Nobody wants to think about dying, which is why many people actively avoid planning for their death. Creating a will, buying life insurance, making funeral arrangements—none of these are fun Friday night activities. Not only can it be unpleasant to think about, but life insurance can also be incredibly difficult to figure out. In fact, only 57% of Americans have life insurance.
Part of a new trend of online companies offering life insurance, Bestow breaks down a sometimes complicated topic so you can easily apply for term life insurance to better help your family plan for the future.
About Bestow
Bestow makes the life insurance
application process easy. You can get a quote in seconds—and coverage in
minutes—when you apply online.
It offers 10- and 20-year term life insurance policies with coverage from $50,000 up to $1 million. Premiums are as low as $8 per month—and they never change throughout the life of the policy, so you’ll always know what to budget for. One of the biggest benefits of Bestow is that it doesn’t require a medical exam as part of the application process.
Insurance companies can be notorious for being stuffy. Lucky for you,
Bestow is technically a life insurance agent: it acts as an intermediary
between you and the insurance provider. Bestow
works specifically with North American Company for Life and Health Insurance®, a well-established life insurance company. So even
though Bestow is new, you don’t have to worry about your policy. Bestow makes
the application process simple, while North American
Company for Life and Health Insurance® issues the policies, plus processes and pays claims.
Who Can Use Bestow
According to the website, you need to be
between 21 and 55 years old, have never had a felony charge, and be generally
in “good health” to qualify for a policy offered by Bestow.
It doesn’t clarify what “good health” means, but the application process asks
questions about your medical history, lifestyle and hobbies. Bestow also says they will
not be able to extend coverage if you have been diagnosed or treated for cancer
in the past ten years. As of publication, 20-year policies are only available
to individuals younger than 45.
Bestow is currently available in every state except New York.
Application Process
Bestow uses data points and artificial
intelligence to determine premiums and coverage. Unlike many other companies that offer life insurance, Bestow does not
require a medical exam for coverage.
The application process pulls available data about you—such as prescription and credit history, driving records, and prior insurance applications—to make a decision.
To start, you’ll need to provide your
name, gender, birth date, height, weight, and state, as well as whether you use
nicotine. That’s all you need to get your free quote! If you like what you see,
you can create an account and answer a few more in-depth questions about your
health and lifestyle, including citizenship, employment, HIV status, and
disability. After you provide your Social Security number and sign, you’ll get your approval and final premium. Your final
number may be higher than your quote based on your health and lifestyle.
You also get a 30-day free “look” period:
you can cancel for a full refund within the first 30 days of purchasing.
Coverage continues through a 60-day grace period from the date of your last
payment.
Making Claims
Your beneficiaries can start the claim
process simply online as well. After you initiate a claim with Bestow, the
claim is processed by its insurance provider, North American Company for Life and Health Insurance®.
The beneficiary will need to provide information about themselves as well as
information about the insured person—including the original policy number.
After that, you’ll receive a claimant’s packet and will be required to fill out
more paperwork. If there is no dispute, your claim should be processed within
ten days.
Term Life vs. Whole Life
Bestow offers only term life insurance
policies. If you’re interested in a whole life insurance policy, you’ll need to
look elsewhere.
Term life insurance lasts only as long as
the policy, making it a good choice for people who want to cover a specific
time in their life—the length of their mortgage, or while their children are
still dependents living at home, for example. Because these policies do not
last as long, they tend to be less expensive than whole life policies.
Benefits of Bestow
So you’ve spent your Friday night
deciding you want to get life insurance.
Congratulations! Why should you choose Bestow? Here are some reasons why you
might:
No medical exam required
Low premiums
Easy application
As with everything, though, there are
some downsides to getting a policy through Bestow:
No whole life policies available
Relatively low coverage capped at $1 million
Not available to people over 55
Why Get Life Insurance
If you have dependents—people who depend on your income, like your children, spouse, or older parents—life insurance is a way to help ensure that they will be covered should something happen to you. If you’re ready for a free quote from Bestow, check it out now!
An accidental death benefit rider is a life insurance policy add-on that pays out an extra sum of money if you die in an accident. Many policies also pay the additional benefit if you die from injuries within a specified period after the accident, such as 90 or 180 days.
The higher payout death benefit is also known as “double indemnity” or “triple indemnity.” This is because it may be double or triple the amount of money your beneficiaries would get if you died of natural causes.
Accidental death benefit riders are a common option for most types of life insurance, including term and permanent life policies. They’re slightly different from accidental death and dismemberment (AD&D) riders, which offer a payout if you survive an accident or lose a limb or experience another debilitating injury, like blindness or paralysis as a result.
Accidental death benefit riders: The fine print
Examples of accidents that may be covered by an accidental death or AD&D rider include car crashes, fires, workplace accidents, falls and accidents involving firearms. The accidents that are excluded vary by insurer. Many policies won’t pay out the additional benefit if you had an accident while participating in dangerous recreational activities or under the influence of drugs or alcohol. Some insurers might not offer you the rider if you work in a risky occupation, like firefighting or law enforcement.
With some insurers, you can purchase stand-alone accidental death insurance instead of adding the rider to a life insurance policy. This coverage only pays out if you die in an accident. It’s most common among people who don’t qualify for traditional life insurance but still want their beneficiaries to receive some money if they die unexpectedly.
