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Top Questions About Bestow Answered

Often times, we hear this: "I don't know what questions to ask." If that's you, you've come to the right place! Here you'll find the top questions people just like you are asking.

July 27, 2021 5 Min read

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Ran Mays | 10 min

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The following blog is a guest post from our friends at Breeze, an online disability insurance provider.

Family and finances: two words that are joined at the hip. And while everyone is quick to give you parenting advice, finding helpful financial tips and tools can feel a bit more challenging. Lucky for you, we’ve assembled this list to help you make moves now that could help your family down the line.

Life changes quickly, especially if you’re just now starting your adult life. Perhaps you’ve recently tied the knot or a little mini-you is on the way (congrats!). In either case, your financial situation is likely to change drastically over the next couple of years, never mind decades. So, too, will your insurance needs.

You may be wondering what the difference is between a whole life vs term life policy. Before we get into the nitty-gritty of which one might work best for you, let’s look at what term and whole life insurance coverage have to offer.

  • There are benefits and drawbacks to each.
  • Term life insurance is typically more affordable, while whole life doesn’t expire after a set period of years – but it’s more expensive.
  • Both options have merit – and the choice depends on what you value for your loved ones.

Article Highlights

  • Term insurance v. Whole Features
  • Term insurance v. Whole Cost Comparison
  • Choosing Term or Whole
  • Other Life Insurance Options

Start with a quote

High-Level Differences Between Term and Whole Life Insurance

The two basic types of life insurance are term and whole, which differ in length of coverage. Term lasts as long as you’ve agreed with your provider. Whole life can offer a guaranteed payout upon your death. But it’s not as simple as selecting a sure thing.

Term Life Insurance – This  is designed to provide ample coverage at a time when you’re most financially vulnerable. And because it expires at the end of your term, it costs significantly less than a whole life insurance policy.

Whole Life Insurance – Because whole life insurance is in force for as long as you’re alive (and pay your premiums), your beneficiary will always receive the death benefit, no matter how old the policy. This can mean fairly intimidating premiums for some applicants.

Whether you’re currently researching what kind of life insurance to buy, or you just want to learn more about term life insurance, here’s advice from some of your favorite personal finance experts. (And if you’re interested in learning even more about what term life insurance is, you can find that information here.)

Disclaimer: This post is for informational purposes about term life insurance and in no way implies that Dave Ramsey, Suze Orman, or Clark Howard have endorsed Bestow. Content sources are linked throughout the article. Views presented in this article are the opinions of Dave Ramsey, Suze Orman, and Clark Howard and do not represent the views of Bestow or its partners. 

What Is Term Life Insurance?

A term life policy covers a specific time period and is intended to provide death benefits in the event of premature death. While you must keep up with monthly premium payments, it only retains value if you pass away during the term.

The Benefits of Term Life Insurance

You know yourself best. Term life insurance coverage is a great option for most American adults, especially if you have a tight budget. With a term policy, you’ll enjoy the benefits of:

  • Choosing your term length. Perhaps 30-years makes sense if you’ve taken out a mortgage. Or a 20-year term suits someone who just had a baby.
  • Getting more affordable rates that comfortably fit into your monthly budget.
  • Some degree of financial resiliency should you pass prematurely during your term.
  • Oftentimes, no exhausting, intensive application process – even sometimes skip the medical exam.

Drawbacks of Term Life Insurance

While the lower price and flexible terms can make term enticing, there are a few reasons to think twice about your choice.

  1. The life of your policy expires at the end of the term. You can’t always add on coverage, but often must reapply, with new rates.
  2. If you do outlive the term, without a return of premium rider (a more expensive agreement where your premiums are returned to you at the end of your term), the money you’ve paid for a number of years is gone.
  3. You can sometimes add a return of premium rider to your policy that you get part or all of your premium payments returned back to you. However, these policies are more expensive.

What happens to term life insurance at the end of the term?

At the end of a term, a policy simply expires. Policy holders sometimes have the chance to re-up their coverage, but not always. Ideally your major expenses are paid off, the kids are on their own, and the financial peace of mind you get from insurance is no longer necessary.

Get an instant quote for term life insurance, no medical exam required.

What Is Whole Life Insurance?

Whole life insurance is exactly what it sounds like: it’s insurance that lasts for your whole life (except it’s actually more complicated than that). It’s often called permanent life insurance, for obvious reasons.

  • You get lifelong coverage, which provides a payout to your beneficiaries on your eventual death.
  • May include an investment component with policy cash value – and this is generally tax-free money.
  • You can often borrow against the account for major or unexpected life expenses.
  • And some policies allow you to sell or transfer ownership – where someone else pays your premiums and collects the death benefit.

