During the pandemic, life insurance purchases reached all-time highs as many people saw value in the coverage and perhaps for good reason. Most people say that life insurance is important, yet many people still don’t have any or have less coverage than they would like.
While many individuals say life insurance is important there still exists a lot of misunderstanding about life insurance, which is why September is life insurance awareness month. It is designed to help people gain a better understanding of how life insurance works and the nuances involved with it.
Want to get ahead of the curve? Here are some tips about life insurance awareness month to help you understand your options.
How to calculate your life insurance needs
For those just learning about life insurance, there are two ways to determine your life insurance coverage amount needs. You can use a needs-based approach or a human life value approach to decide how much life insurance to get. My preference is to go with an HLV (human life value approach), however, to start with you can look at the needs-based to get some simple numbers figured out. Get a piece of paper and answer the following:
How much do you have in liabilities(debt- mortgage, car loans, credit cards, etc)?
How much do you have in savings?
What are your monthly income needs?
Who do you want to protect?
Getting a short-term policy that will pay off the debts if you pass away can be a very big help to those left behind. However, someone that has passed away doesn’t need to consider the monthly expenses those left behind do. So getting more can be helpful. Alternately you can begin learning to use life insurance as a leveraging policy to build extra passive income. Life insurance awareness month maybe when you start, though any time of year is good.
It’s always a good time to get life insurance
Regardless of the time of year, you can look into getting life insurance. While health insurance has enrollment period requirements, life insurance does not. Life insurance takes a couple of days up to a couple of months to have approved depending on the type desired and applied for.
Guarantee issue options are the fastest to apply for however you pay a slightly higher premium for the convenience and there is a max coverage amount available. Regular life insurance options have a more comprehensive underwriting process which usually requires a blood draw, medical history check, and other requirements. The upside to non-guarantee issue is that there are more options both with the type of policy but also coverage amount, carrier options, etc.
According to LIMRA.com, 36% of Americans planned to purchase life insurance in 2021, while 48% of Millenials they surveyed said they were going to purchase life insurance. The reason this is important is that many households would suffer financially if the breadwinner were to pass away unexpectedly (42% within 6 months and 25% within 1 month- again according to limra.com).
Do regular checkups of your life insurance needs
If you were to pass away today, how much life insurance would you want for your family? For most people, the answer is usually “As much as I can get”, however, many sources show that many households either have no insurance or are underinsured. It is in one’s best interest to look into their options any time they have a major life event: change in income, new child, move, purchase an investment property, etc.
Many people consider a checkup every year to be normal, maybe even recommended, I suggest you decide what regular means for you and then also do one prior to a known event or after. Many people go years without having any major changes in life and are content to enjoy life for a while. Good for you if that’s where you are at in life.
Make sure that when doing your checkup you look at your listed beneficiaries. This is especially true for those that get divorced and remarried as you want the protection to go to the correct people.
More about life insurance awareness month
The pandemic has caused more people to think about life insurance, however, this comes from a fear-based perspective. Instead of looking at the negative causes consider all the good that life insurance does for those that are still living.
Life insurance awareness month has been around for about 20 years now, created in 2004 by Life Happens. The goal was to spread awareness about life insurance and how it can help create financial security for families.
What goes often overlooked is that life insurance itself has been around for hundreds of years and has been used by corporations and the wealthy while still alive to create more wealth individually and for their business.
While life insurance awareness month may only be once a year, the need to improve financial freedom has never been greater and can be done all year long. We are here to help you learn to use your money twice, build passive income, and/or free up cash flow. Reach out to create your own customized game plan.