Life Insurance

How Much Life Insurance Do I Need?

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You need enough life insurance to replace your income and cover your dependents’ current and future financial obligations, including outstanding debt, childcare, health care, and education expenses.

How to Calculate How Much Insurance You Need

You can calculate how much life insurance you need by adding your salary, debt, and other obligations. From that total, subtract your assets. The balance represents how much insurance you need. Multiply the balance by how many years you want the coverage to last. You can use an online insurance calculator or calculate it yourself. Need more details?

Income and expenses

When you calculate your income and expenses to determine how much life insurance you need, list everything. Your list might include:

  • Your yearly, after-tax income from all sources
  • Outstanding debt that your survivors might become responsible for, including credit cards, autos, or a mortgage
  • Cost of raising children, including childcare
  • Cost of caring for an aging parent
  • Current and future education expenses
  • Food, clothing, medical, and vacation expenses
  • Funeral expenses

Assets/Resources

Assets and resources vary with each person. For accuracy in calculating how much life insurance you need, make a comprehensive list. Your assets might include the following:

  • Savings
  • College funds
  • Existing insurance policies

What’s Next?

  • Subtract your assets from the total of your income and expenses. After subtracting your assets, the total represents the amount of insurance your dependents need each year.
  • Multiply the total by ten for ten years of coverage. Other factors can influence the years of life insurance coverage you choose:
    • Age of your dependent children
    • Number of years left before you’re eligible for retirement income
    • Family members who will remain dependents due to illness or other factors, regardless of their age

Factors that Can Change How Much Insurance You Need

Life events can increase or decrease how much life insurance you need.

  • Just starting your family – If you’re starting a family and want to have children, the amount of coverage you need will increase with each child.
  • Children become adults – As your kids complete their education and become independent, you might be able to reduce the amount of coverage you need.
  • Family responsibility – If a family member becomes ill and medical expenses increase, or if you become responsible for an aging parent, think about how much life insurance you need.
  • Retirement – As you reach retirement age and have access to more savings and investments, the amount of life insurance your dependents need will likely decrease.

As you’ve read, many factors influence how much life insurance you need. We encourage you to contact us at Hunt Insurance of Raleigh, NC. We’ll answer your questions, explain other factors to consider, and give you a hassle-free quote. Call, text, or e-mail us.

Term Life vs. Whole Life Insurance – How to Decide

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Trying to decide whether to purchase term life or whole life insurance? Although term life insurance is the most common selection, which one is right for you? After you understand the difference, it will be easier to select a policy.

What Is Term Life Insurance?

Term life insurance provides coverage for a specific period or term. Coverage periods are usually offered in increments of five years—usually between ten and 30 years. When the term ends, you can renew the policy, convert to a permanent policy, or let the policy expire.

  • Premiums – Your age, health history, lifestyle, the term length, and the amount of coverage you want will affect your premiums. Term life insurance monthly premiums are less expensive than permanent life insurance premiums.
  • Payout – Your beneficiary is guaranteed a payout if you die during the term of your policy.
  • Cash value – Unlike permanent life insurance, term life doesn’t build cash value.

What term length should you choose?

Consider a policy that provides coverage until your dependent children, if any, have completed college and live on their own. At the end of the term, if you have fewer dependents, you can lower your coverage amount and save money on premiums. Or you can select a term that lasts until you retire if you’re leaving your retirement income to a beneficiary and can reduce your life insurance coverage.

What Is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance. It provides coverage for your entire—or whole—life. Your beneficiary will receive a payout when you die. And the policy includes a use-it-or-lose-it cash savings account that accumulates over the years as you pay premiums.

  • Premiums – Your age, health history, lifestyle, and insurance coverage amount will affect your premiums. Whole life insurance monthly premiums are higher than term life premiums—five to fifteen times higher.
  • Payout – If your premium payments are current, your beneficiary is guaranteed to receive a payout.
  • Cash value – Whole life insurance builds cash value over time. It’s a tax-deferred “living benefit” for you. If you die, your beneficiary will receive the death benefit, but the cash value will return to the insurance company. 

