Learn about life and disability Insurance

Why do people buy Insurance? Do you really need it? How much does it cost?

Generally, we buy insurance to have extra protection; essentially help manage risk or purchase a sort of safety-net should something goes wrong. We'll focus on Life, Disability and 'Do it Yourself' Insurance.

What kind of Life Insurance: Term or Whole?

Whole Life

A type of permanent insurance as it combines life coverage with an investment fund. This policy pays a stated, fixed amount on your death, builds tax-deferred each year that you keep the policy, and you can borrow against it without being taxed.

Term Life

Temporary insurance and considered a risk management safety net if something happened during policy length (10-20-30 years) has no investment component. You're buying life coverage that lasts for a set period of time provided you pay the monthly premium and after. When you're young, premiums for term insurance are as low as a few hundred dollars per year for $250,000 worth of coverage.

Top 6 Tips to Picking a Policy

  1. Compare policies (3 or more): Compare price, the definition of disability, and if it is non-cancelable or guaranteed renewable.
  2. Buy Young: Insurance generally gets more expensive as you age.
  3. Buy a non-cancelable policy: If you have this type of policy, the company cannot change your premiums or cancel your coverage as long as you pay your premiums on time.
  4. A Good Company: Agencies like Standard & Poor's or Moody's independently rate insurance companies. Also try Consumer Reports.
  5. Emergency Savings & Waiting periods: If you have enough savings or sick time from work to cover a longer waiting period, it can reduce your premiums.
  6. Where to buy it: If not through work then usually via an agent, ask friends for referrals or your current agent, research online and compare.

How Much Does it Cost?

It really depends

Sorry, but the more likely you are to use it, the more it will cost. Insurance companies do that math based on your age, medical history, type of work, whether you smoke or not and some other factors to estimate your level of risk.

For example:

  • If you are a 30 year-old woman with great heath, an office job and a non-smoker, you will get pretty good rates for the amount of coverage you purchase.
  • If you are a 45 year-old man, construction worker and a smoker, your rates will much, much higher than the 30 year-old female above for the same amount of coverage.

PolicyGenius provides an easy way to find out what type of insurance coverage you need, and they keep your information confidential. They also help you compare policies and get quotes on pricing, so you can get covered and save money.

Disability Insurance

There are basically two main types:

  • Non-cancelable: The policy's premium can never be raised above the amount shown in the policy, and benefits may not be reduced—as long as premiums are paid on time.
  • Guaranteed renewable: You have the right to renew the policy with the same benefits, but the insurer can increase your premiums— as long as they are increased for all other policyholders.

What are the benefits of having insurance?

  • A personal safety net in case you are disabled for months or years.
  • To retain financial independence: short term (up to 2 years) or long term (till 65 or lifetime).
  • Supplements your income if you can't work.
  • Have to prove or meet definition of disabled.
  • Rates vary according to your age, health, occupation, and features.

Do you really need it?

It depends on your situation, here are a few 'what if' scenarios to do a sort of fire drill exercise on your life.

  • Do you have little to no emergency savings and high expenses? Many of us walk a tight line every month, sometimes short-term disability insurance can help shore up your vulnerable spots in case something like a serious illness or disability.
  • Do you have a comfortable savings to last you at least 6 to 12 months? If your short-term scenario is covered, perhaps long-term is what should be highest on your list.
  • Freelancer? Married? Insurance via work & change jobs?

Did you Know? According to the Social Security Department, 3 out of 10 Americans will be disabled as adults.

Where do you get Disability Insurance?

Through work: Some companies provide their employees with group coverage; check with HR to find out if you have coverage. Ask:

  1. Many long-term disability plans only cover up to 60% of your salary, employer-provided disability benefits are usually taxable.
  2. Often, the policy may only cover you while you work there.

Groups or Associations (e.g., AARP) offer disability income benefits for members.

On your own: Through an agent or online.

Shopping Tips: What to look for and common questions to ask.

  1. Terms, Details & Benefits
  2. Non-cancelable and/or guaranteed renewable?
  3. How long is the waiting period?
  4. What is the maximum benefit period?
  5. What is the maximum monthly benefit?
  6. If 65 and working full time can I renew?
  7. Are injury and sickness covered?
  8. Is there a rehabilitation benefit?
  9. Riders available?
  10. What is the premium?
  11. Premium waived while disabled?

DIY Insurance: What you can do for free

What else can we do to manage 'Life' risk? Insurance in your life you already control? What else turns the dials?

There are many things we do, decisions we make everyday, to turn the risk dial up or down:

  • have a designated driver
  • buckle up, put kids in car seats, or wear a helmet
  • get an ergonomic keyboard
  • seek out mental health treatments like counseling or medication
  • go to the gym even though we have a busy day?

Health

Staying healthy can keep us, well, healthier, according to a British Medical Journal Website article on a Swedish study.

  • Living a healthy lifestyle into old age can add five years to women's lives and six years to men's.
  • It is well known that lifestyle factors, like being overweight, smoking and heavy drinking, predict death among elderly people.
  • Of the leisure activities, physical activity was most strongly associated with survival.
  • The average age at death of participants who regularly swam, walked or did gymnastics was two years greater than those who did not.

Happiness

Being happy can influence how happy we are, but other things that make life rich and 'insure' a high quality of life:

Money is not necessarily the key to happiness: A 2010 study from Princeton University's Woodrow Wilson School found that, up to $75,000, each boost in income increased participants' happiness. But after that, bringing home more income ceased to matter in their overall life satisfaction.

According to the World Happiness Report

  • Mental illness is the single most important cause of unhappiness.
  • The US is ranked #17 in Happiness
  • Which factor has “a strong positive link with life evaluations"? ... having someone to count on.

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