🤓Nerdy Tip
Fewer than 7% of deaths in the U.S. occur due to unintentional injury, according to the Centers for Disease Control and Prevention. Given that it’s far likelier you’ll die of natural causes instead of an accident, it’s important to make sure your policy’s regular payout provides enough coverage for your loved ones.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Written By:
Updated: August 15, 2023
5 Min Read
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GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
When you’re buying a life insurance policy, you may need coverage that begins right away, but full underwriting can take weeks to complete. Simplified issue life insurance is an option for people who need immediate coverage. However, that convenience comes at a cost. You’ll often pay higher premiums and receive a lower death benefit than you’d get through a standard life insurance policy.
What is simplified issue life insurance?
A traditional life insurance policy requires a medical exam and may take four to eight weeks to be in force. Simplified issue life insurance is a type of life insurance policy that bypasses the typical underwriting process and allows you to purchase coverage immediately.
With simplified issue life insurance, you’ll skip the life insurance medical exam and lab tests. Instead, you’ll provide some basic information, like your age, address, occupation, height and weight, and answer a health questionnaire.
You can apply online, by phone, or in person through a life insurance agent or broker. Usually, you’ll find out immediately whether your application has been approved or denied. If approved, you can typically have your policy in force that same day.
How does simplified issue life insurance work?
Simplified issue underwriting is available for most types of policies, including term life, whole life, and some types of universal life insurance. According to a 2020 report by the Society of Actuaries, major insurers approve about 70% of simplified issue applications
.
When you apply for a simplified issue policy, the insurance company will base its decision on the information you’ve provided. But carriers also use third-party reports to determine your eligibility, such as:
MIB Group reports. Your file with the MIB Group, formerly known as the Medical Information Bureau, shows whether you’ve applied for individually underwritten life insurance, health insurance, disability insurance, and long-term care insurance in the last seven years, along with whether you’ve been rejected for coverage
.
Prescription drug history. Insurers check databases that aggregate your prescription drug history using records from health insurance companies, pharmacies, and health care providers.
Motor vehicle records. Insurance companies will check for things like DUIs, suspended driver’s licenses and speeding tickets when they decide whether to insure you.
Some companies also use internet searches and random phone interviews to verify information. The use of criminal background screenings and medical billing data is becoming more common, as well.
Answering “yes” to a question that indicates a health condition doesn’t necessarily disqualify you. But if your answers are inconsistent with third-party information collected, your life insurance application could be referred for further review. For example, if you say you have no history of heart disease but your prescription records show you take medication for a heart condition, the insurer could require standard underwriting.
Who’s eligible for simplified issue life insurance?
Simplified issue life insurance is available to people up to age 75, according to the Society for Actuaries report. Though age restrictions vary by carrier, you’ll often qualify for a higher death benefit if you’re in the range of 16 to 55 years old.
Unlike with guaranteed life insurance, however, you can be rejected for simplified issue insurance. If you have a serious underlying health issue or you engage in dangerous activities, your application could be denied or referred to an underwriter.
How much coverage can you get?
When you apply for a simplified issue policy, your insurer has less information about you than it would get if you went through a full life insurance underwriting process that included a medical exam. That makes you riskier to insure from an insurer’s perspective. As a result, simplified issue policies generally have lower death benefits than traditional policies.
Though some insurers offer as much as $500,000 in coverage, a typical simplified issue term policy will offer coverage amounts ranging from $100,000 to $250,000. Customers older than 55 are frequently limited to $100,000.
Simplified issue permanent life insurance policies are typically designed for burial and other final expenses, so they offer lower death benefits. Many simplified issue whole life insurance policies have maximum death benefits between $25,000 and $50,000.
Simplified issue life insurance pros and cons
Advantages of simplified issue life insurance
Simplified issue life policies don’t require a medical exam or bloodwork.
If your application is approved, coverage can begin the same day.
You can typically buy more coverage than you’d get through a guaranteed issue policy.
Disadvantages of simplified issue life insurance
You may qualify for lower premiums and more coverage through a traditional policy.
Your application may be rejected if you have preexisting health conditions, a dangerous job, or high-risk hobbies.
Is simplified issue life insurance worth it?
A simplified issue policy may be worth it if you’re in relatively good health and you need your policy to be in force right away. For example, if you’re a new parent seeking coverage, you may not want to wait several weeks for coverage to begin. Or if you’ve been ordered by a court to obtain life insurance as part of a child support agreement, you may need your policy to be in force immediately.
If you need immediate coverage, you may have the option of buying a temporary policy while you wait for a traditional life insurance application to be approved. But if you have dependents and you’re unwilling to deal with the time and medical exam required for most life insurance policies, buying simplified issue life insurance can be worth it to provide financial protection for your loved ones.
Alternatives to simplified issue life insurance
Simplified issue life insurance is worth exploring when you have an immediate life insurance need, but it’s not the only option. Here are some alternatives to consider.
Buy temporary life insurance to avoid a coverage gap. If you’re willing to undergo a medical exam but need coverage to begin immediately, you could purchase temporary life insurance for protection while your application is processed. The applications for temporary coverage and simplified issue life insurance are similar in that you’ll only need to complete a basic questionnaire. But once you obtain temporary life insurance, you’ll typically have around 90 days to complete a medical exam for your permanent policy. Insurers often limit your coverage to $1 million through a temporary policy.
