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Life Insurance 101: 6 Pointers to Get You Started

June 11, 2019 · 6 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Life Insurance 101: 6 Pointers to Get You Started

A fundamental question people ask when it comes to life insurance is, “Why buy life insurance?” Well, here’s an interesting fact—one in three families have admitted that if something happened to their family breadwinner, they would face a financial crisis within a month.* Getting prepared can be easier than you might think.

These six pointers below can help you understand:

•  What life insurance is

•  What life insurance can provide

•  Potential benefits of term life insurance

•  How life insurance works

•  When life insurance may be necessary

•  What types of life insurance might work best.

1. Life Insurance Is Financial Support for the People You Care About

Just as car insurance pays you in the event of an accident, injury, or damage to your car, life insurance provides financial support for the people you care about in the event of your death. Partners, children, and even elderly parents who depend on you financially will likely need some kind of safety net. Life insurance can provide you with the peace of mind that they have that financial support should you pass away.

Here’s something else to consider: Debt doesn’t disappear after death. If you own any type of debt (for example, student loans or a mortgage), that debt obligation may transfer over to your estate in the event of your death, which may impact your beneficiaries financially. Life insurance can be a helpful financial safety net for them.

2. Life Insurance Can Offer Financial Security

Typically, a life insurance contract (also referred to as a “policy”) will have the people you care about designated as “beneficiaries”—those you choose will receive a payout in the event of your death. This payout is generally a lump sum of money, which is usually paid in full, and tax free .

Payouts can be used by beneficiaries in a number of ways. The money can keep family members in their communities by going towards living costs like rent or mortgage payments.

Payouts can also help cover child care or domestic help, college costs, and other major expenses. In some cases, payouts are used for estate taxes that families must pay in order to inherit assets, or to settle unpaid medical bills, taxes, or debt.

The cost of the policy to you (the “premium”) is usually a much, much smaller amount than the payout. (You can enter your basic information here to get a rough estimate of how much you would pay in premiums versus your coverage amount (the payout your beneficiaries would receive).

3. Term Life Insurance Can Be Simpler and More Affordable

There are two main categories of life insurance—term life and permanent life. Term life provides coverage for a set period of time (referred to as the “term” or “policy duration”), whereas permanent life insurance covers you for your whole life.

The most well-known types of permanent life insurance are whole life and universal life policies. These types of policies often have an investment component , are more complex, and are usually more expensive than term life policies.

Term life insurance policies only provide life insurance coverage for a set period of time that you choose when you apply for the policy (typically 10-30 years ). Since they have no investment component, they are typically much simpler to understand, and are usually far more affordable. The fixed lower monthly payments and straightforward structure make it the most affordable life insurance option.

4. The Amount of Life Insurance You Need Depends On You

You should always consider your unique financial situation when deciding on life insurance needs.

Talk to your significant other (if you have one) about it, too. Each of you should have a clear idea of who would need what. Remember, budgeting appropriately for the financial support required by a surviving spouse or partner is important.

5. Buying Life Insurance—Sooner Than Later—Can Save Money

Here’s the good news—being young and healthy generally puts you at lower risk, which usually means lower monthly payments. This is because, broadly, life insurance is priced according to your overall health and how old you are when you buy it, so, if you are in good health and the younger you are, the less it should cost, generally.

With some term life insurance, you are also “locking in” your price when it is purchased. Term life insurance from Ladder for example, guarantees that monthly payments remain constant and never increase throughout the term of your policy—which can be a smart move for the long haul.

No matter what your status in life may be, you may decide you’d like a life insurance policy that can also be flexible, if that is something that is important to you. People often ask, “Can I change my life insurance?” The answer is yes, if you have the option with your insurance provider.

At Ladder, it’s easy to change your coverage when your life circumstances change. For example, some people apply to increase their coverage after having children, while others decrease theirs when they pay off a part of their debt (like a mortgage) or have children who have become financially independent and no longer need as much coverage.

Taking control of your policy can be very valuable. That’s why Ladder lets customers easily adjust their coverage down when they need less, or apply for more, when life changes. It’s a smart, convenient feature that can work for you, too.

6. Employer-Based Life Insurance May Not Be Enough

Many people are surprised to learn that life insurance offered through employers may only provide a small fixed amount, or just one-to-two times the employee’s salary. That’s usually not enough to provide sustained financial support for loved ones.

Depending on your situation, it might be a good idea to take out a second policy to ensure full family protection. Also, be sure to check for portability of any life insurance offered through the workplace. Portability gives you the option to continue your coverage after leaving the job.

Ready to Consider Your Life Insurance Options?

Now that you’ve got the basics, let’s examine your life insurance options. In three simple steps, you can apply for the life insurance you need without a hassle.

1. Understanding How Much Coverage Is Necessary

Use this free calculator to estimate how much coverage you might need by answering a few questions. In seconds, you’ll see how cost-effective life insurance can be. (Just click “Calculate My Needs”.)

2. Getting Started

Once you’ve finished using the free calculator, you’ll be prompted to get your free, no-obligation estimate from Ladder, see if you qualify for an offer, and instantly find out how much you can expect to pay each month for life insurance coverage, if qualified. No emails or phone calls required.

3. Getting Covered

With Ladder, you can apply for coverage in less than five minutes and get an instant decision. If you accept an offer, your coverage can begin immediately. You can cancel at any time—no obligations and no questions asked.

You can also adjust your coverage at any point—apply to increase or decrease at the touch of a button. When life changes, your policy can change with it.

Life insurance is an important part of any financial plan. If you’re considering making term life insurance part of your family’s financial security, you can get it done online with Ladder.


*“2018 Insurance Barometer Study, Life Happens and LIMRA”
https://lifehappens.org/blog/2018-barometer-study/ or
https://www.limra.com/research/abstracts_public/2018/2018_insurance_barometer.aspx
This content is brought to you by our friends at Ladder Insurance Services. That means all opinions expressed in this content are those of the author and not necessarily held by SoFi—and are for purely educational purposes only. Nothing herein is intended to provide financial or legal advice.

All trademarks are the property of their respective owners, and any pages linked to and from this one are subject to change without advance notification. While we obviously think very highly of Ladder, SoFi does not provide, endorse, or guarantee any third-party product, service, information or recommendations. Ladder is solely responsible for their content, products, and services.

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* Coverage amounts range from $100k to $8 million. Instant coverage is available to applicants who meet certain risk and eligibility requirements. A medical test may be required for applicants that do not meet these eligibility criteria.

Ladder offers term policies in New York (policy form # MN-26) that are issued by Allianz Life Insurance Company of New York. Term policies are issued in all other states and DC by Fidelity Security Life Insurance Company, Kansas City, MO (policy form No. ICC17-M-1069 and M-1069). Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077. Ladder, 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, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies.

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