Who Needs Life Insurance and When you Should Own It

Chris Stocker

Chris Stocker

Owner and author of The Life of a Diabetic. He's been writing about Diabetes related topics for over 10 years, and has been featured in HealthLine, Diatribe, Diabetes Advocates and JDRF.

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Last Updated on September 24, 2023

Life insurance can provide people with great certainty and peace of mind in a world filled with uncertainty. It serves as a safety net for those looking to protect their family financially if they pass away. Life insurance provides financial stability to the remaining family members, allowing them to pay medical expenses, funeral costs, and other debts that can result from the policyholder’s death. Or your policy could provide living death benefit riders, where the policy would pay out to you if diagnosed with a terminal, chronic, or critical illness.

As you are finding out, having a form of Diabetes can make things slightly challenging, when looking for coverage.  If you have Type 1, Type 2, Gestational, or Pre-Diabetes, all insurance providers will view your profile differently.  Because of this, we’d encourage you to request a quote from us, or call us at 888-629-3064 to discuss your options.  We understand how important a life insurance policy is for your family, and we’d love to help you find the best policy possible.  Not all insurance products are created equally, and we’d help you find the ones with the most valuable riders.

Who Needs Life Insurance

We like to think that nearly everyone could benefit from having some form of life insurance.  But to keep things simple in this article, we’ve highlighted some sample situations, where a life insurance policy would be a must have financial product.

  1. If You Have Dependents

If you have any dependents, then you need life insurance.  It’s that simple.  In the event of an untimely death, your family would depend on replacing your income.  We all know how expensive kids are.  Daycare, sports, clothes, food, summer camps etc.

You may even wish to have a policy to help address higher education expenses.  Life insurance would be the most efficient way of making sure all of these expenses could be addressed.

  1. If You Have a Mortgage

We could argue that if  you have a mortgage, then you need life insurance. Many of our clients prefer to have enough coverage that would satisfy this financial obligation in the event of your death.  Your beneficiary could use the death benefit to make sure the mortgage is covered.

  1. If You Own a Business

If you are a business owner, life insurance is an extremely important part of your financial plan.  You may need a life insurance policy to satisfy an SBA Loan.  Or you might need to have a larger policy in place in case of your death.  The proceeds from your life insurance policy can help keep the business running and address any debts of the business.

  1. If You Have Student Loans

Like most of us, you may have taken out various forms of Student Loans at some point in time.  When considering how much, or if you need life insurance, you’ll definitely want to take in consideration the amount of loans you owe.  Taking out a policy will insure that your named beneficiary can pay off any outstanding loans at the time of your death.

  1. If You Are Married

Having a spouse is usually the number one reason for needing a life insurance policy.  Being in a marriage means you are relying on one another.  If you were to die, we are quite certain you’d wish for your spouse to have the same lifestyle they are currently enjoying.  A tax free death benefit via a life insurance policy is a great way to make sure your spouse is financially set should you pass away.

  1. If You Have Debt

Credit cards, car loans, medical bills and other type of debt would be a great example of needing a form of life insurance.  Obviously, you would not want to burden your family with having no way to pay off your debt should you pass away prematurely. Life insurance is the perfect financial tool to address these financial obligations.

  1. Stay at Home Parents

Stay at home moms and dads are great candidates for needing proper life insurance coverage.  While their job is unpaid, it’s nearly impossible to put a dollar amount on what they contribute.  If a parent were to pass away, you’d most likely have to pay for childcare, transportation of your kids, hiring a maid or even a nanny.  All of these scenarios are a perfect example why a stay at home parent needs life insurance.

Types of Life Insurance Policies to Consider

If you live with a form of Diabetes, we’ll be the first to tell you that you most likely can qualify for the same types of life insurance that people without Diabetes do.  Below are the most common types of life insurance:

  1. Whole life insurance

Whole life insurance is a type of policy that is designed to stay in force for the insured’s entire life.  Premiums will be higher compared to term life and universal life insurance products.  But the reason for that is part of the premium paid is directed to a cash value portion of the policy.

For many people, a whole life insurance policy can be a great financial product to help accumulate retirement income in the future.  Or to use to cover burial and funeral expenses.  Your whole life insurance policy cash value can be accessed in the future via a policy loan, or surrendering of the insurance contract.

  1. Term life insurance

Like the name suggests, term life insurance is a form of temporary coverage.  Many companies offer 10, 15, 20, 25, 30, 35 and 40 year term durations.  The younger you are, the more likely you’ll need coverage for one of the longer term periods.  Term life insurance will not have any cash value component, rather it’ll just provide a defined death benefit.

While a person could outlive their term policy, you would have the opportunity to convert to a form of permanent insurance in the future.  Or you could always reapply at a later date, and ladder multiple policies together or replace an older policy.