Undergo full underwriting. Going through the standard underwriting process takes time, and the medical exam can be intimidating. But it could save you money on premiums, especially if you’re young and in good health.
Obtain group life insurance through your employer. If your employer offers group term life insurance as a benefit, you can usually obtain coverage at little to no cost, without a medical exam or answering health questions. The death benefit is usually capped at one or two times your salary. You may have the option to purchase additional coverage, although you might need to provide health information or undergo an exam. Most group policies won’t allow you to keep your coverage if you leave your job
.
Frequently asked questions
What’s the difference between simplified issue and guaranteed issue life insurance?
A guaranteed issue policy is a type of life insurance that accepts anyone, with no medical exam or health information required. A simplified issue life policy offers a streamlined application process, but coverage isn’t guaranteed and you’ll need to answer questions about your medical history when you apply.
Can I get life insurance without a medical exam?
You can obtain both simplified issue life insurance and guaranteed issue life insurance with no exam. However, an exam may help you lower your premiums and qualify for more coverage if you’re young, healthy and don’t engage in risky activities.
Does simplified whole life insurance build cash value?
As with any whole life policy, simplified whole life insurance will build cash value. But because these policies are often intended specifically for final expenses, the cash value is minimal compared with traditional whole life policies.
Inside: Are you struggling to manage your money? Feeling overwhelmed with debt? If so, it’s time to take action and build better habits. This guide will teach you how to create a budget and start your savings. You need these financial tips for young adults.
The importance of sound financial advice for young adults cannot be overstated.
Often, a lacuna exists in our educational system where personal finance is concerned, leaving many young adults ill-equipped for the financial decisions that await them in their adult life.
Yet, you will encounter situations that require a sound understanding of budgeting, credit usage, investment, and an array of other financial tools without any formal education in these areas.
Financial advice can act as a compass, guiding you on a path to financial health and stability.
This early orientation can help you avoid the pitfalls of needless debt accumulation, poor money management, and inefficient financial choices like I made.
That is why it is of utmost importance to start imparting knowledge and financial habits to young adults as early as possible.
Why Financial Advice is Crucial for Young Adults
Money matters! Especially when you’re young and there’s a world of financial responsibilities unveiled before you.
Understanding financial basics early on is key to smart monetary decisions in the future. Here’s why you should consider this vital:
Knowledge Burst: Understanding finance terms, the implications, and their impacts arm you with knowledge for future decisions.
Saving for Later: Early investment in savings accounts or retirement funds can maximize your funds later in life.
Debts Control: Ensuring debts are paid off faster helps avoid excessive interest in the long run.
Investment: Stock or mutual fund investment can multiply your savings in the right condition.
Remember, your financial health requires deliberate action, start early!
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What is the best saving advice for young adults?
The best saving advice for young adults is to start early and save regularly.
This will help you build up a nest egg that you can use in the future.
Personally, this is my own regret as such it took me way too long to become financially sound.
Also, you want to be mindful of your spending and live within your means.
Best Financial Advice for Young Adults
When you’re in your 20s, the world feels like your oyster, ripe with opportunities and potential.
But among this plethora of choices, the most important decisions you make may very well relate to your finances.
While the excitement of earning and spending your hard-earned money can be exhilarating, it is crucial to remember that wise financial decisions made early on can set the stage for long-term financial success.
We have curated some of the best financial advice to help you make informed decisions and set the foundation for a secure financial future.
1. Create a Budget
Creating a budget can seem like a daunting task. However, once correctly accomplished, it can undeniably make your life a lot easier.
Below are some reasons to start budgeting from the start:
Money management: Knowing the ins and outs of your financial transactions helps manage your money efficiently. A budget gives you a clear snapshot of your income and expenses, allowing you to make strategic decisions about spending and saving. This level of control can be incredibly liberating and reassuring.
Financial discipline: Creating a budget encourages discipline when it comes to financial decisions. It can show you areas where you’re spending more than necessary, such as an underutilized gym membership, frequent dining out, or an unused streaming subscription. By addressing these expenses, you could easily save an additional $100 per month.
Alignment with goals: A budget can provide clarity and align your financial actions with your long-term goals. If you are side-tracked and lose sight of these ambitions, the budget serves as a potent reminder to guide you back to the right path.
Effective savings: A budget constitutes a robust tool that allows you to maximize your income and inculcate a savings habit. Essentially, it’s a roadmap that shows you, in real time, where you can minimize and direct those funds into savings. Those savings can then be invested toward achieving significant life goals more efficiently.
Stress reduction: Tracking income and expenditure can culminate in a stress-free financial life. For example, it helps manage unexpected emergencies or allows you to enjoy after-office drinks without any worries about overspending.
To simplify the job, various user-friendly budgeting apps are available.
These digital budgeting tools or apps offer handy features that can streamline tracking expenses and income. These tools can automatically categorize transactions, display visual charts of spending, and send alerts when you’re nearing the limit of a budget category.
Enjoy guilt-free spending and effortless saving with a friendly, flexible method for managing your finances.
