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A perpetual life insurance policy’s cash value is readily available for borrowing. The money can be used for any purpose and repaid anytime you choose, and a life insurance policy loan has comparatively low-interest rates. There are no loan restrictions or prerequisites (other than the amount of cash value). The drawback? You run the risk of losing your policy (and its cash value) if you don’t pay the loan’s interest, plus you’ll probably owe a lot of money in taxes. It’s simple to get cash by borrowing against your life insurance policy, provided you can make your payments on time.

Can you borrow against your life insurance policy?

How much can you borrow?

How do you take out a life insurance policy loan?

Pros vs. cons of taking out a life insurance loan

Does your life insurance coverage allow for borrowing?

The amount of money you would get if you surrendered your life insurance policy is its cash value. A portion of the premium you pay for a life insurance policy with a cash value, such as whole or universal life insurance, goes toward the cash value each time you make payment. The policy’s terms specify the interest rate, which is how the cash value increases over time. You can borrow cash from the insurer if your permanent life insurance policy builds cash value by using the cash value as security. This choice is usually only accessible until the cash worth of your life insurance policy has grown to a certain level, which might take five to ten years of premium payments. Due to the absence of a cash value component, term life insurance plans are less expensive than permanent ones. They cannot be used as collateral for loans, and if you decide to surrender a term life insurance policy, you will not be compensated.

How Much Can You Borrow from a Life Insurance Policy?

How much you can borrow from a life insurance policy varies by insurer. Still, the maximum policy loan amount is typically at least 90% of the cash value, with no minimum amount.

When you take out a policy loan, you’re not removing money from the cash value of your account. Instead, you’re taking a loan from the insurer and using the cash value as collateral. This is a significant benefit, as the cash value remains within the life insurance policy and continues to accumulate interest.

You don’t need to pay back the loan in a set period, as many other forms of loan are required. However, if you don’t pay the insurer the annual interest, which can be fixed or variable, what will add the interest payment to the value of your outstanding loan?

Length of the loan

You’ll get hit with compounding interest if your loan stretches over many years. And if the total outstanding loan exceeds your policy’s cash value, the policy will lapse. If this happens, you will lose coverage and hit a high tax bill if the outstanding loan exceeds the amount you’ve paid in premiums.

There is a risk in borrowing nearly the total amount of the policy’s cash value, so if you take out a policy loan, continually carefully monitor its size compared to your cash value. In addition, we would recommend making interest payments whenever possible.

How do you take out a life insurance policy loan?

The process of taking out a life insurance loan is straightforward. You fill out a form from the insurer and often get the money deposited in your account within a few days. You may need to confirm your identity, sign a confirmation document or provide a notarized confirmation before receiving your loan if:

You provided new account information to the insurer in the last month

The policy changed ownership recently

The loan exceeds a specific size, such as $50,000

Pros and cons of taking out a life insurance loan

Life insurance collateral loans are a simple way to get money on short notice with few restrictions. You must be very careful about managing the account’s cash value and paying off interest as required.

However, besides the risk of the policy lapsing, there are a few downsides to borrowing against your whole or universal life insurance.

There are no qualifiers for a policy loan.

You can borrow against your life insurance policy without having to meet the requirements for conventional loans. The loan does not reflect on your credit report because there was no credit check. You also don’t need to present any income documentation. You will need to provide identification and evidence of your loan request at most.

If you need money immediately, as for an urgent medical need, life insurance collateral loans might be a perfect alternative because there are no requirements or checks. They can also be used as a bridge loan while you wait for a loan from another source to be authorized. It usually works in your favor to repay an insurance loan as soon as possible. The loan’s interest accrues annually, and the policy will expire if the balance is too high. If this occurs, you would have paid premiums totaling thousands of dollars with nothing to show (no coverage). You can also owe taxes if the loan balance is more extensive than your paid premiums.

Another justification for repaying the policy loan is that the outstanding sum will be subtracted from the death benefit that will be distributed to your dependents after your passing.