A little more on the cash value: these are the “living benefits” provided by whole life insurance. A part of each premium payment contributes toward growing the policy’s cash value. You can tap into your cash value to take out a loan, pay your premiums, or surrender the policy for its cash value amount.

Benefits of Whole Life Insurance

Outside the obvious appeal of the cash value benefit, a whole life policy is a great choice for individuals looking for a guarantee, and want the financial protection that comes from knowing you have a policy to last your entire life.

  • There’s no term.  It is permanent coverage as long you’re making payments.
  • Just like term life, the death benefit is guaranteed to be paid out tax-free to your beneficiaries if you die within the term period (and claim is approved).
  • Premiums grow tax-deferred cash value from which you can withdraw or borrow.
  • Guaranteed death benefit as long as you make payments
  • Premiums can build cash value and the policy’s cash value grows with time

Drawbacks of Whole Life Insurance

It should be clear by now that for many people seeking life insurance, the appeal of whole life is often tempered by the cost.

  • You’ve got to pay more in order to get more out, so you’ll pay higher premiums.
  • Many surrender their policies and incur fees to cancel their coverage.
  • Using the cash value can reduce the death benefit (if loans are not paid back), subject you to taxation, or result in the surrender of the policy.
  • You may find yourself making large payments for a policy you don’t really need in your later years. Your beneficiaries may have acquired wealth. They may proceed you in death. Your mortgages and other debts may be paid.

Comparing Term vs. Whole Life Insurance Policy Coverage

Let’s look at what term and whole life insurance offer side-by-side for a clearer picture. There are trade-offs with selecting either, but once you’ve decided what’s most important you can begin to balance some of those tradeoffs.

Policy Features Term Life Insurance Whole Life Insurance
Length1-30 yearsEntire Life
Cost$25-35/mo on avg.5-15X the $$ of term
Death BenefitYesYes
Cash ValueNoYes
Cash Value GrowthN/AGrows at an established rate.
Premium VariabilityFixed or variableFixed
Type Of InsuranceProsCons
Terms Life InsuranceUsually easy to apply for and can be an affordable life insurance option.

Death benefit could help pay the balance of your mortgage, as well as provide additional benefits to your loved ones.

Does not carry a cash value like most whole life insurance products do.

 

Mortgage Protection Insurance

 

 

 

Pays off the balance of your mortgage if you die.

May cover mortgage payments if you lose your job or become disabled for a limited amount of time

Minimal or no underwriting, so cost is based on the amount of your mortgage, your age, and your smoking status

Reduced benefit over time as you pay down your mortgage

You pay level premiums, even as benefits decrease as mortgage debt decreases

Your loved ones don’t receive a death benefit. 

Private Mortgage InsuranceProtects your mortgage lender in the event of default.Does not provide coverage for circumstances like job loss, disability, or death.

Comparing Cost of Term and Whole Life Insurance

A whole life insurance policy can cost 5 to 15 times as much as term. But if you start adding riders and other insurance options to a term life insurance policy, your life insurance premiums can still increase significantly.

Term life insurance policies are a good option if you only need life insurance to replace your income over a certain period, such as the years you’re raising children or paying off your mortgage. It’s going to be your most affordable coverage.

Who Needs Life Insurance?

Most people start to think about life insurance when they start a family or buy a home, but the truth is, it’s always a smart time to start buying life insurance. That’s because, typically, the most affordable time to buy is now. For most people, life insurance rates get more expensive as you age.

Anyone with someone who depends on their income is a good candidate for life insurance.

1. Parents

Having kids means having bills, from early childcare costs for young children to higher education for older kids. Their financial needs are unpredictable and often come by surprise.

2. Spouses or Partners

From living expenses to outstanding debts and even private student loans, the loss of a loved one could be compounded by crushing financial burden. That’s to say nothing of the funeral expenses and other final expenses that face those left behind.

3. Stay at Home Parents

Stay at home moms and dads contribute a significant amount of non-paid labor in a home. While not typically viewed as financial support, the value of this work can easily be in the six-figures. Life insurance can help to cover the costs associated with childcare, home maintenance and more.

Life Insurance FAQs
What does life insurance cover?

Life insurance covers any financial needs encountered by those who may have depended on your income should you pass away. At a minimum, it can help with funeral costs and final expenses.

How much does life insurance generally cost?

Term policies can be as little as $1/day, depending on several factors including courage amount, term length and your answers to health and lifestyle questions. Whole life can have a 5-15X higher cost.