It takes time to weigh the facts and decide which policy is best for you. Our post, Whole Life Insurance Policy – 5 Questions to Ask First, gives details on what you should consider before selecting whole life insurance.

How Much Life Insurance Do You Need?

Think about how much life insurance is needed to replace your income and care for your beneficiary and dependents if you die.

  • Some experts recommend that you purchase life insurance that equals ten to 12 times your annual income.
  • Other experts advise that you multiply your annual income times the number of years left until you retire.
  • If you have a stay-at-home spouse, consider the cost of caring for your children or home if your loved one predeceases you. Get life insurance for your spouse, too.
Infograph to highlight the differences between term and whole life insurance; from Hunt Insurance of Raleigh

Term Life vs. Whole Life – Five Questions to Ask Yourself

Take another look at the differences between term life and whole life insurance. Ask yourself the questions below. Confirm your reasoning with a licensed insurance agent who can help you compare your options, costs, and the long-term effects of the type of insurance you choose.

  1. How many family members will depend on my income for my entire life?
  2. Do I have debt that limits what I can afford to pay for premiums each month?
  3. What is the value of my assets and estate? Am I subject to an estate tax that I can pay with the tax-deferred cash value of a whole life insurance policy?
  4. Will I have enough savings to self-insure at the end of my term life policy, or will I need to renew or convert it?
  5. Do I have valid reasons to pay higher premiums for whole life insurance that builds cash value? Or can I invest elsewhere and get a higher return?

Start the conversation with Hunt Insurance of Raleigh-Durham, NC. Contact us today.

How Do You Calculate the Cash Value of Life Insurance?

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Interested in calculating the cash value of your life insurance? If you have permanent life insurance, a portion of the premiums you pay gradually accumulates in a savings account. Whole, variable, and universal life insurance policies are types of permanent life insurance that accumulate cash value. How can you determine the cash value of your policy?

Calculating the Cash Value of Life Insurance

You can calculate your life insurance’s cash value by adding the total of the premium payments you’ve made for the policy and subtracting fees, commissions, and expenses charged by the insurer.

The insurance company uses your premium payments in three ways:

  1. Death benefit (the payout to your beneficiary)
  2. Insurance company’s fees and profits
  3. Cash savings account

The distribution of your premium payments means that your permanent life insurance policy builds cash value over time. But knowing the cash value of the policy is essential. If you don’t use it, your beneficiary will receive the death benefit when you die, but the cash value will return to the insurance company.

Factors that Affect the Current Cash Value of Your Life Insurance

Multiple factors affect the current cash value of your policy.

  • Total of premium payments – The sum of your premium payments depends on how long you’ve had the policy. If you’ve only had the policy a few years, your premium total won’t be significant.
  • Your age when you acquired the policy – According to LIMRA research, 40 percent of life insurance policy owners wish they bought a policy at a younger age. When you’re younger, a large portion of your premium payments will go toward the cash value of your policy. As you age, it costs more for insurers to provide coverage for you, so a large portion of your premium goes toward your policy. For example, if you acquired the insurance at age 50, although you’ve had it for 20 years, most of your premiums are used to insure you, and cash accumulation will be limited.
  • Rate of return on your investment – The growth of the cash value of your life insurance depends on the type of policy, the terms of your insurer, and the rate of return on the investment. Ask your insurance company for a cash value chart to see the projected appreciation rate.
  • Loan balances – If you’ve already borrowed from your insurance policy, an outstanding loan decreases the cash value.

You can gather the data and try to calculate cash accumulation on your own. But it’s easier to sign up for an online account on your insurance company’s website to access the amount. Or you can contact the insurer and request the cash value of your policy.

What Can You Do with the Cash?

As mentioned, cash accumulation is a use-it-or-lose-it feature. As the funds build, some of the ways you can use them include:

  • Increase the death benefit for your survivors
  • Pay the premiums for the policy
  • Borrow money with the understanding that an outstanding loan balance decreases the payout to your beneficiary
  • Make a withdrawal, which might affect the death benefit total
  • Supplement your retirement income

Is a Cash Value Policy Right for You?

If you’re exploring your life insurance options, several factors can help you determine if a cash value policy is right for you and your family.

