5 reasons singles need life insurance, too

9:00 AM insurance, life, life insurance, Reasons, singles No Comments

| By Neda Jafarzadeh, The Fiscal Times

While singles likely need less coverage than married couples, they often have relatives who would be affected financially by their deaths.

Life insurance is something only married people need, right? As with so many personal finance questions, the answer to this one is -- it depends.

There are several reasons you might want to purchase life insurance even when you’re single, though you may need less coverage than someone who wants to provide for a surviving spouse or children. That's because there may be other family members or loved ones who could be affected financially in the event of your death.

Many single people are now pondering buying life insurance, given that more adult Americans today are single than are married and that the median age at first marriages has never been higher. (It's currently 27 for women, and 29 for men.) Young adults today are also waiting longer to buy homes or have children, milestones typically associated with the purchase of life insurance.

Life insurers are actively reaching out to millennials (who are more likely to be single) by making their offerings more web- and mobile-friendly and by marketing their policies in unexpected places like Wal-Mart and Costco. Before buying a policy, use a calculator at sites like LifeHappens.org to understand how much insurance you need.

Many consumers get a basic life policy through work, which could cover the needs of a single person without dependents. Remember, though, that if you leave your job, your coverage doesn’t come with you.

Here are five reasons to consider purchasing a policy, even if you're not married

Not every young person needs life insurance – and if you haven’t yet established an emergency fund or you’re still living on your parents’ couch, buying life insurance certainly shouldn’t be a top priority. If, however, you’re making the maximum contribution to your retirement fund and have six months of expenses stashed in a savings account, you may want to consider buying a policy.

Waiting to get coverage until you’re married or have children could make a policy much more costly. A $500,000, 30-year term policy for a healthy, non-smoking male in Chicago costs about $35 per month. The same policy for a 45-year-old runs more than $60 per month, according to calculations by Term4Sale.com.

Another reason not to wait: The older you get, the more likely you are to contract a chronic health condition, which could push up your life insurance premiums or make you ineligible for coverage at all. Buying a policy now will lock in coverage while you’re still in good health and qualify for the best rates.

If your parents (or other family member or friend) co-signed a student loan or a mortgage with you, they’ll be fully on the hook for the amount owed in the event of your passing. In addition to debt, burial costs can also be expensive – the average funeral costs more than $7,000 -- and it can set back loved ones without a significant amount of savings.

If your funeral or your debts will be a significant financial hardship for someone else, consider getting a low-cost policy to cover those expenses -- a 10-year term policy naming that person as the beneficiary could take care of such expenses. With unemployment still stubbornly high and most Americans with dangerously low savings accounts, the last burden a grieving family member needs is a loan company hounding him or her for payments.

This is probably the most important reason a single person should purchase life insurance. Nearly 16 million unmarried parents live with their children, according to the U.S. Census. Even if you don’t have kids, there may be others who depend on you financially, including elderly parents who need caretaking or special needs siblings. The right life insurance policy can serve as a financial safety net for those you care about most.

Work with a financial planner to determine how much life insurance you need on top of any other assets you have in order to insure that your dependents are properly cared for financially after you’re gone.

If you’re a small business owner with partners, a life insurance policy can allow your partners to more seamlessly purchase your portion of the business. Partners in the company would enter into a buy-sell agreement, buying policies (either as individuals or as a company) on the lives of the co-owners with the understanding that the payout would go to the deceased partner’s heirs without giving them a stake in the company itself.

If there’s a cause that you’re passionate about or you’ve got someone you’d like to take care of financially (even if they’re not dependent on you now), purchasing a life insurance policy can help meet those goals. This kind of purchase only makes sense if you can comfortably afford the policy after funding emergency and retirement savings, as well as paying down any high interest debt.

If you do buy a policy as a single, it’s important to re-evaluate your insurance coverage after life events, such as the birth of child or a marriage, to make sure you're still appropriately covered and to update your beneficiaries. If coverage purchased now becomes inadequate for your needs at a later date, you can buy supplemental coverage, rather than starting from scratch.

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How risky hobbies raise your insurance

9:00 AM hobbies, insurance, life insurance, raise, risky No Comments

| By Geoff Williams, U.S. News & World Report

Love skydiving or mountain climbing? Such thrill-seeking pastimes can cost you more than you think.

You think mountain climbing or sky diving is risky? Try telling your insurance agent about it.

Mitchell Fox, 30, of San Francisco, is an avid outdoorsman, a guy who rock climbs and scales mountains, but his thrill-seeking has come at a cost. Fox had life insurance, but after he left his position as a director of marketing at an online stock brokerage to become co-founder of the startup GoodApril.com, a free online tax planning service, he was no longer covered. He applied for life insurance from a company that had a listed rate of $20 a month for $350,000 of term life insurance. He was accepted—if he would pay $180 a month. Reluctantly, Fox declined to buy life insurance, and he's without it for now.