Pay it back anytime

You do not have to repay a debt against your life insurance policy. Additionally, if the total amount owed (initial loan + accrued interest) does not exceed the policy’s cash value, you are exempt from paying the yearly interest. Therefore, if you’re unsure how long you’ll need the money, borrowing from your life insurance policy is a great choice. It usually works in your favor to repay an insurance loan as soon as possible. The loan’s interest accrues annually, and the policy will expire if the balance is too high. If this occurs, you would have paid premiums totaling thousands of dollars with nothing to show (no coverage). You can also owe taxes if the loan balance is more significant than your paid premiums. Another justification for repaying the policy loan is that the outstanding sum will be subtracted from the death benefit that will be distributed to your dependents after your passing.

Although much has changed in the insurance industry over the past 325 years since the Amiable Society for Perpetual Assurance Office produced the first life insurance policy, the industry’s long-standing, reliable procedures have remained primarily unchanged. Insurers have logically concluded that since their industry is risk-averse, nothing needs to be fixed.

That formula makes a lot more sense when consumers aren’t primarily responsible for driving significant changes in the life insurance industry. Most people have little interest in it; only 15% of 1,000 customers polled in late 2020 rated life or health insurance as one of their top three financial priorities.

But therein lay the difficulty faced by life insurers: attracting new clients while keeping existing ones interested and involved. This is especially true for clients who don’t believe life insurance offers much value to their lives. It is simpler to recruit, keep, and engage those most likely to require insurance, but this exacerbates the issue of adverse selection.

The picture for life insurers is obvious once these considerations are taken into account, along with the rise of creative insurance businesses that have proven competent at acquiring clients through customized solutions and elegant user experiences. Insurance companies cannot rely on the industry to remain as it has over the past four centuries while functioning without severe upheaval.

The bright side is that they can count on having support as they go through this change. Working with industry newcomers to build a whole that is bigger than the sum of its parts is the best way to accomplish change on the necessary scale.

The Importance of Established Companies for New Ventures

What necessitates this alliance of forces? Legacy life insurers offer the extensive experience, sector knowledge, and resources necessary to function efficiently and create new projects that will produce the intended results; despite whatever inefficiencies have hampered them.

Unlike other types of insurance, life insurance is unique. The cost of a life insurance policy depends on a far more complicated set of factors connected to policyholders’ health and life expectancies than the cost of a home insurance policy, which can easily be insured a house based on its neighborhood, age, security features, etc. This increases the complexity of the actuarial tables used by life insurance and highlights the need for a steady hand when forming new business opportunities.

Reinsurers are the most prominent participants in the insurance industry’s historical legacy. These reputable organizations have a history of overcoming the particular difficulties facing the sector. They have the capital reserves necessary to handle the significant, individualized risk distribution that life insurance requires. In sharp contrast to the $2.7 billion insurance industry size, the whole reinsurance market was predicted to increase from $402 billion in 2020 to $435 billion this year — a growth rate of 8%. Although managing general agents (MGAs), which gives them the same rights as an insurance carrier, is advantageous for some insurance businesses, it’s obvious where the funding required to power customized insurance experiences rests.

The Importance of David in the Face of Goliath

How can established life insurance companies benefit from working with up-and-coming firms when they require the same established firms’ market power, financial resources, and industry expertise?

Although risk aversion is prized in the insurance industry, many life insurers may benefit from the innovation and risk-taking of startups to finally implement the necessary but long-overdue improvements that will boost customer acquisition and retention. A similar dynamic emerged in the auto sector, where the need for greater sustainability is opening the door to accessible, effective electric vehicles. Partnerships between established automakers and EV startups have greatly hastened this transformation.

In the world of life insurance, such partnerships typically aren’t complicated. Working directly with insurance firms that function as MGAs and use their technical capabilities to reach larger audiences allows reinsurers to circumvent insurance carriers.

In addition, new businesses play a critical part in helping established ones transition to the digital era. This is an urgent need in the life insurance industry. A 2018 Deloitte study found that only 11% of respondents who buy insurance do so digitally. However, research shows that digital purchasing options speed up and make it much more convenient for customers than drawn-out, analog processes.

Finally, startups provide the data-savvy attitude, tools, agility, and imagination that legacy firms need to develop excellent services and solutions as the insurance industry shifts away from static evaluation methods toward more dynamic approaches, such as rewarding and incentivizing policyholders to make healthier choices. An AI-driven assessment process, for instance, might be used to match applicants to various tiers of insurance depending on legacy-startup partnerships. The AI may foresee consumers’ requirements and lifestyle changes and present them with new policy options as circumstances change. Without startups by their sides, legacy insurers risk being disrupted and becoming another Kodak or Blockbuster — long-dominant industry titans that succumbed to competitors who were more creative and innovative.

