Life insurance: More important and less expensive than you think

By Higginbotham on May 20 , 2015


Life insurance: Most people know they need it, yet many people still don’t have it. Still others have some, but not enough. If you fall into one of those categories, consider this: Life-changing events happen in an instant. When it’s your time to go, no one is going to ask … “Wait a minute! Does he have enough life insurance to provide for his loved ones?”

The good news: Term life insurance is probably not going to cost as much as you think.

In fact, the 2014 Insurance Barometer Study by nonprofit Life Happens and the insurance industry research group LIMRA found that more than 80 percent of Americans overestimate the cost of life insurance. For example, when asked what they thought a $250,000 term life insurance policy would cost for a healthy 30-year-old, individuals under the age of 25 guessed $1,000 – almost 10 times the actual cost of $150 a year.

What is term life insurance?

Under the umbrella of life insurance, there are two major types of coverage: Term and permanent. Generally, permanent coverage stays in force until you die, and term coverage stays in force for a stated time period (the term), such as 10, 20 or 30 years. Another major difference is that most permanent policies accumulate cash value (like a savings account) in addition to serving the primary role of paying a death benefit. With term life insurance, the policy does not accumulate cash value. Term policies serve one purpose only: To pay a death benefit if and when it becomes necessary.

Because term life insurance is temporary, and because it does not accumulate cash value, it generally costs a lot less than permanent coverage. In fact, if you have some life insurance through your employee benefit plan, it is most likely term life insurance.

What is greatest advantage of term life insurance?

Term life insurance allows people of all income levels to access affordable coverage at the time they need it most – when they have young families and debt. It’s an essential element of every family’s overall financial plan.

For example, if you have children, you obviously want them to have the best futures possible. If you’re here to provide for them, you can facilitate that goal. But what if you’re not here to provide for them? Will funds be available to ensure that your family can afford to sustain the family home? Can your spouse afford to care for your children, or will he or she need to take on another job? Will your children be able to attend college? You could confidently answer “yes” to these questions if you have adequate life insurance.

Even if you don’t have children, you may own a home or have loans for other large assets. If you have sufficient life insurance, it could pay off your mortgage and other debts in the event of your untimely passing – and those assets could be passed on to surviving family members. Your life insurance benefit could also be used to pay for your final expenses so your loved ones are not left with a big bill.

Take the next step.

It’s best to be prepared. If you don’t have life insurance, consider purchasing a policy. If you already have life insurance, consider purchasing a second policy to supplement the coverage you already have. Contact Higginbotham's life insurance experts to talk about your options.

Tags: Individual Life & Health


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