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Life Insurance for Low Income Families

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Ron Attias, a licensed insurance broker. He had no particular loyalty to any one insurance company, so he was able to shop all major insurance carriers. This means that you always get the BEST plan at the LOWEST price. Each plan can be customized to fit your specific healthcare...

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UPDATED: Mar 13, 2020

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Most of us think that all of life’s challenges would be magically diminished if they just had more money. I tend to believe that money can solve many issues, but not all. The Beatles said it best: “Money can’t buy me love.”

I think that if the ones you love rely on you financially, you must get life insurance, especially if you are a low-income earner. Let’s call a spade a spade. If a wealthy person passes away and doesn’t have life insurance but has left properties, businesses, and no debt for his family, the family can survive.

What happens if a person with no means dies and has no life insurance? The only inheritance he left to his family is zero in savings, an unpaid mortgage, and no future income. Can you see where this family’s future is headed?

In this post, I will share the tips to find an affordable life insurance policy for low-income families.

What Is the Income of a Low-Income Family?

A low-income family is not only measured by the amount of money they make but by how many family members live under one roof, in correlation to state they reside in.

According to the U.S. Department of Education, a family of four earning $37,650 per year is considered a low-income family. Now, if you are the family’s breadwinner, and you are currently struggling financially, could you imagine what would happen to your loved ones if you were no longer here?

Here are some of the questions you may want to ask yourself:

  • Will my children be able to pay school’s tuition?
  • Can my surviving spouse pay the mortgage balance?
  • How can the remaining family members support themselves?
  • Will they even have enough money to bury me?

Here Is Why Most People Don’t Buy Coverage—And Here Is Where They Are Wrong

  • Eighty-three percent of potential buyers believe that life insurance is too expensive. When they were asked how much they thought it cost, most replied that it cost nearly three times the actual price.
  • Most Americans believe that a healthy 30-year old pays $400 per year for a $250,000 20-year policy. The actual truth is $146 per year for male and $128 for female.
  • They don’t understand life insurance either (which is why you must use a broker). Seventy percent of Americans failed a recent 10-question basic life insurance IQ test.

Related: 10 tips to save money on term life insurance

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Tips for Finding Low-Cost Life Insurance Rates

I wrote an extensive guide on how to save money on life insurance here, but I’ll address specifically those with limited income who seek life insurance.

  1. Start online: Yes, just like everything in the world we live in—from ordering food to getting a ride to the airport—everything starts online. You can begin online to get an idea of the prices, but if you don’t know about the type of life insurance, or you aren’t in good health, don’t apply before you talk to a broker first.
  2. Work with a broker: Finding a good broker is harder than finding rates online because every life insurance website has rates, but very few will actually be helpful and walk you through this daunting underwriting process, medical exam, and your policy’s delivery.
  3. Resist the temptation to work with your Farmers or State Farm agent. This is where most unsavvy life insurance customers go first because they know their agent. Your car insurance agent may be a great person who understands a lot about car insurance, however, he/she is no expert in the life insurance field. In fact, they are a captive agent and will only provide rates from one company, which is not only overpriced, but you also have fewer options from which to choose.
  4. Don’t skip the exam: A no-exam life insurance policy is convenient, I get it, but you’ll pay more for the convenience of not taking the exam.
  5. Stay healthy. Easier said than done for most of us, but remember things like keeping a good sense of humor, laughing with friends, and staying positive will help your overall health. Applying while younger and healthy will not only save you money on your policy but will get you the peace of mind you want.
  6. Stay within your budget. There is nothing worse than buying a policy which you can’t pay for in the future.
  7. Does your employer provide coverage? If they do, make sure you take it. It may not be portable if you quit or get fired, but it’s better than nothing and typically offered free by the employer.

What Type of Life Insurance Should I Get?

This is a hypothetical question, and since I don’t know anything about your health history or your financial goals, I’ll only cover the basics here.

I can’t stress that enough, that if you don’t know what policy to buy or are new to purchasing life insurance, don’t go about it yourself, use a broker to guide you through the options.

Term Life

Term life insurance offers the best bang for your buck, and it’s the most affordable type of coverage you can buy. In essence, you purchase protection for a particular timeframe such as 10, 15, 20, or 30 years, where your premium and death benefit remain fixed for your chosen duration.

There is no cash value accumulation or investment component within this coverage, which makes term life easy and straightforward product to understand.

Buy Term Life Insurance If You Are:

  • Looking for mortgage protection or income replacement
  • In good to an average health
  • Under the age of 50 years

Final Expense

Final expense offers a smaller life insurance policy, typically up to $25,000 in death benefit, and is used to cover the charges of affairs specifically related to your death. Anything from burial services, funeral, and final medical bills will be the aim of this coverage.

Final expense policies are whole life, which also builds cash value that grows over time. The premiums and death benefit remain level for your entire lifetime.

Buy Final Expense Life Insurance If You Are:

  • Over the age of 50
  • Not in the best of health
  • Need something to last a lifetime

Bottom Line

I got a phone call in the past year or so with an individual in his early 40s, who was diagnosed with cancer and was shopping for life insurance. The fascinating thing I noticed was that he was willing to pay any price now because now he could see a use for it.

Unfortunately, I couldn’t help him, as it was too late to buy insurance when you only have a few months left to live. We tend to think that death won’t happen now, and since I can’t afford life insurance now, I’ll deal with it later. However, death is inevitable, it’s only a matter of when. We can’t escape it; we can only be prepared.

I’ll finish with this: Whether your income is high or low, if someone you love depends on it, get a life insurance policy that you can afford—whatever the amount is.

If you outlive your policy, both the insurance carrier and your family will be pleased you did.

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