December 6, 2021
11 minute read

How to Choose the Best Life Insurance for Every Stage of Life

Life is about much more than nostalgic moments. While you may cherish those intimate times with family and big celebratory get-togethers, there are also the less talked about necessities, like paying bills and doing your tax returns. And, yes, shopping for life insurance.

Getting Americans to adopt a life insurance plan is another story altogether. Less than half of Americans, or 48% of them, have a basic life insurance policy, according to 2021 data from the Life Insurance Marketing and Research Association (LIMRA).

So the need for a comprehensive life insurance policy is real: 42% of American households would suffer hardship if a family wage earner died unexpectedly. And about a quarter would feel those effects within just a month, according to 2021 LIMRA data.

The COVID-19 pandemic has shown us how unpredictable life can be, and people now realize the importance of life insurance. Almost a third of those surveyed by LIMRA say they’re more likely to buy coverage now because of COVID-19.

But some people still hesitate, thanks to common misconceptions about life insurance, like believing it will cost a lot or that it’s helpful only when someone dies.

People may also avoid thinking about life insurance because, understandably, it’s difficult to consider worst-case scenarios. But preparing for the possibility that you or a family member might die unexpectedly can help the very people you care about the most.

“Many Americans live paycheck to paycheck. If you have loved ones and people who depend on you, just think about what would happen if you died unexpectedly,” says Jonathan Jacobi, LUTCF, FSS, a licensed insurance agent for HealthMarkets in Omaha, Nebraska. “Your family may need 15 years of your income to survive.”

And there are other reasons for needing life insurance besides having to meet the day-to-day basics. Life insurance coverage can help pay final expenses like burial costs, debts, and out-of-pocket medical fees if your loved one was very ill in their final months. Depending on coverage terms, such coverage may also help create an inheritance for your children and grandchildren,  and help pay estate taxes so your heirs may not have to liquidate some of your other assets such as stocks or other investments. Some types of life insurance also create a source of cash for you if you’re in a pinch, permitting you to borrow from it and pay it back as a loan.

There is a lot to understand before you buy a life insurance policy. This guide will help break down important concepts so you can make the best choice. You’ll learn about:

  • Common life insurance myths
  • The differences between term and whole-life policies
  • What to think about when choosing a plan

7 Common Myths About Getting Life Insurance

Understanding the facts can help you make an informed decision about whether to buy life insurance. These are the most common misconceptions that keep people from getting a policy:

Myth #1: It costs too much.

This is the No. 1 reason Americans don’t purchase life insurance. Sixty percent of people cite cost as the main factor, according to LIMRA. Yet more than half of Americans overestimate the cost of life insurance by threefold. “In my 15-year career, rates have actually gone down at least three times,” points out Jacobi. “A 25-year-old can buy a million-dollar term policy for as little as $25 a month. Clients are often surprised at how affordable it can be.”

Myth #2: Only the breadwinner needs insurance; my stay-at-home spouse doesn’t.

Your stay-at-home spouse may not work in the traditional sense, but all that cooking, cleaning, grocery shopping, and parenting go well beyond the average 9-to-5 job.

“My wife has never really worked [in a salaried position], but she has the full-time job of raising our two wonderful children,” says Jacobi. But if his wife were to die, he explains, he would be “an emotional mess and [his] ability to work [would] be somewhat depleted.” That, and he might have to quit his job in order to raise his kids or hire a helper.

Myth #3: I get insurance through my job, so I don’t need another policy.

The average maximum life insurance policy from a job pays only around $200,000, according to the U.S. Bureau of Labor Statistics. That amount may not be enough to replace your income if you have a spouse, children, or debts. And you usually can’t take a life insurance policy with you if you lose or switch jobs. “I tell clients not to even count [on] it because the second you’re laid off, you don’t have it,” says Jacobi. “While some companies do offer portable life insurance plans, the rates are typically much higher than what you would pay for private insurance.”

Myth #4: I’m young and healthy, so I don’t need to worry about dying soon.

When it comes to life coverage, waiting until your health starts to get worse is not the best time to seek coverage. “If you’re young and healthy, it often makes sense to lock in that long-term rate, because there can be a significant cost difference between buying life insurance in your mid-20s and in your mid-40s,” says Silas Jessup, a HealthMarkets executive sales leader and licensed insurance agent in Northern Indiana.

