March 15

Why Everyone Has a Need for Life Insurance

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In 2021 Zippia gathered information from 30 million profiles and found that life insurance agents make an average salary of $95,000 per year. In a world that still tends to favor men with higher wages, women in life insurance do well, making 93% of what men make. This makes it an ideal career choice for women.

According to the Insurance Information Institute, there is a need for life insurance in the United States. As of 2020, there is a 16% needs gap, which is equivalent to 41 million potential clients who say they need insurance but do not have it. To make selling insurance even easier, the Covid-19 pandemic has increased the popularity of online/internet sales from 17% in 2011 to 29% in 2020.  

Everyone has a need for life insurance, which is why becoming an agent is the perfect new career. Whether desiring to be self-employed or just looking for a part-time side job, keep reading to learn why everyone has a need to purchase life insurance.

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Who Has a Need for Life Insurance?

The short answer is, everyone who has someone in their life who depends on their earnings. Life is uncertain, and even if a person is young and in prime health, a sudden illness or accident can rob them of life and the dependents of their income. The sudden impact of Covid-19 and its death toll on the world population is evidence of that.

People who need life insurance include:

  • People with a partner who depends on their income
  • People with young children
  • People who pay all or part of the family mortgage, child’s education, etc.
  • People whose family members would have difficulty paying their burial expenses
  • People with debt
  • People with a business
  • People with special needs person dependent on their financial support
  • People who want to leave a financial inheritance to their heirs

There is a reason for even those with no dependents, such as children, students in college, and single workers, to have life insurance.

The death benefit of even a small policy can provide for the person’s final expenses, such as a casket, cemetery plot, headstone, and funeral costs.

The life insurance contract allows the policy owner to select the beneficiaries who receive the death benefit. With policies as low as $10,000 to more than $1 million, they can select benefits that fit their needs.

Parents need to be aware that not only is life insurance a solid choice to provide for their family, but also a solid commitment to insure their children. If they purchase their child whole life/permanent life insurance when young, their policy is much lower in cost than it will if they purchase as an adult.

What Does Life Insurance Pay For?

Life insurance needs to be part of every person's financial planning.

The beneficiary they designate on the policy will be able to use the funds in a variety of ways, including:

  • The cost of a casket, cemetery plot, headstone, funeral expenses
  • Paying decedent’s outstanding debts
  • Subsidizing family income
  • Paying for educational expenses of children or grandchildren
  • Providing a nest egg for surviving spouse’s financial security

They may designate one or more beneficiaries on the policy. Those people have the ability to determine how to spend the funds. Having adult children as joint beneficiaries is an excellent way to provide them with an equal inheritance after the policy owner dies.

What Are Life Insurance Riders?

A rider on life insurance is an additional benefit or amendment to the terms of the basic policy. Riders do cost an additional amount, but the cost is minimal. There are a variety of available riders for life insurance, including long-term care, waiver of premiums, and term conversion riders.

If a basic insurance company does not meet the client's specific needs, a rider is an excellent option. The rider is a lower cost than purchasing the additional coverage they need as a separate policy. There are several types of riders clients may consider.

Accelerated Death Benefit

This type of rider provides the insured party with a cash benefit while they are alive. This is an excellent choice for someone who has a terminal illness and is short on funds. The cash payout can help them cover costs for medical care and improve their quality of life.

When the insured person passes away, a reduction is made in the death benefit to reflect the early payout. The beneficiary will receive the face value less the accelerated benefit paid.

Long-Term Care Rider

This rider is similar to the accelerated death benefit. It provides the insured person with funds to pay for their long-term care. The funds withdrawn reduce the death benefit as they are used.

When considering this rider, the policy owner must consider whether the LTC rider will likely deplete the entire policy death benefit. If the presumption is that the long-term-care costs will exceed the policy death benefit, the client may want to consider purchasing a stand-alone LTC policy.

Term Conversion Rider

When a client purchases term life insurance, they need to understand the coverage is for a limited period of time, usually 10-30 years. Once the policy expires the policyholder no longer has coverage.

There is no guarantee they will be able to extend or purchase the same coverage at the same cost. Consideration must also be given to the possible inability to qualify for coverage at that time, depending on their health.

A term conversion rider provides the opportunity to convert an existing term life insurance policy into a whole life/permanent policy without having to undergo a medical exam at the time of conversion.

Waiver of Premium Rider

This waiver has limits on availability. It is not offered in every state and is usually only available at the time you purchase the policy. The waiver of premium option allows the policy owner to waive their premium payments if they become disabled, seriously injured, or critically ill.

The rider is a guarantee that the owner's life insurance stays current if health prevents them from earning income and paying premiums. When or if the insured person recovers, they will need to resume making premium payments on their own.

What Types of Life Insurance Are Available?

There are two main types of life insurance: whole life/permanent and term. When purchasing either type of insurance for the first time you will likely need to have a physical exam. This is part of the normal underwriting process to determine your risk class.

The risk class is a group of people who have similar health characteristics. The riskier the health class you fall into, the higher your premium will be. Riskier groups tend to be people who are older, have a poor driving record, or have underlying health problems or illnesses.


 

Pro Tip: Term life insurance provides coverage for a set period of time, usually 10-30 years. Term insurance is popular because it is less expensive than whole life/permanent insurance.

The downfall to this type of policy is that when the client reaches the expiration date of the policy, purchasing additional coverage will be more expensive. There are no guarantees that the client will pass a health exam to obtain coverage.


 

Pro Tip: Permanent/whole life insurance is more costly at the initial purchase time but covers the owner for their entire life, as long as they maintain premium payments.

Some policies include an index participating component allowing the policy to increase in cash value. This provides a higher payout at the time of death. 

One bonus to this type of policy is there is no risk of premiums increasing or being denied coverage later in life. This is excellent life insurance to purchase for children because their premiums will be exceptionally low and remain the same throughout their adult life.

How Much Insurance Does a Person Need?

How much insurance each individual needs depends on their particular circumstances. One of the ways of helping people make this determination is by using an insurance calculator. The estimate is based on the expenses the beneficiary will face following the insured person’s death.

The basic rule is a death benefit large enough to pay off all debts, provide for any minor child's education, and supplement the income of the surviving spouse.

In looking at how much life insurance coverage a person needs, CNBC found that plans an employer pays for are not sufficient. Their figures indicate a benefit that is 10 times the insured’s salary is a good starting point. The key factor is to determine the actual needs dependent upon the individual circumstances.

As an independent insurance agent, you will be helping people understand their need for life insurance and recommending how much coverage they need. Getting started in this career only requires a few simple steps.

You need to get licenses and certified, obtain the proper training, select your business structure, develop a business plan, and move forward from there.

Start Your Life Insurance Career Today

If you're ready to begin a career showing people their need for life insurance, TR King Insurance Marketing can help. We have more than 20 years of experience in the insurance industry and serve over 2,000 independent agents and 150 agencies nationwide. We provide you with the support, contract levels, training, software, tools, and more to become a successful agent.

Getting started is easy using our Sell Life Insurance page to start a live chat, call, or schedule an appointment. Contact us today!

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Matthew King


Matthew King is a co-owner of TR King Insurance Marketing. When he's not creating processes, content, developing training, and implementing digital marketing strategies, he likes to immerse in gaming with his wife and friends.

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