Indeed, life insurance has changed little in principle over the previous 325 years. However, if the new century has taught us anything, change is coming faster than before. The speed with which insurers act to establish new forms of innovation and collaboration will determine whether those winds are at their backs or in their faces.

When was the last time you conducted a marketing automation audit? If your contacts are not converting to qualified leads, your marketing automation may be out of sync with the needs of your potential buyers. Improve your lead conversions with a marketing automation audit that uncovers missteps and gaps in your marketing content and lead nurturing.

What is a Marketing Automation Audit?

A marketing automation audit is an evaluation of your contact database, lead scoring system, marketing workflows, lead nurturing emails, and reporting. The purpose of a marketing automation audit is to determine whether or not your contact segmentation, lead scoring, workflows, and emails are moving contacts through your pipeline and helping you meet your marketing goals.

Marketing automation is essential to running successful inbound marketing campaigns. Well-run marketing automation not only helps you meet your marketing goals, it ensures your buyers enjoy a positive experience with your brand. Over time, your brand and your knowledge of your buyers will evolve. Your segmentation, content, and marketing workflows need to change as well.

If your contacts are not receiving the right content to help them move through the marketing and sales pipeline, it may be because:

Your brand messaging changed

You learned more about your buyers’ needs, but your segmentation is not aligned

You created more targeted content as you learned more about your buyers, but don’t use it in your lead nurturing

Your lead scoring doesn’t reflect your buyers’ behavior

Broken links and outdated content stop leads from moving forward

With all the moving parts in marketing automation, workflow errors are bound to happen. Regular marketing automation audits will help you spot errors and fix them quickly so you can continue delivering the right messaging and content to your buyers at the right time.

How Can a Marketing Automation Audit Improve Lead Conversions?

The goal of marketing automation is to leverage technology to move contacts through your marketing funnel from interested visitor to purchaser. Delivering the right content and the right time in your buyer’s journey warms up their interest in your product or service and helps them make a decision to purchase. A marketing automation audit ensures you are leveraging technology and data on your buyers and their needs to move them from contact to lead.

Completing the audit and making the necessary adjustments to your marketing automation system will enable you to:

Gather the necessary information on your contacts

Put your contacts in the right lifecycle stage buckets

Use tracking to determine contacts’ interest and engagement with your website and content

Deliver content to help qualified leads make a purchasing decision

Move qualified leads to either Sales or a purchase page

How to Conduct a Marketing Automation Audit

Before you begin auditing your marketing automation workflows, it’s helpful to gather data to pinpoint areas of concern. Statistics that indicate there may be issues include:

Low conversion rates or inability to track conversions

Low email open rates

High email bounce rate

High unsubscribe rate

Inaccurate data on leads in each lifecycle stage

Inaccurate lead scoring

Based on the data gathered, determine where you need to focus your marketing automation audit. This may include evaluating the following checkpoints in your marketing workflows:

Forms

Review the forms you are using to collect contacts, including forms on your landing pages and any pop-up forms used on your website. Make sure all your forms are working properly and are directing new contacts to the correct page after submittal. If your forms trigger an automated email reply, make sure the email reflects your current branding and opportunities to engage with you further. Ensure there are no broken links in your email replies.

Are you collecting all of the information you need from contacts, including information that will help you segment contacts based on interests and needs? Is the amount of information you are gathering aligned with their stage in the buyers’ journey? A blog subscription form will typically ask for name and email. Subscribers are generally not ready to give more information and may be deterred by lengthier forms. Downloading a case study, on the other hand, indicates the contact is considering your service or product. Contacts at this stage are willing to provide more details about themselves, such as their company, role, and interests.

Database Segmentation

Segmenting your contact database into subsets based on your buyer persona profiles enables more efficient and effective targeting. Audit your segmented lists to determine whether or not they are still relevant. You may have lists that were developed for one-time campaigns. To keep your lists current, archive any lists that are no longer used.

You may have lists that require a criteria update. Perhaps your lead scoring has changed over time. Look at the parameters for inclusion in your lists and make sure they are still relevant. Make changes as needed.