Can I convert a term life insurance policy into whole life insurance?

Some term life policies allow policy-holders to convert their policy into a form of permanent life insurance, often without further medical exams. You should ask this of your insurer before purchasing a policy.

Which one is ultimately better?

There is no “better” type of policy, only a “better-for-you” policy based on your family’s unique needs.

Get Your Free Life Insurance Quote

You can get a term life insurance quote in seconds and your actual rate from Bestow in just minutes (if approved). It’s entirely online if that’s what you’re into. If not, we have licensed, non-commissioned agents standing by to help advise you. It’s entirely up to you. You can chat online or schedule an appointment to talk to a real person.

There’s no better day than today to start looking at your insurance coverage options and get a fast, free quote on convenient term life insurance policies with Bestow. Taking the first step might provide you with some peace of mind. And applying for coverage might provide your family with financial resiliency in the future.

We’re Taking the Pricks Out of Life Insurance

Needle pricks, that is!

Bestow is helping a new generation protect their financial future. We believe term life insurance should be smart, affordable, convenient, and instant — and that means eliminating the medical exam altogether. Our policies are backed by two A+ (Superior) rated industry giants, so you know you’re getting high quality coverage, without the premium price tag.

Ready to get a quote? Get up to $1.5 million in term life coverage with Bestow.

How Much Life Insurance Do You Need?

This is where our financial experts disagree…

Dave Ramsey

“We recommend you purchase a term life insurance policy for 10–12 times your annual income. That way, your income will be replaced if something happens to you.”

Suze Orman

“Buy a term life insurance policy with a death benefit that is equal to at least 20 times your dependents annual income needs. With such a large death benefit, your dependents will be able to invest the money very conservatively-say in high quality municipal bonds-and live off the income.”

Clark Howard

“When it comes to the question of how much you should buy, people can get crazy with all kinds of complicated formulas. I say simply that you should buy six to ten times your annual income.”

The truth is, there’s no single right answer for everyone.

 

Gift Tag Ideas:

  • To the busiest bee in the hive.
  • Keep calm and mom on.
  • For My Super Mom!

Container Ideas: 

  • A small, over-shoulder bag she can use again and again
  • A plastic box she can use for home organization
  • A reusable zip bag she can throw in her purse to carry the necessities

Ready to buy term life insurance?

With Bestow, you can buy an affordable term life insurance policy in minutes, without a medical exam. Our policies are backed by A+ rated insurance companies, so you know you’re getting high quality coverage, too.


Photo Credits:
Dave Ramsey and Suze Orman: CNBC
Clark Howard: Clark.com

T/Cs:
Bestow is a paid marketing affiliate of Stash
This information is for educational purposes only. This material is not intended as investment advice and is not meant to suggest that any securities are suitable investments for any particular investor. Investment advice is only provided to Stash customers. All investments are subject to risk and may lose value.

1 Investing minimums for fractional shares start at $0.01 for a Personal Portfolio.
2 For retirement, Stash offers access to traditional or Roth IRAs.

3 Offer is subject to Terms and Conditions. To be eligible to participate in this Promotion and receive the Bonus, you must complete the following steps: (i) successfully complete the designated registration process of opening an individual taxable brokerage account (“a Personal Portfolio”), (ii) link a funding account (e.g. an external bank account) to your Personal Portfolio, AND (iii) initiate and complete a minimum deposit of at least [five dollar ($5.00)] into your Personal Portfolio. In the event you only complete the designated registration process to receive the Financial Counseling Service (as defined in your Advisory Agreement) or do not otherwise complete the account opening process for an individual taxable brokerage account (“Personal Portfolio”), you will not be eligible to receive the Bonus.

 

Bestow provides you with accurate, reliable information. Some of the links in this post are from our sponsors. Many or all of the companies featured here provide compensation to Bestow. The information provided in this article is not intended to offer any tax, legal or financial advice. It is always a good idea to consult your tax, legal and financial advisors regarding your specific situation. Furthermore, this article does not ensure the availability of or your eligibility for any specific product.

 

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Bestow Team | 5 min

How Much Life Insurance Do You Need?

Unless you’ve amassed sizable assets and savings that can support your family when you’re no longer around (if that’s you, kudos!), you need life insurance.

You’re probably nodding your head in agreement. You’ve no doubt heard about the benefits of life insurance and understand the need for it, but there’s one question that often stops someone from taking the next step before buying a policy: “How much life insurance do I need?”

We can start answering this question by identifying your personal reasons for buying term life insurance.