  • If you’re in a high-income bracket and maxed out of other tax-deferred accounts, a cash value policy is an option for tax-deferred savings.
  • It’s unlikely that cash value will exceed the premiums paid if you surrender the policy within the first ten years.
  • Permanent life insurance costs an average of six to ten times more than term life insurance. But if you choose term insurance, at the end of the term, you’ll need a new policy, or you might be able to convert to a permanent one.
  • Cash value is separate from your death benefit. If you don’t use it, it’s returned to the insurance company.

At Hunt Insurance of Raleigh, NC, we’ll explain your options for permanent life insurance with cash value and how they compare with term life insurance. We will thoroughly answer your questions with easy-to-understand language that helps you make an informed decision. Start the conversation by calling us or completing our contact form.

What Happens to Term Life Insurance at the End of the Term?

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What happens to term life insurance at the end of the term—or coverage period—for which you purchased it? When the term ends, so does your life insurance policy. But what happens next depends on the type of term insurance policy you purchased. Some of the options might surprise you.

What Is Term Life Insurance?

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A term life insurance policy provides coverage for a limited period—or term. The duration of a plan is usually 1 to 30 years. Although most insurance companies offer policies in increments of ten years, some offer five-year plans. Several factors influence your premiums, including:

  • Age
  • Health
  • Lifestyle
  • Medical history
  • Occupation

Five Types of Term Life Insurance and What Happens at the End of the Term

There are different types of term insurance, and not all of them are reviewed below. Your options depend on what’s offered by the insurance company you choose.

1. Level Term

Your premiums are fixed, or level, for the entire term, regardless of whether it’s 1, 10, 20, or 30 years. Your premiums, in part, depend on your age when you purchase the policy. As you age, it’s more expensive for a company to insure you, so your premiums for a new policy will be higher. But they will be fixed throughout the term.

End of term

Most level term policies allow you to apply for renewal or convert to a whole life or universal life policy. But renewal isn’t guaranteed, and you’ll likely need a medical examination.

2. Increasing Term

The death benefit increases each year—usually within 2 to 10 percent. As the payout for your beneficiary builds over time, your premiums will increase. Rising premiums make this option less accessible than level term life insurance. But if you’re young, you might like the idea of having some coverage now and increasing it as you age.

End of term

Depending on your age, you might have the option to convert to a permanent life insurance policy. Conversion is often allowed throughout the length of your plan, except during the first year.

3. Decreasing Term

Decreasing term life insurance is only available through a few insurance companies. The terms are 1 to 30 years, premiums are fixed, and the payout for your beneficiaries decreases over time. Some people refer to decreasing term insurance as mortgage protection insurance, because your survivors can use it to pay off a mortgage or other debt.

As an alternative, you can buy level term life insurance and decrease the face value of your policy as you pay off debts over time. What’s best for you? Compare the cost of premiums for level and decreasing term insurance. And compare the payout your beneficiaries will receive if you die.

End of term

Before the term ends—and when it ends—some plans offer the option to convert it to a whole life insurance policy that builds cash value.

4. Renewable Term

You can purchase term life insurance that guarantees your right to renew the policy. Depending on the insurance company and policy, short- and long-term plans are available. But the premiums for annually renewable policies increase over time.

End of term

Although you won’t need an exam, you may be required to complete a health history form to renew your policy. Your age and current health will affect your premiums. And your new policy may not be renewable. Insurance companies vary with plans that renew automatically vs. renewing upon your request.

5. Return-of-Premium Term

Although the policy functions as a level term life policy with fixed premiums, the premiums are much higher.

End of term

If you outlive the term, your insurance company will return all the premiums you paid throughout the life of the policy. Exclusions apply if you cancel the policy or borrow money from it and don’t pay it back. Your plan might give you options: continue coverage—but your premiums will be much higher—or convert the policy to permanent life insurance.

Get Professional Advice That Works

You can find a term life insurance policy that ends with a predictable outcome. You’ll get the most out of your term life policy by consulting with an insurance agent who works to understand your financial needs and will help you find a plan that matches them. John Hunt of Hunt Insurance provides term life insurance for the Raleigh, Durham, and Chapel Hill areas. He can help. Call us for a consultation or a hassle-free quote at 919-840-8418.