Start Your Free Trial.
So, no more wondering where your money went.
With a budget in place, you get to tell your money exactly where to go, and this is an empowering shift from feeling out of control to feeling in control of your finances.
By making budgeting a consistent part of your financial routine, you adopt a proactive approach to your money, making your life easier, and your future brighter.
2. Manage Your Debt
As a young adult, managing your debt is incredibly crucial. Not only does it set the foundation for your financial future, but it also helps to keep your credit score healthy.
Here are some top-notch expert tips on how to effectively manage your debts:
Avoid credit cards whenever possible. Although credit card rewards may seem appealing, they can often lead to unwanted debts. Instead, try using cash, debit cards, or cash app cards.
Don’t finance purchases that depreciate in value over time. Rather than taking a loan for things like cars or other depreciable assets, save up and pay in full.
Minimize education-related costs. This can be achieved by going to in-state schools, considering trade school or community college, living off-campus, and exploring scholarships or work/study programs. Learn how to pay for college without loans.
Pay off your debts methodically. Consider strategies like the debt snowball or avalanche methods to strategically pay off your debts. Use a debt payoff app to find your debt free date.
Remember, being in debt can delay your financial goals.
So, learning to manage your debts early on in your life can have a significant impact on your future finances.
3. Invest Wisely
Investing wisely is a cornerstone of solid financial advice for young adults. It sets the foundation for a financially secure future.
Most people are terrified of the concept of investing and stay away from it, which is the worst decision possible.
Investing is about putting your money to work for you, expecting growth or income over time.
Consistently adding money to your investment portfolio can be more beneficial than staying away or trying to time the market.
Investing is ideally a long-term endeavor. Patience is key – you can’t expect to make big gains or reach your financial goals overnight. It’s a process of steady growth.
Simplicity is key for beginner investors. Buying and holding index funds is a good example of a simple and passive investment strategy. Or you can learn how to invest in stocks for beginners.
4. Educate Yourself about Savings and Investment Accounts
Understanding savings is a fundamental aspect of personal finance, yet many young adults ignore this.
Beginning an emergency fund, no matter how small is one of the oft-repeated mantras of personal finance experts.
Consistently making savings a non-negotiable monthly “expense” not only provides a safety net for emergencies but also contributes to various future goals such as retirement, vacation, or a down payment on a home.
A foundational aspect of mastering your finances involves learning self-control, reducing the tendency to make every purchase on credit, and understanding the importance of saving money before making a purchase.
Taking the initiative to read personal finance books and gain knowledge about managing money can greatly aid in controlling your financial future and making informed decisions about savings.
Starting saving for retirement early is essential to secure financial stability in the future.
Learn how much money should I have saved by 25.
5. Limit Your Expenses
Understanding how to limit expenses can be a game changer for your finances.
Track your daily expenses carefully, even the small ones like your morning coffee, as they can add up and provide crucial insights into your spending habits.
Keep your monthly costs, such as rent, as low as feasibly possible, as this will save you substantial amounts over time and accelerate your ability to invest in assets like a home. Learn the ideal household budget percentages.
This one makes the biggest different to spend less money…Categorize your expenses and set specific spending limits for each group, reviewing and adjusting these as needed to curb any overspending.
Regularly review your finances, specifically your bank and credit card statements, every two to three months to identify and eliminate any unnecessary expenditures.
6. Build Passive Income Streams
Okay, this one is my top financial tip!
Navigating the financial world requires strategy, and for young adults, generating passion income streams is a game-changer. With the decline of traditional 9-5 jobs, it’s crucial to adopt flexible financial strategies.
Start identifying your passions that can be monetized. Think about your hobbies, skills, or areas in which you’re an expert. It could be anything from blogging to tutoring or even food delivery services.
Find ways to make passive income. Remember, every bit of extra income counts, and data suggests diversifying income streams can secure your financial future.
Continuous learning is your power tool here. Aim to broaden your financial literacy, understand investing, explore various earning methods, and strengthen your entrepreneurial spirit.
While cutting expenses helps, growing your income using your passions gives you control over your financial destiny.
So, don’t hesitate in doubling up your day job with your passion-driven side hustles.
Expert tip: One of the best ways to make money online for beginners is a key place to start.
7. Create a Cash Reserve
Understand that surprise expenses can unsettle your financial plan, like a sudden car repair costing $700. Having a cash reserve will keep you financially stable through these unexpected turns.
Start an emergency fund: Alongside your regular savings, begin an emergency fund. Aim to save around three to six months’ worth of income.
Prioritize savings: Consider your savings as a non-negotiable expense. You’ll soon realize you’ve saved enough for significant objectives like a down payment on a home.
Build a rainy day fund: This larger $10k-50k rainy day account will help in those long-term expenses or job loss.
Combat inflation: Choose a money market account to preserve the value of your savings, while ensuring quick accessibility in emergencies.
Automation is key: If you’re forgetful, set up an automatic transfer that channels funds to your savings account immediately upon salary credit.
Building up cash reverses will help you to improve your liquid net worth and have less stress around money.
8. Learn About Taxes
Taxes seem complicated, huh? Well, not grasping tax basics can give you a run for your cash. So, get started young and you might save up a fortune in the long run
Start by understanding your salary. The chunk that you take home (net pay) isn’t the whole amount (gross pay) that your employer agreed on. Learn more about gross pay vs net pay.