What Can Life Insurance Pay For?

Life insurance isn’t just for paying your final expenses. It’s a tax-free benefit that your beneficiaries can use for a variety of things, such as:

Debt

Unless you’ve won the lottery (congratulations!) or inherited a windfall, chances are you have some debt. In fact, the average U.S. household carries a debt of $137,063, according to USA Today.

Mortgages, student loans, credit card bills, and financed vehicles are all major sources of debt — and that debt doesn’t always disappear after you’ve passed on. Upon your passing, your debt now becomes the responsibility of your estate, so any assets you’ve left behind for your heirs may be at risk to pay off your debt. Worse, if you have cosigners on any of your loans, they’re on the hook for your debt.

And if someone has cosigned one of your loans, guess what? That debt becomes their problem (uh-oh).

Lost Income

Whether your household is dependent on one income or two, a life insurance policy can replace lost income for as long as you’d like.

Even if you have a group life policy through work, it’s often not enough coverage and buying additional coverage is more expensive than buying your own personal policy. Plus, if you only have life insurance through your employer, you run the risk of a coverage lapse if you leave your job.

Childcare

If you’re your family’s breadwinner, your loved ones will feel the financial impact of losing your income. But you need life insurance even if you’re a stay-at-home mom or dad.

Your children need to be taken care of while the surviving parent continues to work to pay the bills. Childcare, housekeeping, chauffeuring, cooking… all of the tasks that a parent once took care of now become additional expenses.

Financial Gift

Life insurance can be as simple as a gift. Even single people, with no dependents or significant others, have valid reasons for purchasing a policy. It’s an effective way to take care of ailing parents, a beloved sibling, or ease the burden imposed on a business partner after your death.

Final Expenses

It’s exactly what it sounds like. Think of any potential medical bills and funeral arrangements, which can cost anywhere from $8,000 to $10,000. Even a $50,000 policy can go a long way to help your loved ones cover these final costs.

Figuring Out How Much Life Insurance You Need

No one can tell you exactly how much life insurance you need, since it’s entirely dependent on your reasons for purchasing it in the first place. Even top financial experts don’t agree on a set amount. They recommend choosing a term life policy with a death benefit anywhere from six to 20 times your annual income.

Consider the following factors when thinking about how to figure out how much term life coverage you need:

How Much Debt Do You Have?

Term life insurance should provide ample coverage to replace your income or pay off any debt left in the wake of your passing — like your mortgage or any loans you haven’t had the opportunity to pay off.

What Are Your Monthly Expenses?

Life insurance can help your family maintain their lifestyle even when you’re no longer around to support it yourself.

Would There Be Any Additional Expenses?

Think about the hit to your loved ones’ budget after you’ve passed away. If you’re the primary caretaker of your children, what would it take to cover all of your current responsibilities?

Costs like:

  • Childcare: averages about $12,000 per year per child
  • Housekeeping: ranges between $20 to $40 per hour
  • Extracurricular activities: about $700 to $1,200 per year per child.
  • And don’t forget about college tuition! Including fees, housing, books, etc., expect to budget between $25,000 to $50,000 per year!

If you have aging parents or siblings who depend on you, you might have other expenses to consider, like covering a retirement community, assisted living facility, or ongoing medical expenses.

Now Calculate!

Here’s a cheat sheet to help you determine how much life insurance coverage you need. Total up the following:

  • Mortgage
  • Auto loans
  • Personal loans
  • Student loans
  • Business loans
  • Monthly expenses
  • Additional expenses
  • Other (financial gift)

Now compare that to your annual salary times number of years you’d like to cover. Does that amount cover everything your loved ones might need? Do you want to get enough coverage to cover all of the above in addition to your annual salary? These are questions that only you can answer.

Buying Affordable Coverage

By budgeting for life insurance, you can avoid the utter shock of facing near-insurmountable costs after the passing of a partner and contributor to your family. Life insurance can help your family maintain its lifestyle even when you’re no longer around to support it yourself.

Fortunately, term life insurance is simple and affordable, making it a great option for those who want to protect their loved ones without breaking the bank. And buying term life insurance when you’re younger means you can purchase a larger policy for less than if you waited. It’s smart planning, plain and simple.

For example, let’s say you’re a healthy 25-year-old female. With Bestow, a 20-year $250,000 term life policy could cost you less than $15 per month, or $180 per year. That’s some decent coverage for a fair cost, right?

Buying life insurance when you’re younger isn’t glamorous — very few people will leave a “like” on a Facebook post where you tell your friends you signed up for a policy. But it’s a good idea all-the-same.