Segmentation can be streamlined by allowing your contacts to self-select their interests or by adding contacts to lists based on behavior monitoring and lead scoring. Set up workflows that add contacts to lists based on interest, behavior, and lead scoring criteria.

Lead Scoring and Workflows

Lead scoring moves your leads through your contact lifecycle stages and helps qualify leads for your sales team. Over time, you will learn more about your leads and the behavior that signals their interest in your product and readiness to engage further with your company. Also consider that you may add new ways for prospects to engage with you such as webinars, email campaigns, and resource downloads. Inevitably, your scoring criteria will change and your workflows will need to be updated to reflect those changes.

Review your content and the buyer personas and buying stage that each piece serves. Make sure you are delivering the right content to the right people based on their persona and lead score. You may need to edit your triggers and automation rules.

Conversion Points and Tracking

Are your contacts converting from contact to qualified lead at the expected conversion points? If your conversion rates are low, evaluate any issues with the content, timing, and messaging that are preventing contacts from moving through your sales funnel.

Metrics to track and analyze include:

CTA clicks

Form submission rates on landing pages

Open and click rates on emails

Demo requests

Content Delivery

Aligning your content to your contacts’ customer journey is essential to marketing automation success. Automating email workflows triggered by list, lifecycle stage, or lead scoring is at the core of marketing automation. During your audit, make sure you have set up your workflows to deliver content that answers your prospects’ questions based on their current lifecycle stage and leads them to engage deeper with your brand. If you notice that leads consistently drop off at a certain point in your funnel, evaluate the content you are delivering at that point in their journey and align it with their needs.

As your brand matures, you may find that some content assets outperform others. Look at CTA click rates and landing page form submission rates to determine which assets perform best. Also, analyze click-through rates within your eBooks and guides to determine whether or not your contacts are engaging further while reading the content.

It’s common to have an abundance of awareness-stage content and fewer consideration-stage and decision-stage content pieces. Where are your content gaps? Make sure you have consideration-stage and decision-stage content to offer your leads to help them develop trust in your brand.

Email Marketing

Marketing automation software enables email drip campaigns to be sent to contacts. It’s crucial to evaluate the performance of your email campaigns regularly so you can make adjustments as needed. Look at your email open and click-through rates. They will indicate whether or not your emails are well-designed, use effective subject lines, and include engaging copy. A/B testing subject lines, copy, and calls-to-action in your emails can help you refine your email marketing campaigns.

If you notice a low open rate or high bounce rate on your emails, they may be landing in your subscribers’ spam folders.

Another item to check in your marketing automation audit is email frequency. How often are you emailing your contacts? Do different segments receive emails at different frequencies? If your emails are underperforming, consider optimizing the frequency and timing of your emails.

If you currently don’t send a welcome email sequence to your new contacts, consider automating a SOAP sequence that focuses on building a relationship with your new prospect, creating trust as well as interest in your brand.

Contact Database

The goal of marketing automation is to help you connect with engaged prospects and nurture your relationship with them before, during, and after they make a purchase. If you notice a low engagement rate on your emails, the issue could be poor database hygiene. If your list is bloated with contacts that have hard bounced or who are no longer interested and have disengaged from your email campaigns, it will affect your email metrics.

HubSpot explains, “Email senders with high rates of opens and clicks look more trustworthy to email security filters. And most email accounts, including Gmail, automatically filter out emails that recipients aren’t opening or clicking.” Learn how to improve your email deliverability here. It’s a good practice to cull your contact list periodically and archive or remove any contacts that have not engaged with your emails in recent months.

How Often Should You Conduct a Marketing Automation Audit?

A marketing automation audit is not a one-and-done event. Make it part of your quarterly marketing performance analysis to identify issues and gaps that are preventing you from optimizing your lead conversions.

Definition of Life Insurance Claimants

A claimant or beneficiary of your life insurance is the person who will receive a specific sum of money in the event of your passing. When you purchase a life insurance policy, choosing an heir is an important step because it is the only way legally to designate who will receive the money if you pass away during the policy’s term.

If you are a beneficiary, you should understand how the policy pays out, your options, and anything that might make things more difficult. To find out more about naming or being a beneficiary of life insurance, continue reading.

What Is a Beneficiary in Life Insurance?

You can designate an heir, who may be a person or an organization, when you buy a life insurance policy. Also possible is having more than one. They receive a predetermined sum of money or a series of payments if they pass away during the policy’s term.