If you’re self-employed, remember, you’ve got to handle income taxes, and also the full FICA bundle.
Do your bit of math now and avoid an unexpected cringer next April.
9. Consider a Term Life Insurance Policy
Getting a term life insurance policy while still relatively young is a smart financial move that any savvy young adult should consider early in their career.
This safety net serves multiple purposes, especially in ensuring the protection of your future family if for any reason you’re unable to provide for them.
Term life insurance policies are typically far more affordable for young adults. The research notably reveals that the younger an individual is, the more affordable the life insurance policy tends to be. Therefore, beginning this investment in your early years enables you to lock in a lower premium rate, thereby saving significant amounts in the long run.
A life insurance policy is an important piece of your financial planning puzzle. Remember, cost increases with age so act fast!
10. Take Action and Stay With It
Taking action and sticking with it is crucial in managing finances well.
First, you’ve got to get clear about your financial goals. Want to set up a passive income stream or travel? Make them specific, feasible, and measurable.
Once you’ve set your goals, break them down into bite-size pieces. For instance, calculate the costs and set quarterly goals. Make sure to these vision board supplies to keep your goals front and center.
Ultimately, this proactive approach coupled with persistence can help you efficiently manage your funds and stay financially healthy.
FAQ
Honestly, this is completely up to you.
The better bet would be to learn about financial management topics yourself.
Finding a fee-based financial advisor will be difficult when you have no significant assets. And then, when you do, a financial advisor can put a drag on your investing portfolio.
If you decide to work with a financial advisor, find a fee-only financial planner who provides unbiased advice – since they aren’t driven by commission.
Financial planning while young—especially in your 20s—is key to future success and financial security. Here are some steps to establish strong fiscal habits:
Firstly, map out your financial goals. Do you anticipate student loans, a mortgage, or potential investments?
Secondly, budget diligently to save more money early in your career.
Next, consider eliminating outstanding debt quicker by applying saved money from part-time or full-time employment.
Lastly, explore investments such as mutual funds and stocks for optimal use of leftover money after bills are paid.
Remember, according to a study of 30,000 college graduates, 70% never took a personal finance course—making self-education critical.
Use These Personal Financial Tips for Young Adults
In conclusion, managing personal finances is a vital skill that unfortunately is not emphasized enough in our educational institutions.
It’s critical for young adults – you – to learn this skill to establish a strong financial foundation for their future. Especially if you are determined to become financially independent.
This begins by developing a sense of self-control and understanding the importance of delayed gratification.
Regularly monitoring your income and expenses, and adjusting your lifestyle to live within your means, is a crucial habit.
Additionally, the importance of starting an emergency fund and saving for retirement cannot be overstated.
By incorporating these financial tips into their lives, young adults can steer clear of unnecessary financial stress and ensure a secure and financially healthy future.
Take this Advice about Money
It is crucial to understand not just the mechanics of money, but also, the long-term implications of your financial decisions.
Take control of your financial future today, and you are sure to reap the rewards in the years to come.
Discerning financial advice from trusted sources, instead of relying on potentially misleading external influences, is also key. Remember, the sooner you start, the better off you’ll be in the long run.
Remember the data-driven fact: small changes in your everyday expenses can have as big of an impact on your finances as getting a raise.
Know someone else that needs this, too? Then, please share!!
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Written By:
Edited By:
Kevin Mercadante
Kevin Mercadante
Kevin Mercadante has been writing about personal finance since 2010,
covering investing, retirement, taxes, credit cards, real estate, mortgages
and insurance.
His…
Read More
Updated: April 17, 2023
3 Min Read
Advertising Disclosure
Advertising Disclosure
GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Recently, a younger business owner client of mine was inquiring about purchasing a term life insurance policy.
A term life policy makes total sense for his situation, but what he also wanted to give it a twist. In addition to a 30-year term life policy, he wanted to add what’s called a return of premium rider.
For those that are not familiar, the return of premium rider allows the policyholder to get a full refund of all the premiums paid at the end of the contract.
At first, it sounds like a pretty good deal. The most common complaint that consumers have with life insurance is that if you don’t die, all the money goes directly to the life insurance company. If this is the case, then purchasing the return of premium rider seems totally worth it.
Cost of Return of Premium Rider
At first glance, the return of premium rider seems like a no-brainer. One piece of information that you need to know is that the rider comes with a price. The ROP rider on average will run 20%-40% higher than purchase a policy without it. In addition, you have to keep the policy for the entire contract period to get a full refund of your premium. So then the question remains, does it make sense to pay more for the rider since you know you’re getting all your premiums back? Let’s take a closer look….
ROP Rider vs. Regular Term Insurance
To illustrate the cost difference between purchasing regular term insurance vs. one with the ROP ride, here are some life insurance quotes that I ran. In our scenario, I am using a 30-year-old male, assuming he is in excellent health. We are going to get a quote on a 30-year term life policy with a $1,000,000 face value. Without the ROP rider, the annual premium will cost approximately, $720 per year for a total of $21,6000 premiums paid over the 30 year period. By adding the ROP rider, the premium jumps to $1,180 per year, for a total outlay of $35,400. That’s a total difference of $13,800 premiums paid ($460 per year) or a 63.88% increase.
