Life Insurance has to be one of the most confusing and stressful topics for people to discuss. This topic, however, could leave your family in even worse conditions if the unthinkable happens – sudden and unexpected death. I reached out to Jason Moody CPCU Vice President of Centurion Insurance and an expert in the insurance industry. This blog will be the first of a three-part series on common questions people have and maybe neglect to ask regarding life, home and auto insurance. Let us take a look at life insurance and how not preparing for a sudden, unexpected death could have a negative long-term effect on you and your loved ones.
Jason B. Moody is an insurance expert who partners with CEOs, business leaders, and individuals to develop risk management solutions. He has spent over 15 years in the insurance industry working for Fortune 500 companies as a company representative; recruiting and agency development manager of an agency aggregator; and now as a business consultant working to develop risk management plana. Jason is always looking to create value for his teams and clients. His past initiatives earned him awards as Company Representative of the year with the Independent Insurance Agents of West Virginian and recruiter of the year with the Strategic Independent Agency Alliance. He is a Chartered Property Casualty Underwriter (CPCU), a distinguished designation earned by completing rigorous studies of commercial insurance and business topics.
Me: What is life insurance?
JM: Life insurance isn’t a fun thing to think about, and it may seem like an unnecessary expense. But if you have people who depend on you for financial support, then life insurance is really about protecting them. In the event something happens to you, your designated beneficiary would collect a financial benefit upon your death.
Me: What are the different types of life insurance?
JM: Term Life Insurance: This is the simplest and generally the cheapest form of life insurance. You buy coverage for a specific period of time and a specific amount of a death benefit. It is a great idea to have yourself covered through the biggest debt years of your life: paying a mortgage; supporting children in college; or other major events until you have those debts resolved. There is no cash surrender value.
All other types of life insurance are permanent and there are several varieties. All include a savings element that builds a cash value, in addition to the death benefit. Once that cash value accumulates, it is accessible to the policyholder tax-free. The following are some of the common types of permanent life insurance.
Whole Life Insurance: You purchase this policy to cover your entire life, as long as you keep paying premiums. Premiums remain constant throughout the policy, and the company invests a portion of your premium that becomes the cash value. These are more expensive than term policies in the early years, but they even out because the premium does not increase.
Universal Life: This policy is similar to whole life, but has the potential for higher earnings on the savings component. It is more flexible in terms of changing premiums and face value throughout the policy. There is usually a guaranteed return on the cash value. Disadvantages include higher fees and the possibility of increasing premiums.
Variable Life: A variable life policy generally has fixed premiums, and you have control over the investment decisions for the cash value portion. However, this is riskier because there is no guarantee for the cash value.
Me: How much coverage should someone have?
JM: It is difficult to know how much life insurance to purchase. Many people decide based on an income replacement calculation, between 5 and 10 times the amount of your current income. There are many determine how much coverage you will need. Think about your personal circumstances: Are you the sole income in your household? If you are a stay at home parent, think about the costs that would have to be replaced. Are there other expenses, such as college tuition, that may arise in the future? Don’t forget to include potential medical and funeral costs. Above everything, you want to be sure your family does not get stuck with bills, debts or expenses upon your death that they cannot afford.
Me: So, a stay at home parent should have coverage as well?
JM: Yes. Just think of all that your significant other does on a daily basis and how difficult that will be to replace without some type of coverage to help you and your children.
Me: When should I buy life insurance?
JM: Buying life insurance may seem unmanageable right now, but it could be a smart decision. Unlike many other benefits, life insurance is actually more affordable right now than in the recent past. Plus, the earlier age you purchase the policy the lower the premiums will be.
Me: Thank you for taking the time to discuss life insurance.
JM: Thanks for asking me to do it!
I can share my own experience of recently buying life insurance outside my employer’s coverage, which is highly recommended. I waited until the age of 40 to procure a new policy after finding an abnormality at the doctor’s office. Thankfully the abnormality turned out to be nothing serious. That however caused a huge delay in my getting coverage and effected my annual premium. Had I started a policy younger and slightly healthier, it would have been much cheaper over the life of the policy.
Underwriters will look at every facet of your life: age, height, weight, medical history, family medical history. You will be asked to sign a form to release all medical records to underwriting. Many, many more factors are considered as well that we won’t take time to discuss as this is more individually based. Your information will be placed against an algorithm to determine your insurability risk, and cost for coverages.
It should be pretty clear at this point that you need to sit down and make some very important decisions that can affect you and your entire family. Remember, age and good health give you a better chance of qualifying for a good rate on a policy. You can even add policies for your children for pennies on the dollar from your employer typically. Again, not a pleasant thought, but funeral costs are very high and a life insurance policy could make a very stressful time just a bit easier. Feel free to reach out to Jason for more information. Below you will find his phone number and email address.
More on Jason:
Jason holds a B.S. in Justice Administration from the University of Louisville. Jason proudly serves in the United States Marine Corps Reserve where he has over 20 years of service and two combat deployments to Iraq. In his free time, you can catch him spending time on the Kanawha River in West Virginia with his two boys, tubing and wakeboarding.
Jason Moody can be reached for questions at:
304 993 8393
Jason.moody@centinssvc.com