What Happens to Your Life Insurance If You Leave Your Job?

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If you leave your job, what happens to your life insurance depends on the type of plans your employer offers. Group life insurance—or employer-sponsored insurance—can have options to port or convert your plan. But not all plans have these features.

Life Insurance After You Leave Your Job

Whether or not you can keep your life insurance if you leave your job depends on the conditions of the insurance plan. Conversion and portable plans allow you to retain at least a portion of the insurance.

Conversion

Some group life insurance policies allow you to convert to an individual plan if you leave your job. You can convert without a physical exam or medical questionnaire. Common options are whole life or universal life insurance.

  • Whole Life – The insurance will be in effect for your entire—or whole—life. The premiums are fixed and won’t change with your age or declining health. Although premiums are higher than term life insurance, your policy can build cash value. You can borrow from the accumulated cash value or use it to pay insurance premiums.
  • Universal Life – Universal life insurance combines affordability with permanence. It offers the lower premiums of term insurance, but like whole life insurance, it lasts for the remainder of your life. The plans your employer provides may—or may not—build cash value.

Portability

Portability allows you to continue your life insurance plan if you’re laid off or voluntarily leave your company. You’ll have term life insurance protection for a period that is specified by your plan. Depending on the policy, you can take all or a portion of the coverage after you leave your job. The plan might specify—in dollars—the minimum and maximum amount of coverage that you can continue for yourself, your spouse, or a child.

If Neither Option Is Available

If your employer offers life insurance that cannot be converted or ported, you lose your coverage when you leave your job.

Is Employer-Sponsored Life Insurance Enough?

Eighteen percent of consumers only have group life insurance coverage that is employer-sponsored. Two factors can help you determine if your employer-sponsored coverage is enough:

  • Portability or conversion – If your employer offers life insurance that you can’t convert or port after you leave the business, consider purchasing additional coverage. Ask the human resources team at your job about the cost of premiums if you separate—voluntarily or involuntarily. It may be less expensive to purchase a personal term life insurance policy.
  • What’s needed to sustain your survivors? – Funeral expenses, replacement income, education costs, and more can affect how much money you want to leave your beneficiaries. For a list of current and anticipated expenses to consider before you buy an insurance policy, read our blog post, Did You Buy Too Much Life Insurance? What Now?

John Hunt, insurance agent and owner of Hunt Insurance of Raleigh, Durham, and Chapel Hill, sponsors this post. Call us for a hassle-free quote: 919-840-8418.

Did You Buy Too Much Life Insurance? What Now?

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Think you bought too much life insurance? LIMRA’s 2019 report shows that about 57 percent of Americans have life insurance. And 32 percent of those who have insurance only have group insurance, which is usually not enough. But what about your situation? Is the policy you purchased much more than you need?

How Much Insurance Is Too Much?

Several factors influence how much insurance you need.

  • Your annual income – If you’re active in the workforce and anticipate pay increases over the term of your insurance policy, account for projected increases in your calculation.
  • Additional income – Remember to include social security income, rental property, real estate, investments, and other funds that you’ll leave for your survivors.
  • Existing policies – If you have any existing policies, factor them in. Keep in mind that if you have a group policy through your employer, it might not be valid if you change employers. Depending on the circumstances, you may be able to convert the group policy to an individual one, but the premiums after you leave the business can be costly.
  • Current and anticipated expenses and debt – Loans, credit card debt, mortgage payments, medical bills, health insurance premiums, and other expenses–factored them into the amount of income you need to leave your survivors. Funeral and burial fees can cost up to $10,000, so include them in the equation.
    • Burial/final expenses
    • Caregiving for an aged or ill relative
    • Business purposes
    • Charitable gift
    • Estate taxes/liquidity
    • Family financial responsibility
    • Funds for college education
    • Income replacement
    • Pay off mortgage
    • Raising a child
    • Replace a policy
    • Supplement a group coverage plan
    • Tax advantages save/invest
    • Wealth transfer
  • Multiply the highest number—your expenses or income—by 10 to 15 – If you earn $60,000 each year—or if your family spends that amount—your life insurance policy should provide at least $600,000 for your family. Some families choose up to 15 times their income or expenses to cover unexpected events.

