When you’re evaluating your medical benefits this fall for the coming year, take a moment to consider your financial needs as well.
Life insurance policies are often overlooked – just 52% of consumers reported having a life insurance policy in 2021.
“Life insurance policies can provide critical financial protection to families should they suffer a loss of life,” said Christina Hix, vice president of Specialty Benefits at Blue Cross Blue Shield of Michigan. “Many households would quickly face financial struggles should the unthinkable happen. Life insurance can offer peace of mind to families.”
Here’s what you need to know about life insurance as you consider your coverage for the year ahead.
What is life insurance?
Life insurance is a death benefit. The policy owner pays monthly premiums throughout their lifetime. In exchange, the insurance company pays out money to a list of beneficiaries when the policy owner dies.
Life insurance policies are a way for you to guarantee that your family and loved ones will be taken care of after you’re gone. They could be used for mortgage payments, debt payments, funeral expenses or to be used as replacement income to maintain a certain standard of living. For families with children, life insurance policies could be used to cover childcare expenses or college tuition.
Where can I get a life insurance policy?
Many companies offer life insurance policies to their employees. Check your benefit materials during the annual open enrollment period to see if your employer offers employer-paid life insurance coverage or an opportunity for you to buy-up or purchase on a voluntary basis. for benefits is a great time to review health plans and life insurance policies available to you through your employer.
If your employer does not offer life insurance or if the life insurance policy offered does not meet the amount of coverage that you need, supplemental life insurance policies are available for individual purchase.
When should I buy a life insurance policy?
There’s no one right time to buy a life insurance policy, as it can be a difficult question and the answer is different for everyone. It all depends on the stage of life you’re in and how you want to prepare for the future.
It’s good to check in with yourself and your needs after major life events like getting married, having children and buying home to see if your desire to purchase life insurance changes. Life insurance can be affordable, and some policies cost under $20 a month.
Some questions to ask yourself as you consider if now is the right time to buy life insurance could include: Is there someone in your family who relies on you financially? How would they be able to afford expenses if you were gone? Would they be able to cover final expenses like burial costs?
It’s important to understand that the older you get, the more likely you’ll have health problems that might make a life insurance policy more expensive.
How much life insurance do I need?
A general rule of thumb is that you’ll want a policy that’s worth 10 times your annual income, and then add $100,000 for any children. Also consider the types of expenses that would need to be covered for your family and loved ones if you were gone. You can make changes and adjustments to how much life insurance you carry while you’re alive.
There are several types of life insurance policies available in the market, with the two most common being:
- Term life insurance: This type of policy offers coverage for a set term, typically 20 years or 30 years. Often, parents may choose a term that is based on how long their children will be dependent on their income.
- Whole life insurance: This type of policy offers coverage that will cover you for the rest of your life if you pay the monthly premiums. Each month a portion of the premium goes into the cash value of the policy, and over time can be used as collateral on a loan, for retirement savings or to pay off premiums.
Additional life insurance policies include universal life and final expense insurance.
For more information on life insurance benefits offered by Blue Cross Blue Shield of Michigan, you may call a health plan advisor at 855-288-6721, talk to your insurance agent or visit www.bcbsm.com/index/plans/specialty-benefits.html.
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