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In This Article I’m Going To Make The Case For Why Pastors Seriously Need To Consider Buying Life Insurance Coverage, Not Just For Personal Reasons, But Also For Reasons Related To The Economic Health Of The Church That They Lead
Most likely you’re reading this because you’re a pastor or clergy member and you’ve had concerns about having life insurance protection to not only take care of your family, but as a way to possibly benefit the church if you were to happen to die in an unforeseen fashion.
If this describes your circumstances, then this article will do a good job of explaining both the personal reasons to own life insurance as a pastor, as well as the business related reasons.
Here’s An Overview Of Today’s Topic:
- Why should a church consider insuring their pastor?
- How much coverage should the church purchase?
- Universal life or whole life insurance plans
- Burial Insurance Rates, Age 40 to 90*
- How does a personal life insurance plan work for pastors?
- Should a pastor consider taking an exam while applying for life insurance?
Why should a church consider insuring their pastor?
One of the biggest reasons why churches purchased life insurance on their pastors is because pastors are considered to be key people in the organization of a church. Often people are attracted to a church because of the pastor’s influence, their likeability and the message that they deliver. And the church in a sense is a beneficiary of the pastors capability of communicating and connecting with its membership base.
As unfortunate as it may sound, if you as a pastor pass away unexpectedly, this will have an impact on membership levels, enthusiasm and thus donations and funding sources. So purchasing life insurance poses a solid economic concern because it may not only affect the budget of the church, but it could put the church in an adverse position where they’ve got to figure out how to replace you with somebody who’s comparable that can basically do the same kind of job and deliver the same kind of economic contribution week to week.
The solution to this problem is to buy what’s called a key main life insurance policy. The process is very simple to understand. The pastor is insured. The church pays the premiums on the policy. If you pass away, then the church is the beneficiary to that policy and the proceeds from that policy are used to cover the church budgetary requirements in lieu of your absence. This coverage also gives the church time to find a replacement.
How much coverage should the church purchase?
Generally speaking, as far as coverage goes, we look at somewhere between one to five years worth of your pastors annual income to give us an idea of how much coverage is needed. There’s a lot of flexibility in this, but it just ultimately depends upon the time in which economic loss could potentially occur and what amount is appropriate for the church.
Generally speaking, we like to recommend either term life insurance or some kind of permanent life insurance plan, like a whole life insurance plan, to be the source of funding. If a church is looking for the most economical use of their money, the immediacy of a term life insurance plan will provide the most coverage for the least amount of premium. However, term life insurance plans are temporary.
Term insurance has no economic accumulation value, which means once a term life insurance policy is canceled or outlived they no longer hold value. Term insurance generally is purchased for a period of 10, 20 or 30 years. If the pastor is still around when the term ends, the problem of economic coverage may still remain and you’ll have to either reapply for life insurance at a much higher rate or simply not have coverage at all.
Universal life or whole life insurance plans
Universal life or whole life insurance plans are permanent protection plans. And although they will cost more initially, the church can benefit from several advantages with these plans. First and foremost the component of this type of life insurance makes it permanent as long as it’s designed well, which means it doesn’t matter if the pastor dies today or 40 years from now. No matter how old he gets, as long as the plan is designed appropriately, it will pay a death benefit to the church regardless of whatever future date arises.
Burial Insurance Rates, Age 40 to 90*
Rates For $5,000 In Burial Insurance
Rates For $10,000 In Burial Insurance
Rates For $15,000 In Burial Insurance
Rates For $20,000 In Burial Insurance
Rates For $25,000 In Burial Insurance
*Burial insurance premiums are subject to underwriting, based on rates as of 8/20/2018, from state-regulated life insurance companies offering final expense burial whole life insurance protection. Understand that in order to potentially qualify, you must submit an application to see if you’re eligible. Rates are subject to change. Give Buy Life Insurance For Burial a call at 888-626-0439 now to see what program you may qualify for.
Also, with these plans there is generally a cash value component that the church can utilize for budgetary reasons or borrow from if there is a requirement to use these sources of funds. So it acts in some ways as a financial asset to the church and also allows for a level of permanency so that if a pastor stays with the church for a very long time, the life insurance policy will still be there to fund for that eventual time when the pastor does pass away.
How does a personal life insurance plan work for pastors?
Let’s shift gears now and talk about personal life insurance plans for pastors and their family. A person in the ministry purchases life insurance for the same reasons that the average person does. Generally speaking, they want to have life insurance protection for their family if they happen to pass away and ensure their family has an income to replace the money that their family would otherwise lose.
A pastor can pay for life insurance coverage personally out of their own pocket or a church can pay the premium, but the beneficiary can be the family. Either way is acceptable, depending on how the church wants to handle that type of economic investment. The reasons a pastor would have a personal plan in place usually stem around two subjects, either income replacement or debt payoff or both.
Income replacement is the main reason why pastors buy life insurance. If you are a pastor, you don’t want to leave your family out to dry financially when you die. Nor do you want to cause economic stress that would cause them to change their lifestyle dramatically because they’ve lost your income and you are the main financial contributor.
Generally, we recommend a pastor take out coverage in accordance with five to 10 times their annual earnings in order to replace their income. This sum would be great enough to give their family a nice lump sum payment to help them subsist for a very long time.
Also in conjunction with income is debt payoff. Pastors like regular people have mortgages and debts, and the life insurance plan can be used to pay off those debts, so surviving family members don’t have to necessarily struggle to come up with those funds out of pocket.
Should a pastor consider taking an exam while applying for life insurance?
My opinion is that as long as they’re in good shape and healthy, a pastor should always take an exam during the application process for life insurance.
The main reason why is that by taking an exam, it gives a life insurance company the most up-to-date information, allowing them to give those who are the most healthy, the best overall prices.
If you prefer to not take the exam, you can opt for what’s called a non-medical life insurance policy.
With a non-medical policy your ability for insurability will be based off of historical information requested from your doctor’s office.
While this is convenient for many people to do, the problem is that your life insurance will be much higher if you’re otherwise healthy because the insurance doesn’t have up-to-date information. Your health could have changed, but an underwriter will assume the worst and factor that into the price. So if a pastor is healthy, it’s always a good idea to consider buying life insurance with an exam in order to maximize the amount of price and coverage that you can get.