Life Insurance Coverage Slowly On Decline

Sept. 17--Sifting through life insurance policies can be a stressful ordeal for someone who is unfamiliar with its logistics and fine print, and many across America are proving that the language of life insurance is one that's not easily understood.

Since many people don't have disposable income readily available at their fingertips once bills and other financial priorities are taken care of, acquiring another overhead like life insurance has no footing in financial and insurance planning.

Kelly Kirby understands this but knows that in the case that you die accidentally or prematurely, life insurance can provide for your spouse and children, financially square away your debts and funeral expenses, and take care of your business (if applicable) and any loans you may have open with a banking institution.

But life insurance ownership/coverage is showing a steady decline. Thirty percent of U.S. households don't have life insurance at all; only 44 percent have individual policies, according to a recent survey by Life Insurance and Market Research Association, a global network of insurance and financial services companies.

Kirby, president and insurance agent for Kirby & Co. in Brunswick, says the findings are probably accurate in general terms but serve as a reminder for the aging population of what policies could have covered while they were in their prime.

"As we get older, we wish we would've bought more when we were younger. The older we get, the more expensive it gets and most people regret not getting it sooner," Kirby said. "I know that for younger people, especially college students, they don't have disposable income for it, so it then becomes a catch-22 (situation)."

The decision to purchase, Kirby says, should be purely based on personal reasons. "Getting life insurance is personal and depends why the person wants it. If they are married with children, they may want it to provide for a spouse or to pay for their child's college education. If they have a mortgage, they may want to pay it off if they die," Kirby said.

"It all depends on what you can afford and what your fears are."

As a rule of thumb, prospective buyers should base their need on whether someone will be financially helpless if they die, though some people may not need a policy.

These include people who have adult children now living independently, those who have accumulated sufficient assets to support a surviving spouse, those who have no one to protect, and those who have enough assets to cover their expenses after they're gone, experts say.

"A college student who may have loans and doesn't want to put the burden on the parents if they die may want to get a policy but if they have disposable income, there's no need to have life insurance," Kirby said.

But what type of policy makes the most sense for your lifestyle? Kirby says there are various life insurance premiums on the market, but they all boil down to two categories: term life insurance and whole (or permanent) life insurance.

Term life insurance is defined as a policy that covers a predetermined period of time, experts say, whereas whole life insurance offers lifelong coverage with fixed premiums for an open-ended period of time.

"Term policy is a temporary policy (that covers financial responsibilities during a specified time period) but has no cash build-up with it. Permanent or whole life has several variations of it but basically you're paying more for cash build-up that can be used toward increased mortality (policy) rates as you get older," he said.

The premiums for whole life are higher than those of term insurance, but these products also accumulate a cash value that the policyholder can borrow against or receive upon surrendering the policy, experts say.

Remember that affordability of an insurance policy is contingent with the health of prospective policyholder. In fact, a history of health problems, such as heart disease, cancer, diabetes or other serious medical conditions, or a high-risk occupation can boost the prices of premiums, according to Life and Health Insurance Foundation for Education, an industry association.

"There is definite underwriting that goes on for both. Current health conditions are evaluated and the age and sex of the person are taken into consideration. All of these factors come into play because insurance companies think of people in terms of end-of-life care," he said.

"Someone who is 65 years old with a $100,000 policy will have to pay higher premiums because insurance companies look at them and say they have at least another 20 years. But for someone who is 20 years old and in good health with a $100,000 policy will generally pay less. It gives companies a lot more room for error."

That's why Kirby stresses that young adults "purchase as much (insurance) as you can but don't buy more than you can afford because then the company will win. They are betting to take in more revenue than they have to payout for expenses.

"Say for instance you find that you can no longer afford to pay for the policy, you've just paid hundreds of dollars and they never have to pay a death claim."

-- Reporter Brittany Tate writes about lifestyle topics. Contact her at btate@thebruns wicknews.com, on Facebook or at 265-8320, ext. 317.

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