Why do people buy life insurance?
Life insurance is an integral component of a long-term financial plan, but it’s so much more than that. People buy life insurance to protect what matters most to them: their loved ones. This money can be a family’s lifeline as they experience one of the worst times in their lives.
It is likely that the most immediate financial need a family will face is the cost of the deceased’s final expenses and outstanding debts that person may have accrued; for example, medical expenses, credit card debt, car or business loans, etc. Seventy-three percent of consumers leave more than $61,500 of debt behind them when they die.1
In addition to final expenses, life insurance may help protect a family from the financial insecurity that can linger long after the death of a family provider. Life insurance may help replace the family’s lost income for day-to-day living expenses. It may also be there to help the family continue to pay the mortgage so they don’t have to sacrifice the lifestyle the deceased worked so hard to provide for them. Grieving loved ones have enough to deal with; having to leave their home should not be one of them.
Life insurance may extend even farther into the future by helping to provide funding for the children’s education. In 2019, the average annual cost of tuition and fees for an in-state student to attend a public college was $11,260; for a private college, $41,426.2 Life insurance really may be a gift of love that can continue to provide financial security long after the insured is no longer here.
What happens when you buy life insurance?
Buying the right type of insurance to add to your financial portfolio is nothing more than making sure you have the right tool for the job. Although many people may do research online, one in five Americans say they are actively looking for a financial professional to work with.3 Since people tend to find insurance confusing, consulting with a licensed insurance agent is always a smart step in choosing appropriate life insurance coverage according to needs and budget.
Once you choose the type of policy that’s best for you, the next steps are to choose your beneficiary (to whom the payout will be made), and the amount that person will receive. Once these decisions are made, the insurance company may have requirements to be met prior to the policy being issued. Once those are met, the rest is easy: continue to pay your premiums to keep the policy in force.
How do you make a claim on life insurance?
If you are reading this because you have lost someone and need to file a life insurance claim, we are very sorry for your loss. We hope this helps guide you through the process of making a claim on your loved one’s life insurance policy(ies). Please remember that the process may be different depending on the state where you live, the circumstances surrounding the insured’s death, and the insurance company(ies) you’re dealing with.
When someone dies, the death must be registered with the local or state vital records office, within a certain period of time. The funeral home, cremation organization, or other person in charge of the deceased person’s remains will generally prepare and file the death certificate. To order copies of a death certificate, contact the county or state vital records office in the place where the death occurred. They will tell you what you need to do. Request at least ten copies as you will need one each time you claim property or benefits that belonged to the deceased person.4
The next item on your list is to gather information on the policy(ies) your loved one may have had. Call the insurance agent or look online at the company’s website for claims instructions. Be sure to ask each insurance company what documents they require, since these will vary. In some cases, you may be able to download the claims forms, or you may have to request them. Once you complete the claims forms, submit them according to the company’s directions. Include a copy of the death certificate as well as any additional information you may think is relevant and be aware that the insurance company may ask for more information depending on the circumstances. Depending on the type of policy, you may get to choose to receive the payout in a lump sum or in installments.
The financial needs that arise when a loved one dies can be significant. Your loved one took a responsible and loving step by buying life insurance coverage. It’s important to follow the proper steps to receive the money the deceased wanted you to have.
Credit.com, Americans Are Dying With an Average of $62K of Debt (May 15, 2020)
U.S. News & World Report, What You Need to Know About College Tuition (May 15, 2020)
Life Happens, 2019 Insurance Barometer Study Note: Pro Membership required to access this document. (May 15, 2020)
NOLO, How to Get a Death Certificate (May 18, 2020)
Categories: Insurance, Life Insurance, Supplement health insurance