Plus, poor health and old age aren’t the only causes of death. Unintentional injuries such as poisonings (including narcotics), motor vehicle and traffic accidents, and drownings are the leading causes of death among people between the ages of 25 and 34, according to 2019 data from the Centers for Disease Control and Prevention.

Myth #5: I’m not healthy enough—I’ll probably get rejected.

More than 1 in 4 (27%) American adults under the age of 65 currently live with a pre-existing health condition like heart disease or type 2 diabetes. That’s a lot of people, but some insurance carriers can take this population into account: Poor health is not an automatic denial for all coverage.

With certain types of life insurance, you can get a policy without taking a medical exam. These are known as simplified issue life insurance policies. “You can get up to $300,000 of life insurance approved in a matter of minutes after you just answer several questions,” points out Jacobi.

Myth #6: I have plenty of assets that can support my family.

You may have a lot of assets, but they may not be liquid, meaning you can’t access their cash value right away. And they may be taxable. Subject to meeting policy requirements and payment of all required premiums and payments, “With life insurance, your family is guaranteed an exact amount of money at an exact point of time,” says Jacobi. A type of life insurance known as permanent life insurance can also be an investment strategy (read more about it below). “Smart investors sometimes use permanent life insurance as a vehicle to accumulate cash value and interest on a tax-favorable basis,” he says.

And while your assets may be enough to financially support your family for several years you may use those assets for your own long-term care. “Whether it’s final expenses, paying off debt, or offsetting the cost of long-term care needs, there are many reasons that folks might want to consider life insurance, even after age 50,” says Jessup. Speaking of…

Myth #7: I’m over 50—I’m too old for life insurance.

If you’re over the age of 50, you may wonder if you still need life insurance. In many cases, the answer is yes, says Jessup. Here are some questions to ask that could help you make that decision:

  • If you have kids, are they still in college? If so, or if they’re otherwise not financially independent, depending on the policy terms, life insurance can help pay for their education and living expenses.
  • Are you or your spouse in the Social Security “blackout period”? A “blackout period” is the time when no Social Security benefits are payable to a surviving spouse. This occurs from when the youngest child leaves high school until the surviving spouse applies for benefits. In addition, an early death may prevent you or your spouse from receiving salary increases that could have increased the amount of Social Security benefits. Life insurance can help fill in these gaps, depending on the policy.
  • Do you have enough of a financial safety net? Some sources recommend that a family should consider saving about half a year’s income to meet surprise expenses, including burial costs. Without adequate savings, your spouse and kids could become more financially vulnerable, and it could become more difficult for your spouse to get credit.
  • Do you want to make sure your heirs get money after your death? Life insurance can help ensure that some or all of your benefits go to them, tax-free, depending on the plan and as long as the structure is set up properly. (Talk to a tax expert who is experienced in this area.)

For more guidance, call a HealthMarkets agent who can work with you to choose a life insurance plan that’s right for you and your family at (800) 827-9990.

Types of Life Insurance: Term and Permanent

If you’re in the dark about the types of life insurance available, you’re not alone: More than half of Americans (53%) say they haven’t purchased life insurance (or haven’t purchased more) because they are unsure how much they need or what type to buy, according to LIMRA. are two basic types of life insurance:

  • Term insurance—also called pure life insurance—which lasts a fixed amount of time, usually a decade or longer.
  • Permanent life insurance, which lasts until the policy holder dies.

They each have unique advantages, and some people should consider both, depending on their situations and needs.

Term Life Insurance: What It Is and How It Helps

Term life insurance, also called pure life, provides temporary coverage that lasts anywhere from about 10 to 30 years, with a fixed monthly payment. Its purpose is to pay out a death benefit to your beneficiary (or beneficiaries) if you die during the term of the policy. Typically, this type of coverage will allow loved ones to do things like replace your income, pay off a mortgage, or send your kids to college.

It’s usually much less expensive than permanent life insurance: The cost of term life insurance for a healthy 30-year-old is around $160 per year.

