Are you aware that September is Life Insurance Awareness Month? Research shows that 4 in 10 American households are putting their financial future at risk by not having life insurance.
According to LIMRA’s 2020 Insurance Barometer Study, 54 percent of all people in the United States were covered by some type of life insurance. The total percentage of market penetration for the life insurance industry is relatively stable, though it has been trending downward over the past decade.
2020 saw an industry-wide gain of at least two percent in the first half of the year, according to LIMRA. While exact data is not available, the latter half of 2020 saw continued growth in people applying for life insurance due to the pandemic.
In 2019, insurance benefits and claims totaled $762.1 billion, according to the Insurance Information Institute (iii). Compared to 2018, when benefits and claims totaled $784 billion, the number decreased.
This amount includes death benefits, annuity benefits, disability benefits and other payouts. The largest payout in 2019 was $339.6 billion for surrender benefits and withdrawals from life insurance contracts made to policyholders who terminated their policies early or withdrew cash from their policies.
One of the most significant determining factors in life insurance costs is age. The premium amount increases on average eight to ten percent for every year of age. Age can also influence whether a person qualifies for life insurance coverage at all.
Revenue-wise, the life insurance industry generated $922 billion in 2019, a 2% increase from 2018’s $904 billion.
$759 billion in direct premiums were written by line, life/annuity insurance in 2019
About four-fifths of the revenue from life insurance premiums came from ordinary, direct policies. The other one-fifth came from group life policies.
Other avenues of revenue for life insurance companies include net investment income, reinsurance allowance, separate accounts revenue, and other income, totaling $242.4 billion.
At nearly 13%, MetLife has the largest market share of the life insurance industry for direct premiums written, followed by Equitable Holdings (7.9%) and Prudential (7.8%).
Life insurance premiums are primarily based on life expectancy, determined by several factors, including gender, age, health, smoking, and more. Generally speaking, the healthier you are, the cheaper your premiums.
Another thing that affects your rates is the type of life insurance that you choose to obtain.
Term life insurance is typically least expensive because it lasts a set number of years with no cash value other than the death benefit.
Permanent life insurance lasts a lifetime and includes an investment portion. Because of this cash component, the cost for this type of life insurance is substantially more.
These are some average rates for life insurance from a few insurance carriers, keeping in mind that actual premiums will vary per individual:
Life insurance company Average cost of life insurance for 35-year-old female is $20.34 per month and the average cost of life insurance for 35-year-old male is $23.63 per month
Deciding which life insurance policy to purchase or even deciding to get life insurance at all can feel overwhelming, especially when consumers are often influenced by a lot of information, some of which is not based on fact.
You may have heard that life insurance is too expensive or only healthy people qualify, but often these things are not the truth or are only partly true. Here are several life insurance myths:
Fact: You are never too old or too young to purchase life insurance. It’s true that your costs will increase as you age and that people with illnesses or certain risk factors may pay more, but there are life insurance policies available for everyone.
Fact: Your loved ones can use life insurance benefits to pay off your debts, including student loans, mortgages, and car loans. It can also be used to take care of your final expenses, such as burial.
Fact: To keep it simple, it depends on the type of student loans you have. Federal student loan debt is forgiven upon death or total disability, and family members are not responsible for it. In this case, a life insurance payout could go to other things such as living expenses or funeral costs.
Private student loan debt can be different and is not as cut and dry. You’ll need to ask your lender if they provide student loan death forgiveness, which will give you a better estimate of how much life insurance coverage you need.
Fact: Life insurance benefits are generally income tax-free up to a certain threshold, according to the Internal Revenue Service (IRS). However, any interest payments on top of the policy may be taxed.
Fact: It is possible to convert some term life insurance policies, depending on the policy you purchased. However, you should find out the details from your agent before buying your policy.
Fact: Having life insurance later in life has many advantages, like relieving the burden of funeral costs, paying state estate taxes, paying off your debt or simply giving your children a nest egg they can use to help support their own families.
Fact: The national median cost of a funeral with a burial is $7,300, according to the National Funeral Directors Association. Your savings were likely for retirement, so your loved ones may have to pay for your funeral costs if there is not enough left over. Additionally, if you have any debts, your estate will use your savings to pay for those, which could reduce the amount left for your beneficiaries.
Fact: Consumers often overestimate the cost of a term life insurance policy. Many individuals are surprised to learn that a healthy 30-year-old could potentially get a $250,000 20-year level term policy for just $13 a month. With this policy, beneficiaries would receive the full $250,000 (as most are tax-free) if they were to pass away between 30 and 50.
Life insurance can be very affordable, depending on the type and amount of coverage you need.
Fact: If you’re a stay-at-home parent, you don’t bring in an actual paycheck, but you likely provide services that could cost a lot of money to replace, such as child care, daily transportation, cooking and more. Life insurance benefits can help replace some of these costs.
Fact: Life insurance actually does often cover a policyholder’s death by suicide in many cases. Frequently, however, life insurance policies include contestability and suicide clauses which must expire before the benefit will be paid out. This period is usually two to three years, but beneficiaries may receive the death benefit once the clauses expire.
Fact: While health is often used to calculate rates and coverage amounts when determining a policy’s premium, it doesn’t mean that life insurance is out of the question with a pre-existing condition. Even further, there are some policies specifically built for consumers with pre-existing conditions, such as diabetes.
Additionally, suppose the individual is within the eligible age range, typically 40 to 85. In that case, they can consider guaranteed issue life insurance if they don’t want their medical information to be a factor at all.