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In This Article I’m Going To Discuss The Importance For People Who Earn A Low Income To Carry Some Form Of Life Insurance Coverage
Most likely you’re here today because either yourself or a loved one earns a low income and is concerned that the cost of life insurance may be out of their reach. But on some level you still know you need life insurance coverage and want to know what your options are to get affordable, yet high quality life insurance coverage in place.
In this article I’m going to specifically address this concern, covering a number of important topics that will help you figure out how to get quality life insurance coverage with a low income without breaking the bank.
Specifically, I’m Going To Cover The Following Topics As They Relate To Buying Life Insurance:
- The Importance Of Meeting Your Goals And Budget
- Why You Should Consider Getting Life Insurance As A Low Income Earner
- How Much Life Insurance You Truly Need
- Factors That Affect Your Insurability
- Strategies To Get The Best Overall Price And Coverage
- Coverage Rates For Different Types Of Insurance
Why those earning a low income should always be covered with life insurance
As someone who is earning a low income, whether that’s because you work a low income job or are retired, it’s important that you always have some kind of life insurance in place. Why is this the case?
Even though you have a low income there’s probably somebody in your life that relies on your income for day to day expenses and paying debts. What would happen if you happen to pass away?
For example, if you work a low income job on an entry level, the chances are if you pass away and have children or a wife, that their lives would be dramatically affected by the loss of your income. Imagine what would happen to them if they couldn’t make the mortgage payments and lost your home to foreclosure.
Or what would happen if you passed away, especially if you’re elderly, and left your kids responsible for paying for your funeral. They may be in a position where they simply can’t pay that kind of expense out of pocket, which could cause stress and derision among family members. Everyone knows how money tends to break up families more than bring them together.
Either way, life insurance solves some of the most difficult challenges a family may face when someone dies. And it’s sustaining a familiar lifestyle in the face of continuing debt after your death that could make all the difference to those you leave behind.
Most likely the biggest reasons that prevent you from buying life insurance is the concern over price. Having been raised in a low income family myself, I understand how every dollar matters and that you need to make sure anything you purchase is a good use of your money.
We’ll talk about some factors later as to how low income families or anyone for that matter can search for the best overall price, as there are strategies that you can employ to get the best overall pricing and value of coverage.
Why should low income earners carry life insurance?
There are a number of valid reasons why low income earners purchase life insurance coverage.
Replace an income
As mentioned previously. If you passed away, how would your spouse and family subsist? If they depend on your income, they would be put in poverty immediately with your passing. But that can be avoided with an affordable small life insurance policy to help offset what money your family would lose with your death.
Generally speaking, we recommend approximately 5 to 10 times your annual income as a starting point for purchasing life insurance coverage. This will handle many years to come, giving your loved ones the ability to pay off final expenses and cover debts.
Many people on a low income also carry debt such as credit card debt, medical debt, and mortgage debt. All of this without your income earning power can crush your surviving family and put them into the poor house.
Remove those burdens from them with a more affordable life insurance policy. The way it works is simple: your family receives the money as the beneficiary, and then takes a portion of that money to pay down or completely cover the mortgage or other debts you may have such as medical and credit card debt.
This will leave your surviving family financially free without debt, while leftover money can take care of ongoing expenses without a dramatic shift in the lifestyle that you’ve built for your loved ones.
Cover final expenses
Many people on a low income purchase a life insurance policy because they’ve reached retirement and found that they have very little, if any, money for their final arrangements. They also recognize that if they pass away, whether they’re body is taken care of by burial or cremation, that their family is going to be responsible for final costs.
That final responsibility unfortunately can create a lot of stress between siblings. Typically in many families there are sibling that are doing very well or doing better than the other siblings and they will be expected to carry most, if not all, of the cost.
And while this may be handled appropriately, in many cases the sibling who’s doing well may feel resentful about being the one financially responsible. There may be promises of repayment that never pan out, and in many cases this causes strained relationships and unnecessary frustration.
Truth be told, if you don’t take care of your burial expenses, then somebody else will.
If your kids aren’t in a financial position to pay for final expenses out of pocket, you’re likely putting them in an uncomfortable situation that will have negative consequences. So buying an affordable insurance plan is well worth it to relieve final expense obligations that could potentially divide your family or cause stress.
How much life insurance coverage do you need if you are on a low income?
We mentioned earlier that a good starting point for coverage is around the 5 to 10 times your yearly salary in coverage. This amount will effectively cover debts, mortgages, credit card bills, and other bills, and leave your family well protected if you are on a low income.
