We all have some new habits these days to protect ourselves and our loved ones: wearing a mask, washing our hands, practicing safe distancing.
Have you thought about adding life insurance to that list?
Not necessarily because of the pandemic: Heart disease and cancer are still by far the leading causes of death in the U.S. But the coronavirus highlights the importance of being proactive to safeguard our families — physically and financially. Life insurance is an important way to do that.
Are you covered?
Nearly half of us aren’t, according to LIMRA’s 2020 Insurance Barometer Study. Yet most families would feel a financial pinch pretty quickly with the loss of a primary wage earner: 28% within a month, 44% within 6 months in LIMRA’s study. Of those who have coverage, 43% in LIMRA’s study say they don’t have enough or aren’t sure if they do.
Your employer may provide a base level of group coverage, either a flat amount or equal to a year’s salary. That’s great, but it’s likely not enough — and if you leave the company, you may leave your group coverage behind. To keep your protection intact at a level that meets your family’s needs, you’ll need your own policy. Ask your employer if your group insurance coverage is “portable” — meaning you can take it with you — or about converting your group coverage to an individual policy.
How much coverage do you need?
Research shows many people underestimate the amount of protection they need to maintain their families’ way of life. Your ability to earn an income may be your biggest financial asset. Without it, those who count on you for that support could face significant financial hardship.
One rule of thumb is to multiply your annual income by at least 3, ideally 5 to 7, for the amount of coverage you need. But you could need more if, for example, you have special-needs dependents or an unusually large amount of debt. Or if you have no dependents and significant savings, you might need less.
How much will that cost?
Probably not as much as you think. More than half those LIMRA surveyed estimated the cost of a typical policy at three times the actual cost.
Your employer may offer the opportunity to buy additional coverage at your annual benefits enrollment. This is often an affordable and convenient way to increase your protection. You may even be able to have the cost automatically deducted from your paycheck.
When’s the best time to buy coverage?
The sooner, the better in most cases. In fact, 40% of consumers in LIMRA’s survey wish they’d bought it at a younger age.
“For individual policies, the younger you are, the more likely you are to qualify for more coverage at a lower premium,” advises Matt Purington, assistant vice president of product and market development at Unum. “For group policies, the cost will likely increase as you get older, but you’ll usually have the opportunity to purchase a significant amount of coverage regardless of your health status. Buying while you’re younger and healthy also ensures you have protection in place in case you develop health conditions later on that could make coverage more expensive or hard to get.”