Invest the Difference
Since I’m a firm believer of long term investing, my initial argument would say, go without the ROP rider and invest the difference. Let’s see how my theory holds up. If we take the difference of $460 per year and invest it and average 6% over the 30 year period, it looks something like this:
By averaging 6% return, you will have accumulated $36,366 over the 30 year period. Subtract the $21,600 you paid in premiums over that period and your net amount is $14,766. As you can see in this example, purchasing the ROP rider seems to make sense. Hmmm…..Gets you thinking, right? Now let’s see if we average 8% return:
If we are able to average 8% return over that same period, we accumulate a total of $52,110 and after subtracting the premiums were left with $30,500. Compare that to the $35,400 we would get back with the ROP rider, and we’re still in the red. If we can average closer to 10% return, then we have a greater chance for the normal policy to be more economically viable.
One major thing to consider is that the money returned to you with the ROP is not inflated for inflation. As you can imagine, $35,400 today will not get you as far 30 years from now.
Few More Considerations
I have to admit that the outcome of the scenarios I ran were different than what I predicted. What we have to keep in mind is that when I analyzed the cost differential, we are relying on a few big assumptions:
That the person can afford to pay the higher premium.
The person will keep the policy for the entire 30 year period.
The cost of insurance won’t decrease.
This and other variables would have a dramatic impact on the long term results of this scenario.
When Does Purchasing ROP Rider Make Sense?
Typically, you wouldn’t purchase ROP on such a long term policy. Where it is more common is term polices 10 to 15 year in length. You usually see this being used in buy/sell agreements between business partners where each partner buys insurance on the other’s life. With such a shorter time horizon, the ROP makes more economic sense.
Disclaimer: I have purchased 3 term life policies and never have opted for the return of premium rider.
What about you? Have you purchased a term life policy with a ROP rider?
For more information, check out other types of life insurance.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
On television, you may have noticed the Gerber commercial that talks about buying a life insurance policy for your child.
Ask any parent how far they would go to protect their child and most would tell you as far as they have to go.
Ask any financial expert if buying life insurance for kids makes sense and you might get an earful with half voting ‘yes’ for insurance and the other half voting ‘no’.
For me, I’m definitely on the ‘no’ side. Why you ask? We’ll get to that in a moment.
The Plus Side
Many argue that purchasing a life insurance policy for your child is a low-cost money move that will be beneficial in the future. It can be an effective plan for the future should the child grow up with health problems or have a family history of health problems that would make it difficult for them to get insured as an adult. Generally, life insurance is based on the amount of income you earn. Since you can not make an accurate assumption as to the amount of money your child would make in the future, you can use your own income as a guideline.
The Down Side
The experts who recommend against life insurance for kids generally feel the policies are outdated and there are now better options for investing in your child’s future. They feel that other resources like the 529 plans can be better suited for future savings. Not everyone is buying their children life insurance policies today. If there is coverage, it’s generally only to cover the costs of burial if something should happen, typically around $5000.
Personally, I’ve come across several clients that were “sold” life insurance policies for their kids to have insurance on them as well as a savings tool for when they get older. Now that the kids are older, the parents are disappointed (I’m being nice here) that the cash value hasn’t accumulated nearly as much as they were led to believe. If you’re being sold life insurance as investment stop and remember this:
I have not and do not intend to take out a life insurance policy on my kids. We started 529 plans for both as well as custodial accounts that we’ve used to purchase stock certificates. As they grow older, I’ll also plan to open Roth IRA’s for them as soon as they have earned income (Dad’s ready to get them on the payroll 🙂 ) From my end, I just don’t see the need for life insurance on them. Amy I wrong? I’m sure others have their opinion on the topic, but it won’t make me change my mind.
How to Purchase a Child’s Insurance Policy
If you absolutely feel that you have to have some sort of life insurance on your child, here’s a strategy that many financial experts can agree with. In addition to having a life insurance policy, utilizing other savings tools is also good financial practice. A parent’s best bet is to purchase a 20 year term policy that is renewable and can later be converted to whole life insurance.
For instance, a $10,000 policy can be later increased to $280,000 worth of insurance coverage. As an adult, the child would have life insurance coverage without medical tests and procedures. Some also use life insurance policies as a way to invest money tax-deferred. Since you are taxed on the gains of the investment, the first withdrawals are from the tax-free premiums. This will not be a replacement for when they have a family and need 1 million in life insurance, but if they have any health problems it does give them something.
After you have used all of the premium funds, you can take a loan against the gains tax-free also. You will have to keep the policy for your lifetime or you have to pay taxes on the amount taken.
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Not a Guilt Trip
Unfortunately, there are unsavory agents that will take advantage of a parent and use guilt as a sales tactic. When I hear stories like this it sickens me. Purchasing life insurance is a financially smart move and should not be done simply because you love your children.
However, if you as a parent do not have adequate life insurance coverage yourself or not enough going toward your retirement accounts, you should not spend the cash on insuring your children.
In the event something does happen to you, your child will have nothing to fall back on. Review your own insurance needs, especially as your family is changing. Speak with your insurance agent or financial advisor and make sure the amount of insurance you have is adequate to cover your own needs before purchasing a child’s policy.