As an elderly person or senior, I would recommend getting enough coverage to take care of the debt you have at the moment. You’re in a bit of a different situation than a young married couple with children. Most likely if you pass away, there’s not going to be people, such as your children, depending upon you. The impact won’t be felt as deeply if you are only leaving behind a spouse, as opposed to a spouse and children.
Generally speaking, for life insurance professionals like ourselves at Buy Life Insurance for Burial, we try to match the need of an elderly person buying a final expense protection to the exact dollar amount that is necessary.
In most areas of the country $10,000 is a good starting point for a burial. Although some people opt for $15,000 to $20,000 in life insurance because of the fact that the cost of living is going up, and having a higher amount will account for the fact that cremation and burial prices are likely to go up too.
What factors affect insurability?
In this section I’m going to discuss the six most common factors that affect your ability to qualify for life insurance.
Your health is a big determinant of what kind of pricing you may qualify for on your life insurance plan. Health questions include, but are not limited to, the following:
Do you have a history of…
- Heart disease
- Lung disease
- Liver disease
- Kidney disease
- Circulatory disease
- Mental health disorders
- Cognitive memory problems
- Prescription use
All of these questions will be asked in much further detail on your application, so be fully prepared to answer as transparently as possible with the knowledge that life insurance companies will pull medical records and prescription history records to back check any sort of questions that you answer.
Like your health, your lifestyle has implications on your capability to qualify for coverage. When we speak of lifestyle, we are typically referring to any sort of non-professional activities you take part in, such as extreme sports, as well as driving incidences, like DUIs.
The more conservative and safe your lifestyle is the better opportunities you’ll have for a better value of coverage. If you take part in high risk activities outside of work that fit in to this particular description, you may experience rate increases and pay a higher price for your coverage.
Smoking status has an impact not on your eligibility for coverage, but the likelihood for price increases.
If you’ve smoked within the last year, most likely you’ll pay a higher price for your coverage. However, if you do smoke cigars, cigarillos, pipes or chew tobacco, you may qualify for non-tobacco rates with specific companies. Speak with us for further details.
The older you are, the more you pay, so lock in your life insurance coverage now to avoid paying a higher price potentially in the future.
Strategies to get the best price for your life insurance
What follows are three specific ways you can potentially lock in a better price for your life insurance coverage when you are a low income earner.
Always worked with a broker
We here at Buy Life Insurance for Burial operate as brokers, which means we work with several different life insurance companies. The reason we do this is because it allows us to shop around for the best price and coverage.
Working with a broker is an important factor to consider if you are on a fixed income and looking for life insurance on a low budget. What you don’t want to do is work with what’s called a captive agent.
Captive agents represent a singular company which may not offer the best underwriting if you have health problems. This could result in higher pricing, which may also put you in a position where you cannot afford the coverage that you are quoted.
You are limiting your options if you work with a one trick pony company that doesn’t have the scope of availability that a broker can offer. And if you’re on a low income, let’s face it, you deserve the best deal. You’re not making a lot of money and you can’t afford to spend more.
Compare prices with and without an exam
Normally, I recommend people take an exam if they’re in good shape and are looking for significant coverage. However, because you’re on a low income, it’s likely that the coverage you purchase, whether that’s a final expense plan or a term life insurance plan, is going to be under the threshold amount that would require an exam.
What I would recommend is compare the pricing between a non-medical life insurance policy, which does not require an exam, and one that does, and then determine based on that comparison whether or not an exam would be worth it.
What’s the best type of life insurance to purchase on a low income?
The best way to answer this question ultimately comes down to what your goals are for life insurance coverage. For those that are currently working and have many years left at their jobs, it’s most likely that a term life insurance product will be the best choice.
Overall term life insurance is the best choice if you are looking to replace income, pay off debts, and to leave a legacy behind.
Term insurance is temporary POP coverage, which means that it cancels usually within 10, 20, or 30 years.
Term insurance has level premiums which don’t go up during that time and can provide comprehensive death benefit payout to protect your family in case you die. Most importantly, the pricing on term insurance is substantially less expensive than a permanent life insurance, which makes it a great option if you’re on a low income.
Permanent Life Insurance is something I would only usually recommend for those people who are on low incomes at an advanced age that are just looking for enough coverage to pay for their burial or cremation expenses. The reason we need permanent life insurance at this age is because ultimately death is going to happen, though it may be unpredictable.
Many people may buy a term insurance product thinking the price would be better, but ultimately outlive that coverage and don’t have anything to show for later on in life when they most desperately need it.
Permanent life insurance offers a permanent death benefit. So no matter when death occurs, the life insurance pays out.