Did You Overdo It?

If possible, purchase enough insurance to replace your income and cover expenses for 10 to 15 years. If 10 to 15 times your expenses or income is about $800,000 and you purchased a $3,000,000 policy—or multiple policies that value that amount—you’ve probably bought too much life insurance.

Is It Too Late?

If you think you’ve bought too much life insurance, what can you do about it now? Talk to a trusted life insurance provider or investment advisor who can examine the terms of your plan and determine if you’re able to sell the portion you don’t need. You might be able to turn some of the cost of the premium into income.

Before you buy your next insurance policy, talk with an independent agent. You’ll receive personalized service and straightforward advice to plan for your loved ones’ future. Contact Hunt Insurance today.

Is Term Life Insurance a Waste of Money? 4 Ways to Tell If It’s Right for You

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Many people wonder if term life insurance is a waste of money because it’s active for a limited amount of time—or term. When the policy ends, if you still want coverage, you’ll need another one. So, what’s the point in making the purchase?

Why Choose Term Life Insurance?

Term life insurance isn’t a waste of money. Although it doesn’t accrue cash value, it’s an affordable option when you’re on a budget, need payments that generally stay the same, or need coverage for a limited period.

1. Consider the facts

  • According to LIMRA’s 2019 Insurance Barometer Report, 43 percent of Americans don’t have life insurance.
  • Term insurance is the most common type of insurance that consumers purchase. During the 2019 study period for the LIMRA report, 71 percent of purchasers chose term insurance.
  • A July 2019 mortality trends report published on the Center for Disease Control website indicates that between 2012 and 2017, U.S. death rates increased for all adults between ages 25-44 in all ethnicity and race groups.

2. It’s affordable

  • Term life insurance costs less than whole life insurance, which is active throughout your lifetime.
  • You can purchase life insurance for the years you need it most.
  • Some people purchase term life insurance policies in succession to match the demands of their budget vs. a single permanent policy.

3. Fixed payments

Level term life insurance policies have set payments that don’t increase during the term. When the policy ends, if you decide to purchase a new one, your age, declining health, or the length of the policy will affect the cost.

4. Weigh the financial advantages

If you don’t have adequate insurance, a term life insurance policy isn’t a waste of money. Consider some of the ways that the funds will help your beneficiary:

  • Business purposes
  • Charitable gift
  • Estate taxes/liquidity
  • Pay for burial expenses
  • Pay for college education
  • Pay off mortgage
  • Replace a policy
  • Supplement existing group coverage

What Are the Types of Term Life Insurance?

Three common types of term life insurance include level, renewable, and convertible.

Level

Level term life insurance is available from 10 to 30 years, in five-year increments:

  • 10
  • 15
  • 20
  • 25
  • 30

Renewable

Features of renewable term life insurance include:

  • Terms are offered in increments of one or five years
  • No need for a medical examination or evidence of the state of your health
  • Age-based premiums

Convertible

What should you know about convertible term life insurance?

  • Offers the ability to convert to a permanent policy
  • Conversion is available for a limited time
  • Premiums will increase if you convert to a permanent policy

Who Purchases Term Life Insurance?

There are plenty of people who don’t think that term life insurance is a waste of money. It appeals to people with varying backgrounds and circumstances, including:

  • Retirees who want coverage until retirement income is available
  • People who desire supplemental coverage to pay off a mortgage, provide college funds for surviving children, or provide additional income for a spouse
  • Young people who want to take advantage of lower premiums based on their age and good health
  • Anyone on a budget with limited funds for purchasing insurance

How Much Does Term Life Insurance Cost?

Several factors influence the cost of life insurance, including:

  • The amount of coverage required to care for the needs of your survivors
  • Your age and gender
  • Your health history
  • Your family health history
  • Your occupation
  • Your hobbies
  • Whether or not you smoke or use recreational drugs

You can ask for a free quote from multiple sources to compare your options and costs.

