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No 'one size fits all' for life insurance options

Life Insurance and Annuities
by Tim DeMars
No 'one size fits all' for life insurance options
No 'one size fits all' for life insurance options

Millions of Americans have at least weighed their options when it comes to life insurance, and many go on to actually buy the coverage they need. However, this isn't always the case, and issues often arise during that assessment process as a result of people not being able to fully understand their coverage needs based on their unique life circumstances. To that end, it's vital for those within the life insurance sector to make sure they can provide consumers with plenty of sage advice about the best policies for their needs.

One group that doesn't fall under the traditional rules pertaining to life insurance needs is stay-at-home parents, according to Kiplinger. After all, the general advice given to everyone regarding life insurance is often that they need 10 times their current annual salaries. Of course, unless those stay-at-home parents have jobs that allow them to work from home, they likely don't earn a salary at all, so in theory there would be nothing to replace, and they wouldn't need coverage.

However, that's not the case, because they are providing labor in the form of childcare that would otherwise be quite expensive from a daycare or preschool, the report said. As such, it's vital for them to at least have life insurance that would cover the cost of that child care until such time as a child wouldn't need it any more.

Finding the right coverage takes plenty of research.Finding the right coverage takes plenty of research.

Others with unexpected life insurance needs
Meanwhile, parents of young children - whether they stay home or not - may face similar issues, the report said. When kids are, say, under the age of 5 or 6, they may need a lot more than 10 times an annual salary because they're going to need financial support beyond the next 10 years. This is especially true due to the cost of living constantly being on the rise and inflation, both of which make a median salary today worth less five or 10 years down the line. As such, some experts recommend these people need more like 20 times their current salaries to cover all those eventualities.

In addition, many young people who don't have coverage yet - often because they don't see the need for it because they don't have dependents or spouses - may likewise feel as though life insurance just isn't a pressing need, according to ValuePenguin. This may be especially true because many millennials tend to overestimate how much life insurance costs, or underestimate the benefits it could provide. But when young adults have significant debts such as student loans or car and credit card payments, having that coverage will help alleviate some of the financial burden that would otherwise be passed on to their parents or other relatives.

Young adults often view life insurance as a sort of investment tool, as well, and while that can often be the case - and typically is a good idea for young people - it's not a hard and fast rule, the report said. Being able to advise millennials as to the benefits of term life insurance can also go a long way toward helping them make the most informed decision possible about their coverage.

What about older people?
At the opposite end of the spectrum, many Americans who are now approaching retirement age may be looking at their long-term life insurance policies and thinking about what to do with them, according to U.S. News and World Report. In certain instances - such as no longer carrying any debt - they may feel they don't need coverage any more at all. In those cases, it's wise to first talk to an advisor who can counsel them on the best possible options for dealing with that eventuality; it's often unwise to simply let a long-term policy lapse.

Furthermore, it may be possible for them to reduce their ongoing life insurance costs by likewise contacting their insurer to reduce the death benefit that policy carries, the report said. This will lower their premiums but can also provide a little more financial wiggle room as they approach their post-career years, during which time they will be more likely to live on a fixed salary from a combination of pension, retirement savings, Social Security and the like.

Weighing the options
As with anything else related to life insurance, the best possible plan for any person is to consider all their options and really study the differences between coverage such as whole, term or universal life insurance, according to personal finance expert Mark Avallone, writing for Forbes. When people are able to make informed decisions about what kind of life insurance they need, they will be far more likely to land on policies that work well for their insurance and budgetary needs on an ongoing basis, giving them the flexibility to add to and subtract from their coverage over time.

To that end, it's vital for those within the life insurance industry - from policy providers to brokers - to do more to ensure their outreach is effective in educating people about all the options available to them. That effort, in turn, will help them forge strong, lasting relationships with consumers who will be more likely to be satisfied with their life insurance situations.

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