No one enjoys thinking of impending death, but providing for those we leave behind long after we're gone is one of those uncomfortable necessities. Do you have the protection of life insurance in place for your North Dakota family? If not, before you start your search for life insurance, there are several factors to consider.
Life Insurance Facts and Statistics
The following facts and statistics are true of U.S. households, according to the U.S. Bureau of Labor Statistics:
- Three in 10 American households (35 million) are uninsured, and half say they need more life insurance.
- More than half of Gen X and Y households – representing 30 million people – need more life insurance.
- The middle market represents the largest segment of uninsured households, with half (36 million) admitting they need more life insurance.
- Seven in 10 women agree that life insurance is a necessity and all people should have it. Only 62% of men believe this to be true.
- One-third of wives have no life insurance at all – despite the fact that 7 in 10 households are dual-income households, and nearly 30% of wives earn more than their husbands earn.
What Is Term Life Insurance?
A term life policy is in force for a specific period of time and has a face value (coverage amount) that you specify when you buy the policy. In the event that you die within the specified term, the insurance company pays the face value of the policy as a death benefit to your beneficiaries.
Insurers sell most term life insurance policies in yearly increments. You can find term life policies for periods of 1, 5, 10 or even 20 years and anything in between.
What Is Whole Life Insurance?
Whole life insurance is much more complex than term life. Many whole life policies also have an investment aspect.
A whole life insurance policy is in force for your lifetime as long as you continue to make your premium payments. Like term life insurance, whole life insurance pays a death benefit. It also has an accumulating cash value.
Whole life is a type of permanent life insurance. Other types of permanent life insurance include universal life, which provides for variable premiums and interest rates, and variable life, which provides an investment option.
Which Type of Life Insurance Should You Choose?
The differences between term and whole life insurance are vast. The type you need depends on your goals and your North Dakota family's circumstances. Consider the following features of each to determine which is best for you.
Term life insurance:
- Provides death benefits only
- Pays benefits only if you die during the policy term
- Easiest and most affordable life insurance to buy
- Purchased for a specific time period, such as 5, 10, 15 or 30 years, known as the “term”
- Becomes more expensive as you age, especially after age 50
- Must be renewed if you want coverage to be extended beyond the term length
- Suitable as temporary, additional coverage in conjunction with a permanent life insurance policy
- Convertible to whole life insurance
Whole life insurance:
- Covers you for life
- Provides death benefits as well as a cash value accumulation (based on a rate of return) that builds during the life of the policy
- Typically requires a health examination in order for you to qualify
- Can be purchased without a medical exam but at a higher cost
- Takes 12 to 15 years to build up a decent cash value
- Can be a good choice for estate planning
- Provides for cash value withdrawal during the life of the policy
- Initially has more expensive premiums than term life insurance but can potentially save you money over the life of the policy if in force for a considerable number of years
What Does Life Insurance Cover?
A basic term life insurance policy should provide enough death benefits to take care of burial expenses and end-of-life care.
A more comprehensive, whole life insurance policy can cover these items:
- Cost of living: Life insurance can cover your family's vital expenses after your passing, such as the payment of your mortgage, outstanding debts and children’s college tuition.
- Trusts and charities: You can use life insurance policy to create a trust as a financial legacy for your heirs, a chosen charity or other organization.
- Retirement and estate planning: You can structure your whole life insurance policy for living costs during your retirement or for estate planning. You can even structure it to cover the cost of your life insurance premiums.
- Business continuation: Business owners often purchase life insurance to protect their business in the event they die unexpectedly. For example, a business owner can construct a buy-sell agreement that pays benefits to one or more surviving co-owners, who can then purchase the policyholders share of the enterprise.
What Will Your Life Insurance Quotes Look Like?
The algorithms North Dakota insurance providers use to calculate life insurance premium quotes are complex and can significantly vary from company to company. Generally, however, the younger and healthier you are, the lower your life insurance quotes will be. For example, a 20-something non-smoking female may find quotes for as little as $20 a month for a term policy, whereas a middle-aged smoking male may find quotes up to $1,000 per month for a comprehensive whole life insurance policy with investment features.
Insurance companies typically take the following into consideration in determining your life insurance quotes:
- Whole vs. Term: Term life insurance quotes are significantly lower than whole life insurance quotes because term life only pays death benefits while whole life builds cash value.
- The limits you choose: A $20,000 term policy will cost far less than a $1 million term insurance policy.
- Your age: The cost of life insurance climbs dramatically as you age.
- Your health: If you have no health conditions, your costs will be lower than if you smoke or have heart disease, diabetes or other chronic conditions.
- Whether you have a medical exam: If you buy “no exam life insurance,” your costs will be much higher because the life insurance company is taking a higher risk to insure you than if you take a medical exam.
Life insurance is complex. It's a good idea to speak with a qualified insurance agent who can help identify your life insurance needs and find you policies and quotes that fit your goals.
Where To Find Life Insurance
You want to be sure that you don't burden your North Dakota loved ones by your passing. You may even want to leave a lasting legacy. Whatever your goals, life insurance is one of those protections few households can do without. Knowledgeable, independent insurance agents in the Trusted Choice® network are always available to answer your questions, help identify your life insurance needs and even assist your loved ones in filing a claim for their benefits.
Contact a Trusted Choice member agent near you to find out how you can protect your loved ones long after you're gone with a life insurance policy that meets your needs and budget.