You typically need to take a medical exam to get a term plan—doing this could save you money on premiums if you’re in good health. The other option is to skip the medical exam by going with simplified issue insurance that only requires answering a few questions, like which medications you’re taking and past surgeries, says Jacobi. But the downside is that you will likely pay more in premiums.

Almost everyone can benefit from a term life plan, says Jacobi. And because such coverage is relatively inexpensive, it’s accessible to most people. This type of coverage may be worth considering in these stages in your life:

You’re young and married with kids. Having a young family is often a time when you may need life insurance, because it would take a larger death benefit to replace the loss of your income after you’re gone.

“I teach my clients a simple cost-needs analysis tool,” says Jessup. “It’s the acronym DIME—debt, income, mortgage, and education—and it helps clients identify how much life insurance they probably need. The process totals up a person’s debt, income to be replaced, mortgage payoff, and educational costs to help a client find their number. How much debt would they need to wipe out if they suddenly died? How many years of income would they need to replace until all their children are in their early 20s? What is the estimated cost of their mortgage and how much do they want to allocate to help with their children’s educational expenses if they’re not here? This analysis process provides important information on how much life insurance each parent should carry.”

You’re married with no kids. Even without little ones running about, you may still need replacement income if you or your spouse dies. Many child-free couples rely on two incomes to survive, so you may not be able to maintain the same living standard on just one. If you may also be thinking about having kids soon, before you start a family, you may also want to consider getting term policies.

You’re a single parent. Being a single parent isn’t easy, especially when it comes to finances. Even if you get child support, it may not be enough to replace your income after you die. The average $500,000 term life insurance cost for a 40-year-old nonsmoker is around $50 a month. If you appoint your children as beneficiaries, you may need to also appoint a legal custodian, such as a grandparent or close family friend, to be responsible until your children are of legal age.

You’re single with no children but have other dependents. There are times when singles with no children have to support someone else. You may need to take care of a younger sibling, a parent, or another relative. Term insurance may be a suitable choice because it’s designed for short-term needs. The people you’re helping to raise will grow up and start earning their own income, while caring for the elderly is unfortunately a temporary situation.

You’re young, single, have no dependents—and don’t come from money.  Although when you’re single, most don’t necessarily need life insurance, having it can benefit your family. As a young single in college—or someone trying to build credit history—there may be times when someone such as a parent has to cosign on a loan for you. This can include student or car loans. If you were to die, that person can become responsible for those debts. Your family may also need to cover your funeral expenses in addition to those debts.

When buying a term policy, you also may want to consider renewal guarantees, which allow you to start a new term right after the current one ends. While you may have to pay a higher premium based on your current age, you won’t need to undergo a new health exam. Otherwise, you may have to pay more or be denied coverage.

Permanent Life Insurance: What It Is and How It Helps

A permanent life insurance policy offers lifetime coverage—it ends when you die, and you never have to renew it. As with term life insurance, the premiums generally stay the same, and there’s a death benefit paid to a beneficiary.

But there’s an additional perk to permanent life insurance: A portion of your premium builds cash value that earns interest, explains Jacobi. This allows you to make some money on your policy. Some permanent life insurance policies also allow you to borrow from the cash value in your life insurance, adds Jessup. Like all loans, you’ll have to repay the insurer with interest.

Aside from the investment advantage, the main difference between term and permanent coverage is that the annual premiums for permanent coverage can cost more—up to 15 times more in some cases. That makes sense, considering it’s also an investment tool and lasts your entire life.

There are generally four types of permanent life insurance:

  • Whole or ordinary life. This is the most common type of permanent insurance policy, where you pay a certain amount in premiums on a regular basis for a specific death benefit. The money is stored in a savings account, which allows it to grow some interest. In most cases, a medical exam is required.
  • Universal or adjustable life. This type of policy can be more flexible than whole life insurance. You may be able to increase the death benefit later if you take and pass another medical exam. The savings aspect of this type generally earns a money market rate of interest, which is more than what you would see in a savings account.
  • Variable life. This policy combines death benefits with a savings account that you can invest in stocks, bonds, and money market mutual funds. The advantage is that you may make more money on this policy if the market does well, but it also carries more overall risk if the market tanks.
  • Variable-universal life. This allows you to have the investment advantages of a variable life policy along with the ability to adjust your death benefits.

