Follow this guide to know everything you need to know about how to find out if someone has life insurance. If you’re unsure if someone has or had a policy, there are ways to find out.
When it comes to financial protection for your family, life insurance is one of the best choices you can make. But life insurance isn’t an easy topic to discuss, even among close family. Considering the association of the subject we often overlook or avoid it altogether. If you already have it, be sure to have a conversation with your loved ones about your coverage.
Unpredictability is part and parcel of life. If something happens to you, one will surely want to leave their beloved ones in a secure financial nest. Protecting your beloved family is everyone’s priority. Life insurance promises to protect and safeguard the future of your family, and in particular, it ensures peace of mind. Essentially, life insurance is a contract between an individual and the insurance company. If you are new to the concept of life insurance, you must have various questions about how life insurance works, what is the need for this insurance, or how life insurance works as an investment.
To answer all your queries and concerns, the following article will cover all the aspects of life insurance and how to find it. Further, there will be a plethora of legal and financial terms whose familiarity will prove advantageous to you. So, follow this detailed guide on how much is life insurance per month.
Table of Contents
- 1 Defining life insurance?
- 2 How does life insurance work when you die?
- 3 How does life insurance work when you live?
- 4 Unclaimed life insurance policy
- 5 Finding a life insurance policy when someone dies
- 6 How to find out if you are a beneficiary?
- 7 Do life insurance companies contact beneficiaries?
- 8 Benefits of life insurance
- 9 Average life insurance rates
- 10 Factors that don’t impact life insurance premium price
- 11 Types of life insurance
- 12 What does life insurance cover?
- 13 Why do people buy life insurance?
- 14 Conclusion
Defining life insurance?
The first and foremost point is defining the definition of life insurance in layman’s terms. What is life insurance? It is a way to protect your family or business by signing a contract between you (the policyholder) and an insurance company.
Life insurance can serve a diverse range of benefits and purposes. Ranging from replacing homes to paying outstanding debt, life insurance can be utilized for a vast number of things including covering college tuition or funeral expenses. The real question is how much is life insurance per month.
Owning a life insurance policy is a must for every person who desires to guarantee the financial security of family members and surviving loved ones, after his/her death. Basically, the insurance company will pay a handsome amount known as a death benefit to your beneficiaries after your death in exchange for your premium payments.
How does life insurance work when you die?
Many citizens want to get familiarized with the working of life insurance and what happens after the insured person dies. Well, the explanation lies in the concept of death benefit which is discussed below.
What Is a Death Benefit and why is it paid? The money paid by the insurance company after your death is known as a death benefit. It is essentially a payout to the beneficiary of a life insurance policy, annuity, or pension when the insured passes away. For life insurance policies, death benefits are not subject to income tax and beneficiaries receive the death benefit as a lump-sum payment.
The beneficiaries named by the insured can use the money for whatever purpose they desire. In the majority of occurrences, the money is utilized to pay everyday bills or a mortgage, put a child through college, etc.
How does life insurance work when you live?
In other case scenarios, you outlive the life insurance policy’s tenure. What’s next? You are faced with two other options. Namely, the policy will simply end and you’ll no longer be covered. Or your insurer may allow you to convert all or a portion of the policy into permanent life insurance.
Unclaimed life insurance policy
If a person with a life insurance policy dies, but his or her beneficiaries are unaware of the coverage, it is an unclaimed life insurance policy. This is relatively common and can happen for several reasons as listed below:
- The beneficiaries are not aware a life insurance policy exists.
- The beneficiaries are not aware they are named as beneficiaries in the policy.
- The beneficiaries can’t locate the insurance company.
- The insurance company can’t locate the policy’s beneficiaries.
- The insurance company no longer exists and has lost contact with the policyholder.
The amount of unclaimed life insurance benefits in the United States topped $1 billion dollars by 2013, according to Consumer Reports. At the time, the average payout was $2,000 and some were as much as $300,000.
Finding a life insurance policy when someone dies
There are several ways to find a life insurance policy when someone dies. These include internet tools and some detective work on your own.
Life insurance policy search by Social Security number
The National Association of Insurance Commissioners (NAIC) is a group that represents the chief insurance regulators of each of the 50 United States, the District of Columbia, and U.S. Territories. They have an online tool that can help track down unclaimed life insurance policies through SSN.
