Why Everything You Think You Know About Life Insurance Is Wrong
Life insurance: as you yawn, roll your eyes and think to yourself that there couldn’t possibly be anything less relevant to read— we completely acknowledge your lack of enthusiasm.
After all, life insurance is something that many people, especially healthy and young professionals, put off or don’t consider at all. Perhaps it’s due to a sense of invincibility, or maybe a notion that life insurance is for our parents.
But whether you’re single, married with kids, or just thinking about buying a home or starting a family, the very real benefits of life insurance should outweigh your reluctance.
Case in point: Only 4 in 10 people surveyed for Life Happens’ 2015 Insurance Barometer Study feel they have sufficient life insurance coverage. Cost is the primary reason, according to the study. Yet 80% of respondents overestimated the true cost for term life insurance, with those under 25 over-estimating the cost of a 20-year, $250,000 term policy for a 30-year-old by a whopping 375%.
Because we care about your financial health and know that life insurance should be a critical part of your overall financial plan, we sat down with Marcos Fernandez, a SoFi Product Marketing Manager, to debunk the top five life insurance myths.
And pssst… in case you didn’t hear, we’ve collaborated with Protective Life Insurance Company to offer our members Term Life Insurance with SoFi, issued by Protective. It’s never been easier to check your quote, apply online without a medical exam*, and get the coverage you need.
Myth #1: Life insurance is for older people. Actually, it’s smarter to buy life insurance when you’re young. “Typically, youth and excellent health go hand in hand,” says Fernandez. “Since most health-related issues tend to develop later in life, a young person can expect to pay a lot less in life insurance premiums before chronic conditions take hold.”
If you take out a 10-, 20-, or 30-year policy at a young age, you’ll have the opportunity to lock in a good rate that won’t change over time. So, go ahead and run another mile or take another spin class; your body and your budget will thank you.
Myth #2: Employer coverage is adequate. According to the MetLife Employee Benefit Trends Study, 62% of American workers surveyed look to their employer benefits to help gain financial security. But most group term policies are grossly inadequate. “Many employer-based term-life policies are valued at around one to two times the employee’s salary,” says Fernandez. “Yet, the industry recommends life insurance coverage of 7 to 10 times annual pay.”
Additionally, if you leave your job, your policy will be canceled, unless you convert it to an individual policy, which would mean paying the full monthly premium out of pocket. But according to the MetLife study, only 44% of employers offer “portable benefits” to their workers.
So, when choosing the coverage amount, consider the bigger employment and financial picture. “Ask yourself the all-important questions,” says Fernandez. “How many years of income replacement will your family need? Do you plan to help your children with their future college tuition? What are your current available funds, including savings and investments outside of 401(k)s and IRAs? Then, use SoFi’s new tool to calculate your needs based on your answers.”
Myth #3: Plan options are complicated. Sometimes insurance-speak, like legalese, can be intimidating. But don’t get turned off, because with life insurance, there’s one guiding principle: If you need it, make sure you buy enough of it.
There are two main types of life insurance: term life and whole life. Term life covers you for a specific period of time, often 5 to 30 years. It’s designed to pay out a benefit to your beneficiaries if you suddenly pass away, and it’s an affordable option. On the other hand, as long as you pay your premiums on time, whole life can provide lifelong coverage and includes an investment component—the policy’s cash value. The cash value grows over time, and you generally don’t pay any taxes on the gains as they accumulate. While the premium for whole life is typically higher than term life, the death benefit and the rate at which cash values grow is guaranteed, as long as your policy is active.
Myth #4: Monthly premiums can get pricey. While the cost of premiums depends on a number of factors, including your age, gender, lifestyle choices, and family medical history, rates for term-life insurance are relatively low and quite competitive. For example, a 30-year-old male in excellent health and living in California can purchase a 10 year, $500,000 term-life policy for just under $15 per month, and this monthly premium stays the same for the entire 10-year coverage period selected. Best of all he may be able to apply online for his policy in just about 20 minutes, potentially with no medical exam.
Myth #5: The application process is mind-numbing. The days of door-to-door insurance salesmen and their long-winded pitches and fear tactics are gone. “Thanks to advancements in technology, researching and applying for life insurance online is now very convenient,” says Fernandez. “Term Life Insurance with SoFi, issued by Protective offers low rates, 10-, 20-, and 30-year terms, and coverage up to $1 million—in some cases without a medical exam*. And you don’t have to wait months to find out if you’re eligible.”
If you’re thinking of buying a home, marrying, or starting a family, now should be the time to reevaluate life insurance options and discuss your findings with your loved ones. After all, it’s never too early to start thinking about how to protect your assets and your family’s future. And while no one life insurance solution works for everyone, SoFi’s online tools and reps can help you find the right life insurance fit for you and your loved ones.
Best of all, we promise to make it simple and painless. SoFi members can get a free insurance quote in two minutes, and the application takes less than 20 minutes to complete.
* Coverage amounts up to $1 million and express application processing may be available to applicants up to 40 years old that meet certain risk and eligibility requirements of Protective Life. Full medical underwriting may be required for applicants that do not meet Protective’s eligibility criteria.
Neither Protective Life nor SoFi offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making any tax-related decisions.
Term Life Insurance (ICC16-TL21) is made available by Protective Life Insurance Company (PLICO), Birmingham, AL. Policy form numbers, product availability and features may vary by state. Not available in New York. Coverage and pricing is subject to eligibility and underwriting criteria. Consult policy for benefits, riders, limitations, and exclusions. Up to a two-year contestable and suicide period. Benefits adjusted for misstatements of age or sex. In Montana unisex rates apply. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under PLICO policies. Insurance is underwritten by PLICO. PLICO, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other.
Social Finance Life Insurance Agency, LLC (SoFi Agency), a licensed insurance agent, is licensed to sell Protective Life Insurance Company (PLICO) products and may receive compensation from PLICO and/or its affiliates. SoFi Agency and its affiliates do not guarantee the services of any insurance company. PLICO and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. The California license number for PLICO is 07726 and for SoFi Agency is 0L13077.