September is Life Insurance Awareness Month (LIAM), a national effort coordinated by the nonprofit Life and Health Insurance Foundation for Education (LIFE) to encourage Americans to take stock of their life insurance needs. It was created to address a pervasive problem:  68 million Americans do not have life insurance; those with coverage have significantly less than what most experts recommend to ensure a secure financial future for their families.

Life Insurance Awareness Month Spokesperson Scott Hamilton

Don’t Be Part of the Statistic
“Many individuals believe they can forego purchasing a life insurance policy for themselves,” says Michael Gallo, Assistant Vice President of The NIA Group Life Insurance Division.  “But, here is the problem:  life insurance is not meant to benefit the policyholder, it is designed for the financial benefit of loved ones, including your spouse, children and other dependents.  Should you die, the decision made to pass up coverage could cause long-term financial hardship and undue stress for dependents.” 

Who Needs Life Insurance?

According to Gallo, you typically need life insurance if:

• You have dependent children.
• You are married, and your spouse:

- is not employed.
- makes significantly less than you do.
- could not maintain your family’s standard of living without your income.

• You have siblings or others with special needs that you wish to provide for.
• You have a large mortgage to pay off on your home.

 What Kinds of Coverage Are Available?
While there are many variations of life insurance available, there are essentially two main categories of coverage: term insurance and permanent insurance.

Term insurance provides protection for a specific period of time, such as 10, 20 or 30 years, and pays a benefit only in the event that you die during the term. This type of insurance makes sense if you have a need for coverage that will disappear at a specific point in time. For instance, you may decide that you only need coverage until your children graduate from college or a particular debt is paid off, such as your mortgage. Term is generally less expensive than permanent insurance.

Permanent insurance, on the other hand, provides lifelong protection and does not expire after a set period of time. As long as you pay the premiums, and no loans, withdrawals or surrenders are taken, the full face amount of the policy will be paid upon your death.  Because it is designed to last a lifetime, permanent life insurance accumulates cash value and is priced for you to keep over a long period of time (Source: Life and Health Insurance Foundation for Education).

Life Insurance Rates Have Dropped
If you are a non-smoker and in good health, now is probably an opportune time for you to purchase life insurance as premium rates have dropped substantially over the past several years.  This decline can be attributed to several factors, including longer life expectancies, increased competition among life insurers, the rise of the Internet as an information tool, and improved technology in collecting, assessing and providing life insurance policies on the part of the insurance carrier. 

Additionally, individuals who have had trouble obtaining life insurance because of preterm conditions like heart disease and Type II diabetes are finding that it is not only possible to obtain coverage today, but that they can obtain it at a much lower rate than they might have been quoted in previous years.  “In the past, a person with a chronic illness would have been placed into a rate class with a markedly high premium.  Thanks to disease management, patient education and advances in medicine, this is no longer the norm,” continues Gallo.

How Much Life Insurance Do You Need?
“The general rule of thumb is that you need life insurance between five and 10 times your annual pretax income,” says Joshua Klein, Kornreich-NIA’s Director of Life Insurance, an affiliate of The NIA Group. “Typically, you need more coverage if you have significant financial debt, several dependents and a high mortgage, and less coverage if these factors do not exist.”