Once you fill out an online form on the policy locator tool, the NAIC will ask participating insurance companies to scour their records to see if they have a life insurance policy in the name of the deceased person you listed on the form. The companies will also look for policies that name you as a beneficiary.
Ways to locate a lost life insurance policy
Another way to find out if someone had life insurance is by talking to the deceased’s family and friends. You can also check bank statements for premium payments to a life insurance company.
There is also a possibility to check the deceased’s mail for at least one year after the death for life insurance premium notices. Also, search through the Canadian OmbudService for Life & Health Insurance online search tool if you believe the policy may have originated in Canada.
If the efforts remain futile, try to check with your state’s unclaimed property office or use the National Association of Unclaimed Property Administrators’ online property locator tool.
Contact the deceased’s previous employers or union in case there is a group life insurance policy.
It is also advisable to contact your state insurance commissioner or look online to see if your state has online search services available to look for lost life insurance policies — at least 29 states offer this free service. Other ways include:
- Look through the deceased’s personal files, books, safe deposits or other secure storage places for insurance documents.
- Review the deceased’s tax returns for interest payments from an insurance company.
- Search the deceased’s computer and other digital storage — external hard drives, flash drives, a Dropbox or other online storage.
- Talk with the deceased’s financial advisors or lawyers.
How to find out if you are a beneficiary?
The important step in the insurance process is choosing the beneficiary who will claim the death benefit after one passes away. The policyholder has the authority to name multiple beneficiaries.
Further, he/she can also decide what percentage they each will receive when they die. Additionally, there is a possibility that you name contingent beneficiaries in case the primary beneficiaries have died. There is a possibility that you opt for naming trust by creating a revocable living trust and naming it as the life insurance beneficiary. For example, the trust money could be used to take care of children.
In the occurrences where someone decides to name a trust the beneficiary of your policy, an attorney is hired to structure the trust correctly. Moreover, it is advised to work with a financial planner so a larger and better financial plan can be designed. It is important to update your beneficiary selections regularly because events such as marriage or divorce can be impactful.
How does a beneficiary make a claim? Named beneficiaries who are selected by the policyholder to claim the death benefit after their demise can easily claim the hefty amount after following a standard protocol.
The claims are paid at the earliest opportunity given that all conditions have been satisfied and the said beneficiary has all the documents required for clearance. Typically, the insurance company doesn’t contact themselves rather the beneficiary has to initiate the claiming process. Below is the list of the documents that are necessary for the claim:
A copy of the death certificate is needed to be submitted. Claims are typically paid within 30 days after the insurer receives the necessary documents.
Do life insurance companies contact beneficiaries?
Many life insurance companies try to contact beneficiaries if the beneficiaries don’t contact them first. There’s no automatic process that tells them about policyholder deaths. Usually, the way the insurance company finds out the policyholder has died, and that the policy needs to be paid, is from the beneficiaries or other family members.
For multiple states, it is required insurance companies to check the Social Security “Master Death File” for deceased policyholders and to try to notify their beneficiaries when they find a policyholder on that list. Hence, it won’t be odd if no company finds you. Considering
So, don’t count on the company finding you. If you think your loved one might have had a life insurance policy, and you might be a beneficiary, there are things you can do to find out.
Benefits of life insurance
At last, life insurance provides a number of useful benefits including
Life Insurance payouts are tax-free – Life insurance payouts are not considered income for tax purposes and hence the beneficiaries do not have to report the money when they file their tax returns.
Dependents won’t have to worry about living expenses – Life insurance policies help people avail themselves of certain benefits like they do not have to worry about their living expenses or other major costs.
Life Insurance can cover final expenses – When someone has a life insurance policy, their beneficiaries can use the money to pay for their burial expenses easily. Some insurers offer final expense policies.
Coverage for chronic and terminal illnesses – Various life insurance companies offer endorsements that allow you to access your death benefit if you are diagnosed with a terminal illness and are expected to live less than 12 months.
Policies for retirement savings – If you purchase a whole, universal, or variable life insurance policy, it can accumulate cash value in addition to providing death benefits. As the cash value builds up over time, you can use it to cover many expenses.
Average life insurance rates
The average life insurance rate cost is about $27 a month As per the statistics, the data provided by Quotacy revealed the most common term length and amount sold for a 40-year-old buying a twenty-year-old $500,000 term life policy.
