If you don’t yet have life insurance, or if you think you might need more coverage, than you are not alone. A recent study from the Life Insurance Marketing and Research Association shows 80 million Americans do not yet have life insurance and another 26 million say they need more coverage.

September is Life Insurance Awareness Month, an observation started in 2004, and the perfect time to learn about this important aspect of adult life.

Some important things to keep in mind:

  • Life insurance is probably cheaper than you think. If fact, half of Americans overestimate the cost of life insurance at more than 3x the actual cost!
  • Life insurance is mostly tax-free, depending on the type of product. The exception is any interest received, which is taxable and needs to be reported to the IRS.
  • Life insurance gets more expensive as you get older. The younger you are, the lower the cost will be.
  • Covering funeral expenses is the most popular reason people buy life insurance. Here’s what people say is important to them: Covering funeral expenses – 83%, Replacing wages of the insured – 68%, Leaving an inheritance – 63%
  • Most people are not confident in their knowledge about life insurance.

Additionally, U.S. life expectancy at birth dropped in 2021 to its lowest level since 1996, according to new federal data, another reason Americans without life insurance should consider purchasing this coverage.

“Now is a perfect time to sit down with an insurance agent to review your insurance needs,” said Jason Terry, Director of Life Insurance for AAA.

AAA offers a checklist of common expenses to consider when deciding how much life insurance to get.

  • IMMEDIATE NEEDS
    Even families who put much effort into planning their future can overlook the immediate financial needs that follow a loved one’s death. The death benefit kicks in soon after the insured passes away. However, before it can be allocated toward everyday expenses, the lingering matter of their final financial needs takes precedence. For many, this may include funeral and burial expenses, which can amount to several thousand dollars.
  • ANNUAL INCOME
    Of course, one of the principal purposes of your life insurance policy is to compensate for any loss of annual wages that currently contribute to supporting your family and household expenses. You may be the sole income for your family, or you might share this load with a spouse or significant other who could be thrust into financial strife without your support.
  • CURRENT ASSETS
    Depending on your financial stability, in the event of your death, your family might be entirely reliant on your life insurance benefits, but this won’t be the case for everyone. Investments and other assets should be taken into account when trying to determine adequate coverage.
  • LONG-TERM EXPENSES
    Based on your stage of life (and that of your family members), you will need to plan out your insurance coverage accordingly. Especially if you have a whole life insurance policy, you need to account for not only your family’s lifestyle and survival – including necessities like housing, food, clothing, etc. – but also any unexpected expenses that may arise.

Consider all possibilities when discussing life insurance with your advisor. AAA can help get the conversation started here.

Unfortunately, some out there want to take advantage of the fact that people may be concerned about their life insurance. Using misinformation and tricks, they hurt vulnerable customers.

Here are some common scams that everyone should be aware of.

  • FAKE BENEFICIARY CLAIM: You may receive an e-mail or message that claims you’re the beneficiary of someone else’s life insurance. They may even name someone you know and claim they passed. Or, they might lie and say someone bought a policy for you. In either case, they will likely try to pull information from you. This is just one of many ways to steal your identity.
  • A PROBLEM WITH YOUR POLICY: The scammer will reach out to you once again. When they do, it will appear as if they’re from your life insurance provider. For example, the e-mail might look similar to the official ones you have received before or link to familiar-looking websites. Then, they’ll claim something’s wrong with your policy. Often, the scammer tries to make you panic and act rashly. So, for example, the e-mail or message might say you missed your last payment. It will essentially ransom your coverage for details like your credit card information and Social Security number. 
  • CHURNING AND TWISTING: Both churning and twisting are annuity-based life insurance scams. They take advantage of annuity-based insurance, which allows you to invest and earn an income stream through your policy’s company. However, the waiting period for a payout can last 10 to 15 years. In churning, scammers offer an immediate cash bonus if you exchange your current annuities with new ones. But this resets the hold period. If you withdraw early, too, you face severe penalties. In the case of twisting, the scam artist coerces you into buying a new life insurance policy in place of your old one. They use false or misleading information, like policy restrictions or hidden premiums, to get you to do this. And at the end of both scams, the money lines the agent’s pocket.
  • HOW CAN I SPOT A LIFE INSURANCE SCAM?

There are a few ways you can identify potential scams. For example, the way they contact you may be suspicious. Look for flaws in their e-mails to you, such as misspellings or incorrect addresses.

Some scam artists are very good at what they do, though. If you have trouble determining if a company or website is legitimate, contact your state’s insurance department. They can check if the company is real and if it can sell to you. The National Association of Insurance Commissioners (NAIC) can help you find your department’s contact information.

Don’t be afraid to make an insurer wait until you’re comfortable. Hold off on any paperwork until you’ve seen the agent is licensed. Also, avoid those who demand certain types of payment, like cash.


David M. Higgins II, Publisher/Editor

David M. Higgins was born in Baltimore and grew up in Southern Maryland. He has had a passion for journalism since high school. After spending many years in the Hospitality Industry he began working in...

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