You can distribute the funds however you like as the policy owner:

One person can be designated to receive everything.

You can designate two or more people to split the total sum however you choose.

Your estate may have a name.

You can designate a trust to receive the proceeds from the policy if you have one or desire one.

When they pass away, some people prefer to leave money for a charity; you can mention any recognized organization you like.

If necessary, you can give names to your minor children. It helps to be aware that most states call for an adult guardian to oversee minor assets if you intend to do this. The process of choosing a guardian can be expensive and time-consuming.

It’s crucial to contact the insurance provider and present a death certificate if you are the beneficiary of a life insurance policy and your loved one has passed away in order to begin the payout procedure.

Making a trust or custodial account is one way to hasten this procedure. Your children’s money is placed in a trust, where a trustee will look after it until they are of legal age or the age you specified for them to inherit it. If you don’t specify anyone, the “de facto” beneficiary is your estate.

How Should Insurance Beneficiaries Be Known?

Make sure you give accurate information when naming people to receive insurance money. You’ll need to know things like their birthday, social security number, and contact information. Additionally, make sure everything is correct before submitting it by checking it twice. If there are mistakes, the wrong people might get the money, or your heirs might have to deal with legal issues.

Let’s take the example where you list “spouse” as your beneficiary. Two years later, you get divorced and remarry without altering your insurance policy. After your passing, both your current and former spouses might make an attempt to collect the money.

You’ve created a legal problem that could delay payout because the definition of “spouse” is ambiguous. One was your legal spouse at the time of your death, and the other was your legal spouse at the time the insurance policy was written. Along with all the legal fees, stress, and heartache that always follow fights over money, a fight over money is likely to take place.

Contingent and Primary Beneficiaries

It is frequently advisable to add one or more supplemental beneficiaries to a policy. If the primary beneficiary (or beneficiaries) passes away or cannot be located, a contingent beneficiary is a person who gets some or all of the money.

Note: If you list multiple people, specify how much money (in a percentage form) each one should receive.

For example, suppose you buy a policy with a $1 million benefit. You designate the beneficiary as your spouse. Your partner will receive the entire sum should you pass away while the policy is still in effect. However, you might pass away before your main beneficiary.

Your three adult children are added as contingent beneficiaries because you want to ensure that the money is passed on to your children. You include each of them in the policy and distribute the funds equally. In this manner, your children will each receive a third of the money after your passing, even if your spouse dies before you do.

Per Capita and Per Stirpes

The decision of whether to choose per capita or per stirpes when naming beneficiaries is another factor to consider. If no other contingent beneficiaries are listed on the policy and one or more of your beneficiaries pass away, these specify how the money should be distributed.

Per capita (“per head”) is frequently used as the abbreviation. This implies that you don’t have to describe every potential event in great detail. Instead, an equal portion is distributed to each of your living beneficiaries.

For instance, if you have three adult children and one of them passes away before you do, the other two will instead receive half of the face value each. If you choose per stirpes and one of your beneficiaries passes away before you do, the beneficiary’s children, if any, will receive their share.

A per stirpes arrangement would give your two grandchildren the one-third that your three adult children were going to receive, for instance, if one of your three adult children passed away before you and was survived by two children. One-sixth of the funds would be given to each grandchild.

Life insurance is a wise choice for estate planning. In light of that, it might not be the best course of action for you and your situation. Consider speaking with an estate planning lawyer, who can assist you in putting together a strategy to ensure that your loved ones have what they need after your passing and that your assets go to the people you want them to.

There may be a box to check on some beneficiary designation forms so you can choose per stirpes. If there isn’t a box, ask your agent if you can enter per stirpes.

Who Has the Authority to Alter the Life Insurance Beneficiary?

When submitting a life insurance application, name at least one beneficiary. It doesn’t follow that you can’t alter it later. If you are the owner, you always have the option to remove or add people. You might decide to appoint someone else because of changes in your life, for instance.

In the event of a marriage or divorce, you might want to appoint someone else. A good reason to review your policy is the birth of a child. Alternatively, you might have another justification for the change. However, if you designated a beneficiary as “irrevocable,” you will need to obtain their approval before making any changes (they must sign the policy change form).

Additionally, in some circumstances, your insurance provider or state may place limitations on who you can name. For instance, married couples who reside in states with community property laws might need the consent of their spouse before naming anyone else.

