
Or a universal life contract and a term rider might have a premium of $1,912 per year. As can be seen by these two illustrations, just about any price can be calculated depending on the type of policies, their combinations and the desired results.
There is a term within the life insurance industry called “Net Cost.” In simple terms, the net cost is the amount of cash available from the cash values compared to the premium input. With life insurance, the more you put into the policy in the way of premiums, the more you get back later, say at age 65.
When viewing “cost” in this manner, which cost less, a policy where you break even at age 65, or one where you receive $180,000 more than the total premium input?
Once again, it depends upon the purpose for which the policy owner buys the life insurance in the first place that determines the outcome.
Cost and affordability factors in the purchase of life insurance is in the eyes of the beholder, whether it is age 25, age 50, or age 85.
Of course, it is important to be able to fit a monthly or an annual premium payment into the budget, but if the amount is not justifiable by the reason for the purchase, the effort is doomed to failure from the beginning.
Careful planning and touching all of the details is an important process and should not be ignored.
Working with an experienced broker who is knowledgeable, has the right connections with companies can be an invaluable asset when it comes to searching for the right companies who will give good advice and service through the years.
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