  1. Guaranteed Universal life insurance

GUL is a form of permanent life insurance that is mainly designed to provide life insurance for the insured’s entire life.  There is a cash value component to the policy, but the accumulation will be minimal.  These types of policies are ideal for a person who simply wishes to guarantee a death benefit payout to their beneficiary.

  1. Variable universal life insurance

Variable universal life insurance is similar to universal life insurance. Still, with one key difference: the cash value component is invested in stocks and other securities rather than being held in a savings account. It means that the cash value can grow more quickly but also carries more risk. Variable universal life policies typically have flexible premiums, meaning that the policyholder can choose to pay more or less each month.

  1. Survivorship life insurance

Survivorship life insurance (also known as mutual life insurance) is a policy that insures two people, typically spouses or domestic partners. The policy pays out a death benefit when both insured individuals have died. Survivorship policies are often used to help provide financial security for loved ones after the death of one spouse or partner.

  1. Indexed universal life insurance

Indexed universal life insurance is similar to universal life insurance. Still, with one key difference: the cash value component is invested in an index fund rather than being held in a savings account. It means that the cash value can grow more quickly should the stock market rise.

There is no market risk with these products.  If the index your IUL is invested in drops, your cash value will not decrease.  An IUL is a great product for people who wish to have a death benefit product, along with the opportunity to accumulate cash value over time.

How to Choose the Right Policy for You

Choosing the right policy for yourself can be an intimidating decision. You need to ensure that you are selecting a plan that offers comprehensive coverage for your circumstances but does not break your budget. Before selecting any plan, it is essential to research the different options and compare them in terms of coverage, cost, and payment flexibility.  Everyone’s financial situation is different, so please don’t make the mistake of following advice from the Dave Ramsey’s of the world.  ( Dave is great a financial advice outside of life insurance recommendations )

While looking into different plans, ask any lingering questions you might have about the details and requirements around each policy before making a final decision.  You need to speak with an agent or financial professional.  Please do not make any financial decisions such as life insurance, before getting some advice from an industry professional.

Benefits of Having a Life Insurance Policy

There are many benefits to owning a life insurance policy.  Let’s explore some of the main advantages to being insured.

  1. Financial Security for Your Family

One of the primary benefits of having a life insurance policy is that it can provide financial security for your family at the time of your death.  Replacing lost income due to death is a concern for most people with a family. If you are the primary breadwinner for your family, or even a stay at home parent, your death could leave them in a difficult financial situation. A life insurance policy can help to ensure that your family can maintain their standard of living in the event of your death.

  1. Pay Off Your Debt

Another benefit of having a life insurance policy is that it can be used to pay off debt. If you have outstanding debts, such as a mortgage, car loan, business loan or credit card debt, a life insurance policy can be used to pay these off so that your family is not left with this burden.

  1. Covering your Final Expenses

A life insurance policy can also cover final expenses, such as funeral costs. Funeral costs can be expensive and put a financial strain on your family at an already difficult time if there’s no money readily available to cover these costs.. A life insurance policy can help ensure your family is not left with this burden.  Many families can benefit from owning a burial insurance policy.

  1. Create an Inheritance

If you have children or other loved ones, you would like to provide for; a life insurance policy can create an inheritance for them. You can use the death benefit from your life insurance policy to fund a trust or other account that will be used to provide for your loved ones after your death.

  1. Donate to Charity

Another benefit of having a life insurance policy is that it can be used to donate to charity. Suppose there is a particular charity that you would like to support and leave money to. In that case, you can designate them as the beneficiary of your life insurance policy, and they will receive the death benefit after your death.  This could be a Diabetes Non Profit, University, Church, or any other organization you have an attachment to.

  1. Tax-Free Death Benefit

One of the most significant benefits of having a life insurance policy is that the death benefit is tax-free. 401K’s, IRA’s and other types of saving accounts cannot provide this type of luxury.  Your beneficiaries will not have to pay any taxes on the money they receive from your life insurance policy, which can help them to make the most of their inheritance.  Life insurance is the most tax efficient way of transferring wealth.

Considerations Before Buying a Policy

Since life insurance comes in many types of products, and amounts, you’ll want to review your current financial objectives before deciding on what type of policy, and how much.  Here are some tips that will help you ultimately choose the best product.

  1. The type of policy you need

There are many different types of insurance policies available, and choosing the one that best suits your needs is essential. For example, if you’re a homeowner who wants to cover a mortgage, you’ll need a different type of policy than someone who wants a cash value based policy.

  1. The amount of coverage you need

Once you’ve decided on the type of policy you need, you’ll need to determine how much coverage you need. It will depend on factors such as the number of years of income you’d like to replace.  Or the amount of debt you’d like to make sure is covered by a life insurance policy.