Note: Contact your insurer and ask for a “beneficiary change form” if you want to add or change an heir.

Do beneficiaries of life insurance policies have to pay taxes? A life insurance death benefit received as a lump sum is typically not regarded as taxable income. There are, however, some circumstances in which you might owe taxes.

For instance, any interest paid above the face value of the money if it is received as monthly payments or an annuity is taxable income. Additionally, if the funds are transferred to your estate rather than a specific individual, estate taxes might apply. The good news is that there won’t be any estate taxes assessed unless your estate is worth more than $11.7 million.

Summary

If the insured passes away during the policy term, a beneficiary of life insurance receives the death benefit.

Multiple beneficiaries, including primary and contingent beneficiaries, may be named, along with a person or trust.

Your beneficiaries must have accurate identification information so that they can be located and legal disputes are kept to a minimum.

The majority of life insurance proceeds are tax-free, but in some cases, a portion of them might be.

Before you proceed, be sure you are aware of your state’s life insurance laws and how to handle naming minors.

Everyone dreads seeing the dreaded “phone number” section while online filling out information to acquire immediate life insurance quotes.

Why do so many people find that objectionable?

Because you are aware that your phone will ring endlessly until you answer and that you will be added to a call list. Once you respond, the salesperson on the other end won’t stop until he has persuaded you to buy something you didn’t need at a price higher than what you originally desired.

That isn’t how things ought to be. You are, after all, seeking rapid life insurance rates. You don’t want to wait for a commission-based salesperson to call you back at a time that is inconvenient.

In the end, “quick quote” websites that want your phone number do so because it will benefit their business, not because it will make your life simpler or your shopping experience more pleasant.

You won’t have to worry about that inconvenience if you hunt for your quotes in the appropriate location.

We eliminated all the anti-consumer tactics we saw on other websites when we created our fast quote engine, including the requirement for your phone number. Instead, we concentrated on gathering the necessary data we require to offer quotes that are more accurate than those you will find elsewhere online.

If you don’t wish to keep your quotes to refer to them later, we don’t even demand an email address from you — fewer speed bumps and no later regrets.

Of course, we’re pleased to assist you there if you wish to be contacted. We have in-house experts available to chat with you if you give us a call. However, doing so is voluntary, and you’ll never be asked for your phone number. Furthermore, our agents don’t receive commissions significantly sets them apart from other agencies.

Do you know how you feel when a used car salesperson talks to you? This can also occur when you try to get life insurance since many will attempt to upsell you on whole life insurance. Whole life insurance is useless and more expensive when compared to term life insurance. On the other hand, commission-based agents receive a more extensive check.

It seems to sense that customers are hesitant to share their phone numbers.

Calling an insurance agent on the phone shouldn’t make you nervous. Be aware if you are required to give your number to receive immediate life insurance quotations. However, suppose you’re doing your research correctly. In that case, you can wait to call until you’re prepared to apply and keep your contact information to yourself until then.

#areteautomation #lifehealthadvisors#healthtips #stayhealthy #knowledge

CRM technology has advanced steadily in the B2C market due to the recent rapid expansion of eCommerce retailers and mobile shopping. The majority of significant CRM system suppliers now provide a variety of features specifically designed for the e-commerce sector, which they have identified as one of the trendiest business models. If you are interested in learning more about the advantages of CRM for eCommerce and retail business, you have come to the correct spot.

The demand for better customer service has expanded dramatically as online retailers compete more fiercely, and companies are increasingly implementing CRM systems designed specifically for online retail. These days, customer experience is revolutionized by systems like Salesforce Commerce Cloud and Magento, which boost your online sales. But if you pick the right CRM, these platforms combined with one provide you a competitive edge in your eCommerce firm. The various advantages of having a customized CRM for Retail and eCommerce Businesses will be discussed in this piece.

1. Customer Segmentation

My feed is immediately overwhelmed with highly relevant sponsored advertising as soon as I go through my social media accounts after researching search engines, and I end up clicking on most of them. You have likely had the same experience. Social media shows us the advertisements we are most likely to click on since it has learned our search habits. Wouldn’t you want the same relationship with your customers if you were running an online retail business?

Sales agents can interact with clients most effectively by viewing customer groups organized by gender, interests (fashion, gadgets, etc.), spending history, and other factors.