"As someone who works in finance, I understand why an insurer would charge a higher rate to a higher-risk customer—that makes good business sense. And honestly, mountaineering is a dangerous hobby. My wife took a scary fall a couple of years ago on Mount Shasta and was lucky to be mostly unhurt," says Fox.

That said, Fox feels the insurance industry as a whole isn't thinking through these rates in a fair way. "It frustrates me that the difference between paying nine times as much per month for insurance was the fact that I was honest on my application about a sport I only infrequently participate in—I've climbed three mountains in two years. Am I really nine times riskier a customer than less-active people, whose chances of heart disease are probably higher? Am I really nine times riskier than a bad driver? I don't recall the question, 'Are you a good driver?' on the application."

So if you have an active lifestyle or have been thinking your life needs more adrenaline, here are some things to consider.

You will pay for that risky hobby. And you will possibly pay quite a bit more than you expect. Joel Winston, a former deputy attorney general for the state of New Jersey, is now a New York-based attorney who founded AnnualMedicalReport.com, an organization aimed at improving privacy protections for personal medical information. There are no hard-and-fast rules on what an avid or occasional mountaineer like Fox will pay, but Winston has compiled what he says is a rough estimate of additional prices an otherwise healthy person can expect to pay if he or she is seeking $500,000 in term life insurance and engages in the following activities:

Motorcycle riding: expect to pay an additional $1,000 per year
Scuba diving: additional $2,500 per year
Skydiving/BASE jumping: additional $2,500 per year (and there's a good chance you'll simply be denied life insurance)
Hang gliding: additional $2,000 per year
Rock climbing: additional $1,500 per year
Hunting: additional $500 per year
Recreational boating/fishing: additional $750 per year

It isn't just life insurance, either. Winston says the individual health insurance market is "almost like the Wild West, depending what state you're in." In some states, companies selling individual—not group—policies have started increasing premiums based on dangerous hobbies. Again, these aren't hard-and-fast numbers, but assuming your insurer knows what you're doing in your spare time, a Mixed Martial Arts (MMA) fighter can expect to pay an additional $1,000 a year for health insurance, and a marathon runner, an extra $750. If you have an individual health plan and own a registered gun, whether it's something you hunt with or have tucked away in a drawer, you might easily spend an additional $2,000 a year, says Winston, although that practice will end when the Patient Protection and Affordable Care Act, also known as Obamacare, begins.

You can pretty much give up the idea of getting long-term disability insurance. There are probably exceptions, but if you engage in risky activities like skydiving, you won't likely get this insurance, or you'll have to pay so much that it won't be worth it. Vincent Sarullo, 45, is a co-founder of Tower Fund Services, a financial services company in Red Bank, N.J., and while he has a quiet day job, he enjoys deep sea diving. Sarullo is also a rescue diver for the fire department in Red Bank. He works in a respected industry and is trusted by his local fire department to dive. Doesn't matter. He can't get the insurance.

Ironically, he says of an industry that is all about studying the details surrounding dangers, "I think the insurance companies just don't understand the risks, or lack thereof," says Sarullo, who won't give up diving to attain long-term disability insurance: "I love it too much."

You can do something crazy every once in awhile. Wake up one day and suddenly feel the urge to learn to skydive? Watch the opening scene in the Billy Crystal comedy classic "City Slickers" and decide that you, too, should run with the bulls in Spain? If you risk death in some wild stunt and don't end up coming out okay, your life insurance will still pay out, says Laura Adams, a senior insurance analyst at InsuranceQuotes.com, an insurance comparison site.

There is one caveat, and that's whether you bought your life insurance a few weeks or days before you ran with the bulls, which would suggest you bought it because you knew there was a good chance you might be a goner. Adams says that generally with an insurance policy, "there's what's called a contestability period, usually about two years, where the insurance company is more likely to investigate a death."

Above all, be honest in your application. You might easily think it's not worth the trouble to tell an insurance company about your love for mountain climbing, and it's true that it's probably not smart to volunteer the information. But if you're asked and lie to an agent or on your application, you're taking just as much of a risk as the pastime you're engaged in.

"If they ask about your lifestyle, you've got to be honest," says Adams. "If you're a pilot or scuba diver and you lie about that, and then you die in a skydiving accident or you go spelunking and they find you underwater in a cave, the insurance company may not pay out. They can argue that it was fraud and that your beneficiaries aren't entitled to anything."

And odds are, they will find out. Insurance companies, says Winston, are well aware of "the groups you're involved in, the commentary you write on Facebook, the stuff you post on Instagram. If you have a low-value insurance policy, it won't come up, but if it's a serious policy that could bring in big numbers, they'll want more background on you."

Winston adds that even if you're quiet about your activities, someone else might not be. "Somebody might post a picture of you diving underwater and tag it to you on Facebook, and so suddenly your insurance company knows what you've been up to, and it isn't even something that you disclosed," Winston says. "But that's just the way things are interconnected now."

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