The average cost of term life insurance by age
These annual life insurance rates are based on a $500,000, 20-year term life insurance policy for super preferred applicants. Here we discuss how much is life insurance per month and annually.
- Aged 30, Average rate for men – $227, Average annual rate for women – $192
- Aged 40, Average rate for men – $340, Average rate for women – $287
- Aged 50, Average rate for men – $3835, Average rate for women – $652
- Aged 40, Average rate for men – $340, Average rate for women – $287
- Aged 60, Average rate for men – $2,362, Average rate for women – $1,673
- Aged 70, Average rate for men – $9,298, Average rate for women – $8,205
Average cost of whole life insurance by age
These annual life insurance rates are based on a $500,000 policy for super preferred applicants.
- Age 30, Average annual rate for men – $4,985, Average annual rate for women – $4,372
- Age 40, Average annual rate for men – $7,372, Average annual rate for women – $6,428
- Age 50, Average annual rate for men – $11,250, Average annual rate for women – $9,877
- Age 60, Average annual rate for men – $18,130, Average annual rate for women – $15.753
- Age 70, Average annual rate for men – $30,325, Average annual rate for women – $26,815
Factors that don’t impact life insurance premium price
Earlier, we determined the factors that will have an effect on the price of life insurance premiums. Those factors include the rate offered, type of insurance policy, age, and medical condition of the potential policyholder.
Now, we will list down the factors that will not affect the life insurance rate that is being offered. These factors have no effect and are not considered whilst issuing a life insurance policy.
Ethnicity, race, and sexual orientation – Insurance policy and prices do not depend on insurers. While age and gender are thoroughly assessed, insurance companies can’t discriminate against elements of diversity.
Credit score – The credit scores are checked-in detail, one can surely expect the insurer to look at the credit history going back seven years. In case you have a bankruptcy on your record, you might be deemed to have a higher risk of mortality.
Marital status – The life insurers don’t have different rates for married applicants. However, some insurances like many auto insurance companies do impose additional costs on marital status.
Number of life insurance policies – While a larger number of insurance policies does not affect the price of premiums, the policyholder has to justify purchasing increased coverage across multiple policies.
Number of beneficiaries named – Whether you have one life insurance beneficiary or five, this won’t impact your rate.
Types of life insurance
Primary, there are two types of life insurance: term and permanent life. The two types of life insurance are discussed in detail below.
Term life insurance
The first type of life insurance we will be discussing is Term Life Insurance which is unarguably the most affordable and most popular type of life insurance. Term Life Insurance rose to unprecedented fame among its admirers and acquired the majority of the market with 71% of purchasers preferring it according to the Insurance Barometer Report.
The principal reason behind its acclaim is that it provides coverage for a certain amount of time and the premium payments stay the same amount for the duration of the policy. The policy lengths can vary from 10, 15, 20, 25, or 30 years. In case of the policy holder’s demise within the term of the policy, his/her named beneficiaries can easily claim and receive the death benefit money without tax.
Furthermore, once the term policy reaches its expiration date the policyholder has the facility to renew the coverage by the increment of the year. The increases in time are termed as guaranteed renewable. However, each year of renewal is more expensive than the previous year and has higher rates.
The term life insurances are the most favorable policy because they last a specific number of years and in case of expiration, there are no payouts. While it’s the cheapest life insurance it has a fair share of a disadvantage since in case an individual outlives his/her policy, their named beneficiaries won’t receive a payout.
Permanent life insurance
Next up, we discuss Permanent life insurance that can be whole or universal. How does payment life insurance work? They provide lifelong coverage and are more expensive than term life.
The permanent life insurance policies are bound to be permanent if the policyholder meets the monthly premium payments and can offer a cash value component. The duration of these policies is not fixed and they can last for the duration of the insured one’s life.
Such life insurance slowly yet surely builds valuable cash value whose component accumulates on a tax-deferred basis over the life of the policy. In simpler words, it performs the role of the saving portion of the policies.
Since there is a possibility that the policyholder can borrow against the policy’s cash value or make a withdrawal, then one can decide to end the policy and get the cash value. This way the surrender charge will be discarded.
The following policy is a gradual phenomenon and the cash value may build slowly over many years. Hence, an individual/policyholder cannot assume that he will have access to a lot of cash value right away. To view your projected cash value, you need to check your policy illustration.
