There are a lot of opinions of when you should purchase life insurance but unfortunately with life insurance it’s not one size fits all. One of the biggest factors to consider when buying life insurance is your health. When purchasing life insurance the healthier someone is when they apply and get approved for life insurance the cheaper it will be. Typically as people age they develop more health problems which reduces their chances for the best rate class for life insurance. It is important for people to be realistic with their health and where they fit into the insurance company’s underwriting guidelines. If someone has diabetes, high blood pressure, coronary artery disease, or elevated liver enzymes, chances are they were not born with these conditions. Here is the bottom line when it comes to life insurance; poor life choices will probably cause you to pay more for your policy. Of course there are things out of a person’s control like cancer and family history, but insurance companies base their underwriting guidelines on the law of large numbers which means they look at thousands of people with certain health conditions and actuarially calculate life expectancy. If you walked into a bank with a 400 credit score would you expect the bank to give you a loan with a good interest rate? The same principal holds true when applying for life insurance. Before getting upset and blaming the agent or insurance company it might be a good idea to take a look at yourself in the mirror when you get out of the shower and also read through your medical records. Statistically the younger a person is when they purchase life insurance the better rating they will lock in for the rest of their life.
Lifestyle decisions also play a major role in when you should get life insurance. If you are planning on taking up what insurance companies would consider a “hazardous activity” it might be a good idea to purchase life insurance before you make your plans. Things insurance companies view as hazardous are skydiving, hang gliding, rock climbing, motor vehicle/cycle racing, ballooning, bungee jumping, mountain climbing, scuba diving to more than fifty feet in depth, or in caves, motor boat racing, snowmobile racing, flying as a pilot, student pilot, copilot, and traveling to dangerous countries. Typically insurance companies will ask the insured on the application if they plan on engaging in these in activities in the next twelve months or have engaged in any of these activities in the previous twelve months. If a policy owner wants to pay the lowest cost of insurance then it is wise to plan ahead and know how hazardous activities will affect their life insurance rate classification. The majority of insurance companies will put what’s called a “flat extra” rating on the insurance contract which means take the standard rate and apply anywhere from $1.00 to $10.00 per thousand of life insurance coverage. It is a very good idea to plan ahead and or ask yourself if the hazardous activity is worth paying a lot more for your life insurance policy.
Furthermore, it is important to understand why and if you need life insurance. When thinking about the right time to purchase life insurance there are multiple reasons such as:
• Income Protection – meant to replace the missing income of wage earners for the family or loved ones in the event of an unexpected death.
• Retirement Planning – utilizes permanent life insurance to potentially supplement retirement income for the policy owner.
• Buy-Sell Agreement – a business solution meant to ensure the business will have liquid cash in the event of an unexpected death of an owner, typically to buy out the deceased business owner’s spouse. If designed properly with an attorney and the correct amount of life insurance the business can continue to operate with minor interruptions.
• Key Person – meant to replace the income producing value of a key employee during the transition period of replacing the key person by utilizing a life insurance policy.
• Executive Bonus – a great way to reward and retain executives and highly compensated employees.
• Pension Max – by planning ahead and purchasing life insurance an individual can take the max single life payout option with peace of mind knowing the death benefit will replace the missing joint income if the policy owner predeceases their spouse.
• Estate Planning – addresses the concern of liquidity for the decedent’s estate. Typically if the estate has a lot of non-liquid assets life insurance becomes a great solution for estate liquidity.
• Mortgage Protection – meant to pay off the mortgage balance, typically through the use of a fifteen or thirty year term life insurance policy.
• Child Policies – meant to provide a death benefit for a child, typically through the use of a permanent life insurance policy with the intention of transferring it to the child when they come of age. The cash value in the policy can also be used for potential college expenses as well.
Whatever your reason to purchase life insurance, it is wise to research multiple insurance companies and compare their rates along with the terms of the contract. Some life insurance policies have additional riders built-in and the price is very competitive. If you would like to speak with a Pacific Insurance Group life insurance specialist please call or email our office and we will generate multiple permanent and term life insurance quote options.