Contact Hunt Insurance of Raleigh-Durham, NC for a hassle-free quote.

Read about different types of term life insurance on our blog post, What Happens to Term Life Insurance at the End of the Term?

Life Insurance – No Exam Required

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Getting Life Insurance With No Exam Required

Photo of a stethoscope, clipboard, and medical form for Raleigh-Durham, NC life insurance without an exam for Hunt Insurance.That’s the preference for most people. Explore your options, apply for life insurance, and receive it without an exam. If that’s how you feel, there are a few things to consider.

Factors to Consider for Exam-Free Life Insurance

In many cases, you can get life insurance without an exam. There are options in term and whole life insurance. Your agent can explain the details. Below are some of the factors to consider.

Term Life Insurance without a Medical Exam

Term life insurance provides coverage for a limited period of time, or term, usually between ten and thirty years. When the term expires, you will need another policy, unless you have a policy that is renewable or that can be converted to whole life insurance. There are few things to consider, though, and we’ll talk about some of them.

  • Age – Most often, plans are available for applicants who are between 18 and 70 years old.
  • Premiums – They are based on the age of the person being insured. When the term of the policy is over and you need another policy, the rates may significantly increase, based on your age. Depending on your plan, premiums may be level for the entire term, increase after a specified time, or gradually increase. Premiums increase, because as we age, we are more expensive to insure.
  • Health History – A review of your health history will likely be required.
  • Occupation and Lifestyle – The nature of your job and the health risks involved, as well as any hobbies you have that may be extreme, can affect the cost of your premiums and the insurance you qualify for.
  • Limited data gathering – At times, a urine sample may still be required.
  • Coverage amount – There can be a cap on the amount of insurance you can get without an exam. The amount varies, depending on the insurance provider.
  • Cost – At times, your premiums will be higher than they would be if you consent to an exam.
  • Limitations – The policy main have limitations for an initial period.

There are different options for term life insurance. Find an experienced agent to discuss them.

Whole Life Insurance With No Exam

There are insurance companies, some often advertise on TV, that offer whole life insurance without an exam. Some even advertise guaranteed coverage. What are the limitations? Consider some of them.

  • Age – An age range for qualification will be specified. Many plans are offered up to age 75.
  • Coverage – It’s limited, and it’s usually under $100,000.
  • Premiums – They are based on the age of the insured. If you don’t have a level premium plan, the cost will increase as you age. The older we get, the more it costs to ensure us. Premiums will initially cost more that term insurance, but will be less costly than having to renew a term plan or change plans after the plan expires.
  • Health History – A review of your medical history will likely be required.
  • Occupation and Lifestyle – If you have a job that puts your health at risk, or if you have risky, extreme hobbies, they will be factored into the cost of your insurance.
  • Limited data gathering – You may need to provide a urine sample.
  • Coverage amount – There may be a limit on the amount of insurance you can get without an exam. This will vary, based on the plan and insurance company.
  • Cost – Your premiums may be higher than they would be if you had an exam.
  • Limitations – For a specified period, the policy may have limitations.

Whole life insurance has different options. Discuss them with an experienced agent and weigh the pros and cons.

Do You Really Need Insurance Without An Exam?

Maybe. It depends on the coverage amount you want, your age, your health, and other factors. If you’re healthy, good results from an exam can result in lower premiums. If you’re nervous about having an exam, ask your agent what’s involved, how long it will take, and what qualifications the examiner has. The final decision is yours, of course. Get quotes from two or three insurance agents to discuss your options—with and without an exam.

This post is sponsored by Hunt Insurance of Raleigh, NC.

 

 

 

Welcome to the Blog of Hunt Insurance

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Raleigh health, life, and medical insurance from Hunt Insurance.

Welcome to our blog!

Hunt Insurance offers customized options for life and health insurance. We have years of experience in the insurance industry to help you make informed decisions about the plan that meets your needs.

Our blog posts will highlight industry trends and keep you updated with the latest consumer news.

We welcome your questions and requests for insurance quotes.

Visit our Hunt Health and Life Insurance website to learn more about your options and to get to know us.