Less than 60% of Americans have a life insurance policy in place, and one in five of those people admit that they donāt have enough.
Each year, May 2 is celebrated as National Life Insurance Day, marking the anniversary of the first life insurance policy being written in the U.S. in the late 1760s.Ā
While you may not have had this day marked on your calendar, it does serve as a good reminder that it might be time for a life insurance check-up.
Despite having a national holiday dedicated to it, less than 60% of Americans have a life insurance policy in place, and one in five of those people admit that they donāt have enough. Whether you are underinsured, or part of the 40% who have no insurance at all, one thing is certain ā 100% of us need life insurance protection. So whatās stopping you from getting this vital coverage?
For some, itās simply not knowing enough about the product to make an informed decision about purchasing it. For instance, the first question most people ask is āhow much life insurance do I actually need?ā Dave Ramsey recommends that you choose a face amountāthe amount of benefit that would go to your family if you pass awayāthat is 10-12 times your annual income. This ensures your family has enough financial support to help them move forward, cover any bills and debts and prepare for their future.
Another common misunderstanding about life insurance policies is the difference between term life insurance versus whole (or permanent) life insurance.
The most affordable type of life insurance plan (and the only type that we recommend) is term life. Term life insurance provides you with coverage for a specific amount of time, usually between 10 and 30 years. This option is more affordable because it is not worth anything unless you were to die during the course of the term, at which point your beneficiary would receive the tax-free proceeds of your policy. Once the term period is over, you are no longer covered by life insurance unless you purchase a new term policy.
Whole life insurance (sometimes called cash value or permanent insurance) is insurance that lasts your entire lifetime. The premiums on whole life insurance policies tend to be significantly more expensive because you are accumulating a cash value in addition to your death benefit, which is similar to an investment-type product. Often, these premiums can be up to 20 times more expensive than term life insurance premiums. Because of the high cost of whole life insurance, obtaining 10-12 times your income is typically not an affordable option, so many people buy lower-value policies than what they need and therefore cannot provide their families with the level of protection that they deserve.
As a society, we are strained by debt and struggling to balance our finances and responsibilities. It is possible, however, to ensure you and your family are able to establish an emergency fund, get out of debt and seek out high-quality investment opportunities to build wealth while maintaining a low-premium life insurance policy.
One of the greatest gifts you can give your loved ones is security for the future. Donāt be a part of the 50 million American families who are either uninsured or underinsured.
Jeff Zander is CEO of Zander Insurance.
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