Fidelity Life: According to the Wall Street Journal, life insurance premium volume surged by 20% in 2021, meaning many people either got new policies or increased their existing coverage in the wake of the pandemic. However, this boom is slowing down as vaccines roll out and society returns to normal. Another Wall Street Journal article indicates that applications fell by 6.5% annually in mid-August 2022.
Society may be moving past the pandemic, but that doesn't mean life insurance should be ignored. This article will dive into several reasons people should get a life insurance policy despite the fading pandemic-era boom and cover several policies to consider.
Reasons to get life insurance despite the fading pandemic boom
Although the life insurance pandemic boom is fading, there are still plenty of reasons to consider life insurance:
It financially protects loved ones
The death benefit is the main advantage life insurance offers. If the policyholder passes away during the policy term, their beneficiaries receive a large death benefit that can replace the policyholder's income and pay off their debts. In addition, the world continues to face economic uncertainty despite moving past the pandemic, so this death benefit can provide policyholders and their families significant peace of mind.
It's more affordable when bought younger
Life insurance rates increase with age. So, the earlier someone buys it, the lower the premiums they can lock in. Plus, as life insurance demand cools off, policies may be more affordable in general.
It can help with estate planning
Life insurance death benefits are tax-free in most cases, and that can include being exempt from estate taxes. So, policyholders can use the death benefit as a way to pass more of their wealth to their heirs. When the policyholder passes away, the heir receives all of that death benefit tax-free instead of inheriting taxable cash or assets.
Policy types to consider
Here are some life insurance policies that prospective policyholders might want to consider:
Term life insurance
Term life insurance covers the policyholder for a fixed period, usually 10 to 30 years. Premiums are affordable, given the size of the death benefit. However, policyholders must renew or buy a new policy to continue coverage if their current policy expires.
Permanent life insurance
Permanent life insurance covers the policyholder for their entire life. It also comes with a cash value growth component that grows tax-deferred at a fixed interest rate. The cash value is funded by part of each premium the policyholder pays.
Policyholders can withdraw from the cash value or borrow against it with favorable terms once it gets big enough. If they surrender the policy, they can receive the full cash value minus surrender charges.
Guaranteed issue life insurance
Guaranteed issue life insurance is a small permanent life policy with no medical exam or health questions. This type of life insurance with no medical exam also comes with cash value.
That said, guaranteed issue life insurance policies may come with lockout periods of one to two years. If the policyholder passes away during this period, their loved ones may only receive a refund of the premiums they paid.
Final expense insurance
Final expense insurance is a small permanent life insurance policy for end-of-life costs like funeral expenses and medical bills. The death benefit is small, but premiums are affordable, and the policy can build cash value.
The bottom line
Despite the end of the pandemic-era life insurance boom, it's never been a better time to get a policy. The death benefit provides financial peace of mind and can help policyholders with estate planning. Plus, the earlier one buys life insurance, the lower the rate they can lock in.
Life insurance shoppers on a budget can opt for term life insurance if they need a larger death benefit or final expense insurance if they just need to help loved ones cover end-of-life costs. Meanwhile, permanent life insurance can work well for people who want lifetime coverage and may have more complex financial needs.
Keep in mind that shopping around is important, regardless of the policy type one is looking for. Getting multiple quotes helps policyholders compare and get the best rates on the coverage they need.
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Original Source: Fidelity Life: The Pandemic Boom for Life Insurance is Fading
Lifestyle - RSV News originally published at Lifestyle - RSV News