Some Insurance Is Better Than No Insurance

The loss of a loved one is never easy. Your immediate family will have to come to terms with losing you while trying to pick up the pieces after you’ve moved on.

Unless your savings can sustain your family’s lifestyle when you’re no longer around to continue contributing, you need life insurance. Any level of coverage will provide your family with a buffer period to mourn and figure out future plans. In a way, life insurance is one final reminder to your family of how much their well-being means to you.

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Kyle Miller | 4 min

Dave Ramsey, Suze Orman, and Clark Howard: Life Insurance Advice From Financial Experts

What do Dave Ramsey, Suze Orman, and Clark Howard all have in common? They all recommend term life insurance.

You’ve heard these financial experts on the radio, seen them on television, or read one of their books touting their best practices for financial success. Their advice is tried and trusted, and they have millions of fans who have vouched for their teachings — including their thoughts on life insurance.

Whether you’re currently researching what kind of life insurance to buy, or you just want to learn more about term life insurance, here’s advice from some of your favorite personal finance experts. (And if you’re interested in learning even more about what term life insurance is, you can find that information here.)

Disclaimer: This post is for informational purposes about term life insurance and in no way implies that Dave Ramsey, Suze Orman, or Clark Howard have endorsed Bestow. Content sources are linked throughout the article. Views presented in this article are the opinions of Dave Ramsey, Suze Orman, and Clark Howard and do not represent the views of Bestow or its partners. 

Dave Ramsey

Every week 13 million people tune in to listen to The Dave Ramsey Show where he shares his advice to help people become debt free, build up emergency savings, and put away separate funds towards investments.

Dave Ramsey‘s philosophy on life insurance is simple. He recommends term life insurance for its affordability. Make sure you have enough coverage — and a long enough term —  that will see you through until your kids are in college and living on their own.

And that advice doesn’t just apply to income earners. He recommends stay-at-home moms buy life insurance, too. Why?

“Think about what you would pay in childcare and home upkeep costs if the stay-at-home parent was gone! No matter what, you both need term life insurance.”

Suze Orman

Best-selling author, award-winning television host, columnist and contributor… what else can we say about Suze Orman? She’s one of America’s top financial experts and a household name.

When it comes to life insurance, her advice is clear.

“All you need is term life insurance. Term insurance is very inexpensive, because it will be in place for just a set term — such as 10 or 20 years — not forever.”

Suze Orman recommends term life insurance for pretty much everyone who needs to cover expenses for a set period of time: parents with young children who need support until they become independent adults, if you have spouse who depends on your income, or if you have a mortgage that needs to be paid.

Clark Howard

Every week Clark Howard helps 3.5 million listeners “save more and spend less” on his nationally syndicated radio show The Clark Howard Show. He’s a best-selling author and television host known for his frugal way of living and helping listeners not get ripped off.

He presents a different way of thinking about life insurance.

Level term insurance only provides a death benefit. It does not have a savings or investing component. It’s like car insurance for your life, but instead of buying it annually or in 6 month increments, you buy it for 20 or 30 years and the premium stays the same during the life of the policy.”

Term life insurance is easy to buy, easy to own, and cheap. This is why he recommends it for both working and stay-at-home parents, and why he prefers that you get your own policy and not depend on life insurance through work.

How Much Life Insurance Do You Need?

This is where our financial experts disagree…

Dave Ramsey

“We recommend you purchase a term life insurance policy for 10–12 times your annual income. That way, your income will be replaced if something happens to you.”

Suze Orman

“Buy a term life insurance policy with a death benefit that is equal to at least 20 times your dependents annual income needs. With such a large death benefit, your dependents will be able to invest the money very conservatively-say in high quality municipal bonds-and live off the income.”

Clark Howard

“When it comes to the question of how much you should buy, people can get crazy with all kinds of complicated formulas. I say simply that you should buy six to ten times your annual income.”

The truth is, there’s no single right answer for everyone.

For some, covering one-time costs is enough because there are other funds (like retirement accounts and pensions) that could cover day-to-day expenses. If you have debt (like a mortgage or co-signed loans), consider coverage that would pay it off, in addition to any funeral expenses. And if you have children, think about how much support they may need and for how long.

Ready to buy term life insurance?

With Bestow, you can buy an affordable term life insurance policy in minutes, without a medical exam. Our policies are backed by A+ rated insurance companies, so you know you’re getting high quality coverage, too.


Photo Credits:
Dave Ramsey and Suze Orman: CNBC
Clark Howard: Clark.com

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