Isn’t life insurance designed to cover funeral and burial expenses? Yes! That’s right. And many Americans recognize this. According to the Life Happens and LIMRA 2021 Insurance Barometer Study, it is the No. 1 reason people have life insurance.
This year, the survey delves deeper into the Black community’s perceptions and attitudes in a special report titled “Black Americans: Life Insurance Attitudes and Ownership.”
According to the study, Black Americans have a greater understanding of what life insurance does when someone dies. Around half of all Americans (48%) carry life insurance to cover final expenses, with Black Americans having a higher rate of 66%.
However, that is only part of the story.
What happens to a family’s home, bills, children’s education, and planned retirement if a key source of income is lost due to the death of a loved one?
How will those expenses and dreams be paid for tomorrow, the following day, next year, and so on?
That is also why life insurance exists. However, many people are unaware of the full scope of what a robust life insurance plan may do in the long run. In fact, only one-third of Americans (35%) say a key reason for having life insurance is to offset lost wages or income, and this figure is slightly lower among Black Americans (31%).
Life insurance can be used to cover the following expenses:
EXPENSES IMMEDIATE
funeral and burial expenses
medical costs
auto loans for rent or mortgage
estate settlement fees credit card debt taxes
CURRENT EXPENSES AND BILLS
groceries
housing \sutilities \stransportation
insurance and health care
carrying on a family business
FUTURE OBJECTIVES
College expenses
Life Insurance Retirement Living Benefits
Your policy may include living benefits in addition to income replacement. Permanent life insurance (as opposed to term life insurance) builds monetary value over time.
And you can use that money however you want: to help you buy a home, pay for an emergency, or even augment your retirement income – no questions asked! (However, keep in mind that taking or borrowing funds from your policy can lower its cash value and death benefit, and may result in tax consequences if not repaid.)
Furthermore, life insurance can assist you in leaving a financial legacy for your place of worship, alma mater, or any other organization you care about.
Remember that life insurance is much more than just “burial insurance.” It certainly can be a gift that continues to give long after you are gone. For additional information, see the life insurance 101 part of our website or call an insurance specialist to assist you locate coverage that matches your budget.
What to Expect When Purchasing Life Insurance
Let’s face it: most individuals aren’t thrilled about the prospect of purchasing life insurance. However, the pandemic has given many people pause. According to a recent survey, 45% of younger Americans (ages 22-40) are more inclined to purchase life insurance today.
If you find yourself in the “likely” category these days, knowing what to expect will help you get started. So we sought the advice of Paul Dougherty, a senior life insurance agent based in Maryland and past president of the National Association of Insurance and Financial Advisors.
We also spoke with Marilyn Gill, a 48-year-old San Francisco life insurance buyer, about her recent experience purchasing a policy through an internet broker.
Recognize the job of an agent
“We’re at our finest when we’re fixing a problem for a consumer that they may not even be aware of,” Dougherty adds. “As agents, our duty is to get to know you and to be able to see what’s around the corner for you.”
A certified insurance specialist will conduct a thorough financial needs analysis and lead you through the questions that will assist you in determining how much and what type of insurance is best for you. This consultation is completely free.
“We’re not transactional professionals,” Dougherty explains. “You have a million tasks on your to-do list. We have the luxury of looking at things through the lens of potential pitfalls and assisting you in mitigating those risks before they become disastrous.
It’s a terrific feeling when we can shed light on some of the questions you may not have even asked yourself, and then turn that light to some solutions.”
Online coverage is always preferable to none.
“The best kind of policy is one that is there when you need it,” Dougherty says.
“We let them know they made a good choice,” if a new customer has an online policy. We frequently leave something alone and construct a plan around it to augment what’s already there. I tell folks that I’ll either offer you a better package or make you feel better about what you have.
In some circumstances, they may have precisely what they require.”
“I would love to have someone handling all my insurance needs,” Gill says, “but I didn’t have an existing agent, and phoning one and delving into all my health history would have felt far too awkward.” I also enjoy doing online research.”
She worked her evenings and weekends as a sales and design consultant for a commercial gardener gathering information before submitting an application.
Look for help from a licensed agent
“Our language is unique to our business,” Dougherty adds, “and it is unusual for customers to understand it.” We explain how various policies function and demonstrate our consumers how we can get a solution through a variety of techniques.”
Even if you order online, you may expect assistance from a licensed agent. “I wouldn’t have gone ahead with an online policy if I couldn’t talk to people on the phone,” Gill says. It’s too important a decision to make entirely online.”
Five pointers for selecting an agent:
Obtain referrals
Learn about their specialties.
Inquire if they are a member of any professional organizations.
Schedule introductory meetings
Inquire about their education and training. More information »
Prepare to discard preconceived notions.
“I learned a lot,” Gill admits. “One thing I learnt was that if you have a health condition that is being managed successfully, your rates may not be affected.” That was enlightening. That was causing me a lot of anxiety.”
She was also happy to learn that her prior smoking habit will have no effect on her rates. “All that matters is that you’re in relatively decent health right now.”
The biggest eye-opener for many individuals is the cost. Consumers vastly overestimate the cost of life insurance, according to the 2021 Insurance Barometer Study. A healthy 30-year-old can, in fact, buy a $250,000 20-year level term policy for roughly $13 per month. In Gill’s instance, she paid less than $50 per month for a policy that would pay off her mortgage with room to spare, leaving her college-age daughter as “my largest asset free and clear.”
Understand the main questions
“Ask yourself, if something were to happen to you tomorrow, what would be the financial impact on individuals you care about,” Dougherty asks.
An agent will assist you in quantifying this impact through a confidential discussion of your income, other assets, and debts (like a mortgage). They’ll ask you who you want the policy to benefit — what’s known as a beneficiary. They will also inquire about your health, interests, and other activities that may affect your eligibility. Keep this material on hand, as well as any early ideas and queries.
Questions to ask your agent include:
What amount of life insurance do I require?
What exactly is covered?
What if I am unable to pay my premiums?
Will my insurance premiums ever rise?
Can I convert or change my policy in the future?
What businesses do you suggest, and why?
Longevity and financial soundness are important considerations when making a decision.
If you’re comparing a few organizations with similar rates, prioritize reputation, financial soundness, and longevity over cost.
“You have to believe that the company has been around and will be around in the future—that they’re financially strong enough to make a promise and keep it 40-50 years from now,” Dougherty says. The A.M. Best Company ranks insurance businesses based on their ability to meet financial responsibilities, whereas the Better Business Bureau and J.D. Powers rank consumer happiness.
