Life insurance is a basic financial necessity to protect your most important asset: you. If you die, your family not only loses a loved one, it also loses a source of income, but retains all of the bills and debts to pay. (For more on life insurance, check out Life Insurance: How To Get the Most Out Of Your Policy.)
TUTORIAL: Intro to Insurance
People don't get life insurance for a variety of reasons. Some simply don't want to think about death. Some worry that they are uninsurable because of their health or lifestyle. None of these reasons, however, should prevent you from being insured. Life insurance is one of the fundamental personal risk management weapons in your arsenal and you should make the best use of it. Here are four common reasons people give for not applying for life insurance.
1. A Pre-Existing Condition
You may have a medical condition that you think will exclude you from coverage. If you have a terminal disease, this will almost always be true. For other conditions that can still result in a long life, many insurers will still extend coverage at higher rates. As long as you fully disclose the condition and the medical treatment you receive for it, you may be able to get life insurance. For larger policies, underwriters often rely on their own lab tests and an inspection of existing medical records to make sure you are otherwise healthy.
Obesity will almost always increase your premiums, but in most cases it won't exclude you from coverage. Obesity is a potential underlying factor in many illnesses, such as high blood pressure and diabetes. For that reason, you will be seen as a greater risk than someone who is within their recommended weight for height guidelines. To save money on your insurance policy, try to lose some of the weight before applying for coverage. Ask your insurance agent ahead of time at what weight the premiums change so that you have a goal to shoot for. You also may be able to get your insurance company to re-underwrite your policy after the first year if you lose a significant amount of weight after your policy origination. (To help you determine how much life insurance you need, read How Much Life Insurance Should You Carry?)
A large face-value life insurance policy - if you are not in good health - could cost hundreds of dollars a month. However, you can tailor the type and amount of insurance to your budget. Determine the amount of insurance you need to pay the bills for at least two years plus pay off your mortgage or any other debt. That should be your base coverage. Term life insurance is more inexpensive than whole life and it gives you no-frills coverage for a set number of years. Having some life insurance is better than having no life insurance. You can increase your coverage in the future as your budget allows.
4. Too Many Choices
Buying life insurance can be a frustrating and confusing process. Every insurance provider and every policy is different. Don't let this stop you from digging in and getting the right insurance for you. There are two main types of life insurance: term and whole life. Term insurance gives you life insurance coverage with no bells or whistles for a fixed rate for a defined period of time. At the end of the term, a new rate is offered. The length of time matters as insurance becomes more expensive as you get older. Whole life insurance offers an investment component that you can borrow against or withdraw in the future.
The Bottom Line
Because of the need for a little basic learning when purchasing life insurance, many consumers put it off. Life insurance is an important part of your personal risk management, however, and it is worth it to jump in, get educated, and get insured. Many obstacles that people believe will keep them from buying insurance are, in fact, able to be overcome with the help of an experienced life insurance agent. (To help you with the basics, check out Life Insurance: Putting A Price On Peace Of Mind.)