  1. Your health profile

Insurance companies use your current, and past health information in order to determine final rates.  Information such as Glucose levels, A1C readings, type of diabetes you have all are apart of how companies will underwrite you.  For many people who live with a chronic illness such as diabetes, you may not be able to afford as much life insurance as you’d like due to paying higher premiums.

  1. The insurance company’s financial stability

When choosing an insurance company, it’s essential to ensure they are financially stable. They should be able to pay out claims promptly and have a good rating from independent organizations like A.M. Best or Standard & Poors.  We recommend only work with B+ or higher rated companies.

  1. The company’s customer service record

Choosing an insurance company with a good customer service record is also essential. They should be easy to reach and quick to respond to any questions or concerns you may have.  Also you’d want to work with an agent who’s always there to help out in the future.

  1. The company’s claims process

Before buying an insurance policy, be sure to find out how the company handles claims. You should know how long it takes for them to process claims and what type of documentation they require.  Also, make sure the agent you work is familiar with how to handle the death claim process.

  1. Any discounts available

Certain life insurance companies may offer lower premiums or discounts if you live a healthy lifestyle.  Meaning if you have a regular exercise routine, see your Doctor on a regular basis, or use diabetes technology such as an insulin pump, you may receive lower premiums.  Every little discount helps and goes a long way.

Common Misconceptions People Have About Life Insurance

Here’s seven common misconceptions that several of our clients had, before they worked with us.

  1. It’s too expensive

Life insurance costs are often based on factors such as age, health, and lifestyle. Even those with Diabetes can qualify for affordable life insurance.  Don’t think it’s too expensive, until you speak with us.  We have several tips on how to save money on life insurance.

  1. I don’t need it

Everyone’s life is valuable, and life insurance can help protect your loved ones financially if you die unexpectedly. If you have dependents, such as a spouse or children, life insurance can help to ensure that they are taken care of financially if you are no longer around.  No matter what age or stage of life you’re in, you most certainly can benefit from owning a life insurance policy.

  1. It’s too complicated

Life insurance policies can be complex, but many resources are available to help you understand them. You can speak with us at any time, and we’d be thrilled to go over the pros and cons of various life insurance products.  We are well known for making life insurance easy and we love to explain things in easy terms.  Not to mention, for many people no examinations are needed when applying.

  1. I’m too young or too old

There is no minimum or maximum age for purchasing life insurance. However, your premiums will be higher if you purchase a policy at an older age, as you will be considered a greater risk to the insurer.  The younger and healthier you are at time of applying, the lower your premiums will be.

  1. I don’t have any kids, so I don’t need it

While having children is one reason to purchase life insurance, there are many other reasons. If you have a spouse or partner, they may rely on your income to cover expenses such as the mortgage or car payments. If you have any debt, such as student loans or credit card debt, life insurance can help to ensure that it is paid off if you die unexpectedly.

  1. My employer offers it, so I don’t need to buy my policy

While employer-sponsored life insurance can greatly benefit you, more is needed to cover your needs. Additionally, employer-sponsored policies typically cease when you leave your job, so it is also essential to have your policy in place.  You never want to place all your coverage in one ‘basket’ especially when it comes to life insurance.  Every financial professional in the world will recommend you to own coverage outside of your employer.

  1. It’s not worth it because I’ll never use it

While it is true that most people never use their life insurance policies while living, the peace of mind that comes with knowing you and your loved ones are protected financially in the event of your death is invaluable.  Not to mention, certain policies come with ‘riders’ where you can access part of the death benefit if diagnosed with a terminal, chronic, or critical illness.  You never know what tomorrow brings, so it’s nice knowing a policy can be used while living.

Closing Thoughts and Resources on Insuring Your Future

Securely ensuring your future is a critical element of financial well-being. Although it can be time-consuming and daunting to wade through the options, having the right insurance plan can give you peace of mind that unexpected events won’t leave you in financial disarray.

Before taking a long-term action like purchasing insurance, it is essential to research your options and compare different products and companies. Check out reliable, independent consumer ratings sources or ask us, who have already done the legwork and research to save yourself time. Although having to secure life insurance will take some effort on your part, the result will make a difference in confidently protecting your future. Applying for coverage is much easier than you can imagine.

Our team of insurance agents are always available to help out!  Feel free to call us at 888-629-0634 or contact us with any questions.

Matt Schmidt is a nationally licensed diabetes insurance expert. Over this time frame he's helped out over 10,000 clients secure life insurance coverage with Diabetes. He's frequently authors content to Forbes, Entrepreneur, The Simple Dollar, GoBanking Rates, MSN, Insurancenews.net, and Yahoo Finance and many more.

Matt Schmidt is also the Co-Founder of Diabetes Life Solutions and Licensed Insurance agent. He’s been working with the Diabetes community for over 18 years to find consumers the best life insurance policies.  Since 2011, he has been a qualified non-member of MDRT, the most prestigious life insurance trade organization in the USA

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