The policy is subject to substantial fees and charges. Investment portfolios are subject to market risk. Death benefit guarantees are subject to the claims-paying ability of the issuing life insurance company. Loans will reduce the policy’s death benefit and cash surrender value, and have tax consequences if the policy lapses.
I‘m constantly amazed at the fact of how many young people I come across that don’t have any life insurance. While they all have there different reasons, the most common reason I hear is that it’s too early to think about life insurance. I couldn’t disagree more.
Most Important Question
Are you supporting individuals whose livelihood depends on your income? If the answer is yes, it’s time to look at life insurance.
Now, you may be saying: shouldn’t I wait to get a policy? Why should I pay premiums when I have so many other checks to write? Well, the reluctance is understandable: the perception is that life insurance is for old people, and when you’re 30 or 35, chances are you’ve got a long, great life ahead of you. But in financial terms, here is why this can be advantageous.
Healthy is Good
Typically, Americans shop for a life insurance policy in the middle of their life spans – when they are in their forties or fifties. At that time, they may have already fallen into the grip of bad habits (smoking, obesity, heavy drinking) and diabetes, heart disease, cancer or HIV may have entered their health picture. All these conditions can jack up premiums or make it harder to get a policy.
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Term Life Insurance is Cheap
Okay, maybe you won’t have to contend with any of the above health risks at 45 or 50 – but who knows? Buying a term insurance or permanent cash value life policy early in life, before you have to encounter any of these problems, should allow you to pay less expensive premiums. (Presuming you don’t face recurring risks to your health and safety today.) Getting life insurance quotes online are so easy nowadays, with sites like Matrix Direct offering you a free quote in minutes.
Did you know that premiums for standard-risk term life insurance fell 50% between 1994 and 2008?
Premiums have been getting cheaper and cheaper for new term life policyholders, partly because the mortality rate has dropped over the decades. In fact, the non-profit Insurance Information Institute says term insurance premiums have fallen by more than 4% per year since 2000, and the premiums on cash value policies are averaging roughly 5% lower today compared to a decade ago.
Do young singles need life insurance?
Good question. Some financial consultants will tell you there is no pressing reason for it. Yet if you are single, buying a term life insurance policy (or even a permanent life policy) early on could bring you a better deal and potentially guarantee your insurability. I have to admit that I did not do this. But I was fortunate to take out a term life policy early enough that the premiums were still very affordable.
Maybe it’s time. Time passes, things change, and so does your need for insurance. Check out Good Financial Cents 10 Best Life Insurance Companies for great resources to any of your questions. Even if you are insured, it’s important to keep up with change – as an example, the Insurance Information Institute estimates that about a third of families don’t update their life insurance coverage after a new baby comes home. I’m an exception to this stat. Not only did I increase my insurance after having our first child, but I’m now increasing it again with the soon arrival of our second. I increased the amount dramatically so that I won’t have to worry about increasing premiums if we have another child.
If you’re young and you haven’t yet talked to a qualified insurance advisor, think about doing so today – you may be pleasantly surprised how affordable life insurance can be.
We all get busy and let the “little things” slip through the crack sometimes.
This, however, wasn’t a little thing. In the hustle and bustle of the holidays, building a new home, a second child on the way (and now here) a “little” bill was overlooked and wasn’t paid.
This wasn’t my Direct TV bill or the electricity bill… It was my annual premium for my 30-year term life insurance policy! (gasp).
Insurance Policy Lapse
A month had passed before I realized that my insurance policy had lapsed. Frantically, I called the insurance company to find out what my options were.
In case you ever let any different types of life insurance policy lapse, here’s what you need to know.
Avoid Lapsing with Ladder Life Insurance
A payment slipping through the cracks is one reason your policy might lapse, but it isn’t the only one.
Sometimes individuals run into unexpected hits like job loss or the expense of caring for a sick loved one and find themselves unable to afford the policy premiums they originally agreed to.
Enter the dynamic life insurance policy. With a life insurance company like Ladder, there’s no need to default on payments.
If you find your policy is too much to bear, or conversely, you need more in force, you can adjust your life insurance policy to meet your changing needs.
Laddering down your coverage, as the company refers to it, can help make your premiums more manageable and keep your policy in force whatever life brings your way.
Get A Quote From Ladder >>
How Did I Let My Life Insurance Policy Lapse?
I know what you’re thinking. He’s a CERTIFIED FINANCIAL PLANNER™ professional and he let his life insurance policy lapse?
Right now I have 3 separate term life policies. When my wife and I first got married we purchased a $250k 30 year term life policy on myself.
After we had our first child, I decided to purchase another 30 term life policy for $500k. After we just built our new house and had a second child, I decided to stop messing around and purchased a $1 million term policy.
My initial intention was to let the $250k lapse, although I later decided to just keep them all. I told my wife of my intent, but she thought that I meant to let the $500k policy lapse. Whoops!
Note: Here’s my post that discusses how much life insurance you should buy.
What to Do When Your Life Insurance Policy Lapses
So, your policy has lapsed, now what do you do?
