The Right Amount of Coverage

Consumers try really hard to only buy what they need. Its good to only buy what you need for groceries because excess groceries go to waste. Life insurance, on the other hand, never goes to waste no matter how much is purchased. Even if a life policy is only meant to cover funeral expenses, any amount of coverage above that cost can be used by the beneficiary for other needs. Technically, the beneficiary doesn’t have to spend the insurance proceeds on a funeral; the money can be spent on anything the beneficiary desires. Its also good to error on the side of getting more than enough coverage because of inflation. People ask me all the time how much coverage they need for a cremation. I’m careful to only give rough estimates because one funeral home can have very different prices than another funeral home. $5,000 of coverage should cover a cremation and ceremony. Or you can get half the coverage if no ceremony is needed. Use this quoting tool to see what different amounts of coverage cost.

Policy Reviews

How often should you or your agent review a policy? Some policies such as universal life are high maintenance. Other policies such as whole life are low maintenance. Universal life allows flexible premium payments, which is too much freedom for some consumers. Not paying enough over an extended period of time can cause a universal life policy to cancel. Annual reviews of universal life help to make sure the premiums paid are not too low. Whole life only needs to be reviewed when there is a life event: marriage, birth, divorce, etc. Life events sometimes warrant a beneficiary change.

Where Do I Start?

The world of life insurance can seem both simple and complicated at the same time. The simple part is knowing that you want to be covered at the time of death. Seems simple right? For some types of plans it is that simple. For other types it isn’t that simple. When describing term life insurance, the word “term” is short for terminating; its meant to end at a particular point. Some term policies automatically renew for one year periods, but with each renewal comes a dramatic price increase. Even if people can afford the price increases, term policies automatically cancel at a certain age. This is not ideal for covering the cost of a funeral. The vast majority of people will not pass away while a term policy is in force. Only about 1% of term policies result in a claim, which is the main reason why those policies are so cheap. Whole life, on the other hand, does not terminate so long as people continue to pay their premiums. There are also no price increases with whole life; the price you start with is the price you keep.