One often overlooked option is to purchase a permanent life insurance policy for a child or grandchild when they’re at their healthiest. The policy can last their lifetime (subject to continuing premium payments and meeting all policy terms), and they’ll have the choice to increase their coverage regardless of their health.

As Jacobi notes, if one of your children happens to be diagnosed with a chronic condition such as type 1 diabetes, having a life insurance policy in place from their birth could provide them “with a lifetime of insurability.” It could also provide you with an added bonus: peace of mind.

“The older you are, the more expensive life insurance can be,” says Jessup. “As folks approach retirement age, the focus of their life insurance needs often shifts from debt payoff and income replacement to handling end-of-life final expenses and managing long-term care expenses like nursing home, assisted living, or in-home healthcare.” But benefits can be limited to certain amounts.

The Hybrid Approach: Combining Permanent and Term Life Insurance

People who purchase permanent life insurance can also purchase term insurance for additional coverage if something were to happen to them: for example, when children are young and only one spouse is working; or when kids are in college and not yet financially independent.

If you already have permanent life insurance but your term insurance has expired, it may make sense to purchase another term policy depending on your financial situation. Some companies will also allow you to change all or part of your term life insurance policy to permanent life insurance coverage. But keep in mind that if you’re over 50, you’ll have to pay more than if you purchased it as a 30-year-old.

The average monthly premium for a term policy with a $500,000 benefit is about $118 for a 50-year-old nonsmoker, and it goes up to over $300 at age 60. And most companies won’t sell a policy to people whose terms end past their 80th birthday.

3 Simple Things to Consider When Shopping for Life Insurance

The choices can seem overwhelming, but a great starting point is considering these three things:

  1. Prioritize your needs. Do you only want to cover burial costs or provide your family with replacement income to pay for long-term living expenses?
  2. Think about the time span. Do you need insurance only for a specific number of years or for a lifetime?
  3. Understand the personal factors that affect cost. Your age, personal health status, family health history, gender, smoking habits, and job will all play into your premiums. Risky jobs such as mining or roofing may result in a higher premium, and smokers will pay more than nonsmokers.

Do You Need Life Insurance? Ask an Agent

Everyone’s needs are unique, of course. An experienced HealthMarkets licensed insurance agent will be able to help you narrow your options and determine what type of life policy would most fit your needs. Call (800) 827-9990 or use our online agent locator to find one near you.

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© 2022 HealthMarkets Insurance Agency. All rights reserved.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY users should call 1- 844-704-7357), 24 hours a day/7 days a week, to get information on all of your options.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency in all 50 states and DC. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

48213a-HM-1221

© 2022 HealthMarkets Insurance Agency. All rights reserved.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY users should call 1- 844-704-7357), 24 hours a day/7 days a week, to get information on all of your options.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency in all 50 states and DC. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

48213a-HM-1221

© 2022 HealthMarkets Insurance Agency. All rights reserved.

To send a complaint to Medicare, call 1-800-MEDICARE (TTY users should call 1- 877-486-2048), 24 hours a day/7 days a week). If your complaint involves a broker or agent, be sure to include the name of the person when filing your grievance.

We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY users should call 1- 844-704-7357), 24 hours a day/7 days a week, to get information on all of your options.

Attention: This website is operated by HealthMarkets Insurance Agency, Inc. and is not the Health Insurance Marketplace® website. HealthMarkets Insurance Agency, Inc. is licensed as an insurance agency in all 50 states and DC. Not all agents are licensed to sell all products. Service and product availability varies by state. Sales agents may be compensated based on a consumer’s enrollment in an insurance plan. No obligation to enroll. Agent cannot provide tax or legal advice. Contact your tax or legal professional to discuss details regarding your individual business circumstances. Our quoting tool is provided for your information only. All quotes are estimates and are not final until consumer is enrolled. Medicare has neither reviewed nor endorsed this information.

HealthMarkets Insurance Agency offers the opportunity to enroll in either QHPs or off-Marketplace coverage. Please visit HealthCare.gov for information on the benefits of enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered for coverage through the Marketplaces.

This information is not a complete description of benefits. Call the Plan’s customer service phone number for more information.

48213a-HM-1221