Insurance Policies Have Grace Periods
When I called the insurance company, I learned through the recording that they have a grace period. When you pay your premiums regularly, your policy remains “in force,” but when you miss a payment, your life insurance company is required to give you a 31-day “grace period” in which to catch up.
At the end of the grace period, if you haven’t submitted your back premiums to the life insurance company, your policy will lapse.
This is basically what happened to me. I was fortunate to be in a financial position where there wasn’t a real problem letting the policy lapse. I had plenty of other coverage to take care of my wife and kids.
Even if I had to go through the medical exam again, I know that I would still have received a preferred rate because of my excellent health. (Working out and eating healthy pays off!) Don’t let my luck fool you. Be sure to stay on top of your life insurance policies.
Lapsed Insurance Policy Could Be Bad
Many of the top-rated insurance companies, when offering life insurance coverage to an individual, don’t check to see if the individual has had coverage before, or if that coverage has lapsed.
Some life insurance companies do check to see if you’ve had coverage lapses in the past.
If you have, they may choose not to offer coverage to you in the future, which means you’ll have a very hard time finding the protection you and your family need, even if you’re able to better afford it than you were in the past.
Application for Reinstatement of Lapsed Policy
When your policy lapses, I learned that it isn’t necessarily the end of the world for your life insurance protection. I was informed that you can request an application for reinstatement.
(You can see the picture of the application above). I simply had to answer a few health-related questions and enclose the check for the missed premium amount.
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Double Check With Your Insurance Company
Each life insurance company handles the reinstate process differently, but in general, you’ll be asked to pay all of your back premiums, and you’ll only have about five years within which to request a reinstatement. As long as your health status hasn’t changed, reinstatement can be very simple.
Final Thoughts on Policy Relapse
If your health has changed, however, it may not be possible to have your old policy reinstated – another reason to be sure that you keep the policies you have in force.
When facing the loss of a loved one, the last thing someone wants to think about is the expense related to the funeral. Often the cost comes as a shock to the family. When I lost my father in 2006, it was up to my step-mom and me to go about planning his funeral arrangements. I guess I always knew that the cost of a funeral could get pricey, I just never realized how much
Table of Contents
Average Funeral Costs
The cost of the average funeral has dramatically increased in the last 25 years. However, it’s an expense that we can’t avoid. Being prepared and understanding the costs involved can help the process of planning for a funeral a little bit easier and help people decide whether getting a burial insurance policy is the right choice to support their loved ones.
Breaking Down the Costs of a Funeral
From death to burial, and all the steps in between, today’s average funeral can cost upwards of $15,000. There are a few areas where the expense can be cut, such as in choosing the style and extravagance of the casket. But some basic services, such as the cost of the funeral directors services cannot be avoided.
There are two areas that need to be looked at in terms of expense: the funeral service/funeral home fees, and the burial/cemetery fees. This is where a burial insurance policy can be very helpful.
Costs of Funeral Services
According to the National Funeral Directors Association, the average funeral cost is around $6,500. This does not include the burial fees, including plot and headstone.
Here’s a look at some of the fees broken down and what they cover:
Non-declinable basic services fee, $1800 – this fee can include the cost of the funeral directors services in securing permits, overhead, arranging the funeral plans, and coordinating services
Removal/transfer of remains to the funeral home, $250 – while your loved one may pass at home, in a hospital, or someplace else, their body has to get moved to the funeral home for the services
Embalming, $625
Other preparation of the body, $200 – this may include dressing the body, grooming, or applying make-up
Use of facilities/staff for viewing, $395 – average cost, but can change based on the duration of viewing hours and space needed
Use of facilities/staff for a funeral ceremony, $450 – let’s face it, those folks who drive the hearse, open the doors for visitors, fetch more tissues, etc… need to get paid
Use of a hearse, $275 – includes a driver and their services as well
Use of a service car/van, $125 – this is usually a limousine used to transport the family from the funeral home to the church and/or cemetery
Memorial printed package, $125 – can include programs and mass cards
The Cemetery Costs
Costs related to the burial are separate than those of the funeral. The burial costs include:
The cemetery plot, $1000 – this is the area of land purchased in the cemetery for the burial of the body
The vault, $700 – an airtight container is required to hold the casket, the cost can vary based on the material used
Headstone, hundreds to thousands of dollars – this cost varies greatly based on the size, material chosen, engraving and details.
Regarding the headstone, I have to emphasize “cost varies greatly”. I was unaware of all the subtle differences that can go into selecting a headstone and much the cost can escalate. For example, by having smooth sides or edges really jumped the price up considerably.
Planning Ahead for Funeral Costs
It is common now for people to plan ahead for their funeral services and even pre-pay or purchase a burial insurance policy. Arrangements and payments can be made over time with the funeral home to help family members not be burdened with the costs and details of funeral arrangements in their time of grief.
Even if your loved one hasn’t paid ahead, taking the time to consider what costs are really necessary and where you might be able to save is a good idea.
Word of caution on pre-paying funerals: make sure you know where the money is going. An estate attorney that I work with shared a story of a funeral home that was selling pre-paid funeral plans. Those plans became obsolete when the funeral home went bankrupt.
For some people, burial insurance isn’t enough – they need a traditional life insurance policy.
Did you have to bury a loved one and get shocked at how much it cost?