Ultimately, these policies can easily last one’s entire life and include a cash value component that can be withdrawn or borrowed against while the person is still alive. Next up, we describe the several varieties of permanent life insurance
Whole life insurance
Whole life insurance is a permanent life insurance policy that ensures a fixed death benefit for the named beneficiaries alongside a hefty amount of cash value savings component for the policyholder.
Like everything in the world has its benefits and potential downsides, the same norm goes with whole life insurance that can easily last until the policyholder’s death. The precondition of smooth working is the payment of premiums.
Working on the dazzling mechanism of “set it and forget it”, the following life insurance states that the premiums stay the same and the insured person can get a guaranteed rate of return on the policy’s cash value. The fulfillment results in the death benefit amount not changing. Typically, whole life insurance is far more expensive than term life so citizens who desire to tone down their financial expenses have to explore other options in the insurance niche.
Universal life insurance
The second type of permanent life insurance is universal life insurance which offers far more flexibility than a whole life insurance policy. Facilitating the user with many conveniences, the policyholder can easily alter his/her premium payments and death benefit within a certain amount of limits. By opting for a universal life insurance policy, the cash value will build depending on the policy type.
Let’s take help from this example where we suppose that an indexed universal life insurance policy will have cash value tied to an index. The variable policy will have ranging investment subaccounts.
Dubbed as the most flexible permanent life insurance option, it provides policyholders with the ease to pay premiums at any time and reduce or increase their death benefits. However, they are subjected to market fluctuations because the cash value component is invested in stocks.
Universal life insurance
Due to the minimal cash value, a universal life policy is cheaper than whole life. However, a missing payment could forfeit the policy leaving the insured person empty-handed.
Further, we have burial insurance which is a small whole life policy with a small death benefit. The value of the death benefit is somewhat between $5,000 and $25,000. Majorly, this kind of insurance is designed to cover only funeral costs and final expenses.
Survivorship life insurance
According to the statistics, more than 40 million people wish to have life insurance but have not availed of the insurance plan. The reason is quite simple: people tend to overestimate the cost of life insurance.
The Survivorship life insurance confirms two people under one policy, usually a married couple. The policy pays out the death benefit to the beneficiaries only when both the spouses have passed away. Commonly known as “second to die life insurance”, the survivorship life insurance is part of a larger financial plan to fund a trust or pay federal estate taxes.
What does life insurance cover?
As the intricate working of life insurance continues to get explored, one might feel compelled to ask the question about what does life insurance cover? Various life insurance products are designed to protect the policyholders from unexpected events. Some examples are listed below:
- Life cover – The death benefit which pays a lump sum when the policyholder dies
- Total and permanent disability insurance – The following insurance will provide a lump sum to cope with rehabilitation and also bear living costs
- Trauma insurance – It covers all the expenses if the insured individual is diagnosed with a major illness like cancer, tumor, etc.
- Income protection insurance – It pays a small amount of money if the policyholder is unable to earn due to illness or injury
Why do people buy life insurance?
Due to the advent of technology, a plethora of finance-saving plans keeps on getting introduced in the market. The majority also invests in various kinds of life insurance and we bear in mind that life insurance plays a crucial role in the financial plan.
Nevertheless, it is hard to determine whether investing in life insurance is perpetually a smart investment or not. The prime reason why people invest in life insurance is to cover funeral and final expenses, according to a 2020 survey by LIMRA and Life Happens. Other reasons could include various thought processes but the most popular ones are listed below:
- Burial/Final expenses: 84%
- Supplement retirement income: 57%
- Transfer wealth: 66%
Moreover, many people are also motivated to subscribe to such policies because they need to ensure their loved ones are provided with financial security. Besides ever since the world has been hit by the pandemic, the rising inflation and financial crisis have emerged as top concerns in the aftermath of battling COVID-19.
Overall, it is a tricky concept to decipher the ongoing process of understanding if any individual has the luxury of life insurance or not. But the policyholder definitely has far-sightedness in his/her persona considering LI guarantees the safety of family or loved ones. Moreover, the smooth workflow of life insurance helps battle the risks and scenarios where you are not equipped enough. The fund that is created through premium payment proves to be beneficial in the long run for the beneficiaries.