2. Having access to the most pertinent data

How many visitors to your website abandon the page without making a purchase or paying for the things they added to their cart?

The average cart abandonment rate is a staggering 68.81 percent, according to Baymard. You may take action to turn these visitors into customers with a carefully thought-out CRM implementation in your retail firm!

3. Time Management Techniques

It turns out that sales representatives can only devote 11% of their time to active selling. Problem-solving and administrative tasks take up the majority of the time.

A CRM Customization for eCommerce can automate several self-service procedures, freeing your agents’ time to concentrate on their primary duties. Enterprise processes must now be more intelligent, and the easiest way to do so is to hire a CRM consultant before choosing a system.

4. Centralized Use of Social Media

We bet you are not operating an internet retail business without actively managing your social media profiles.

eCommerce traffic is primarily generated by paid advertisements and social media recommendations. Customers ask questions on social media, and how you respond to their questions affects how they view your customer service.

Consumers who complain on social media in 42 percent of cases anticipate a 60-minute response time. Through our Social Media Integrations, our clients have better-managed response times. You can also use the potent tools that many CRMs offer their clients. For instance, Salesforce Marketing Cloud is a game-changer for marketing in any eCommerce organization.

5. Payment Info

It can be challenging to analyze payment data if your site accepts various payment channels. You can handle everything using CRM, from billing and invoicing to payment failures. Even better, you can incorporate a payment gateway into your CRM.

CRM’s advanced analytics can monitor payment trends, giving you the power to examine:

● Best sources of income

● The most valuable clients

● Several measures you may use to tailor your offerings

6. Order Administration

Lead generation through revenue generation is all included in the order management process. You can see and take action on each product’s order placement, order processing, shipment tracking, delivery, and customer feedback.

Order management is one of the most critical features in a CRM for e-commerce. CRM for Startups can also help you organize your firm and increase productivity if you are starting out.

The use of marketing automation can help move deals through the sales pipeline and provide highly targeted messages. Customer relationship management (CRM) may collect and organize your client data. What transpires when these two systems are joined and their features are used?

Learn how to use marketing automation and CRM together in the best possible manner and how much value they can add to your company. We also include five real-world use-case samples so you may get ideas. After this article, you may sign up for a free trial of the all-inclusive CRM solution Pipedrive.

There are many benefits to combining marketing automation and CRM. It enhances the relationship between marketing and sales, makes it possible to understand client behavior better, raises the caliber of leads, and helps to conserve resources.

A fundamental understanding of both systems is required to comprehend how this is feasible; it goes like this:

Marketing automation is made to automate repetitive marketing processes like sending emails and push alerts. Thanks to automation technology, you can get data from different sources and use it in marketing efforts.

Marketing automation makes it possible to communicate with customers in a timely, precise, and focused manner. One use of automation technology is to move prospects through the sales funnel and into conversion. The respondents to our global marketing automation survey ranked better message targeting and a higher marketing ROI as the two most important advantages of marketing automation.

You may manage your company’s relationships and interactions with clients and prospects using a customer relationship management (CRM) solution. For instance, it keeps track of a person’s history of purchases and how long they have been a customer.

CRM aids in precisely segmenting clients, planning sales operations, enhancing customer service, tracking deals, and streamlining procedures.

CRM already contains all client data; thus, connecting it to marketing automation is essential to bring data into the automation system. However, the benefits of CRM and marketing automation go far beyond just supplying sources for consumer contacts.

Since data is imported and exported between systems, nothing is lost along the way.

You may be confident that there are no obstacles to the free flow of data.

You don’t need to keep track of communications with a single customer across various channels.

Sending automated communications to various segment groups pulled from CRM will be possible. The customer’s activities are added to the data in CRM when the marketing actions have been implemented. You’ll find additional advice for this further in this article, so keep reading!

Individual Customer Communication

Message personalization is essential since it increases the likelihood that the recipient will reply. However, 55% of marketers believe they lack the data and insights necessary for efficient personalization. Customer information is kept in multiple systems at once.

The problem can be solved using marketing automation and CRM to send triggered, customized, and personalized communications based on consumer behavior. You can customize your communications using specific consumer data points, such as prior purchases, closed and won deals, interests, business information, etc.

The picture of client behavior becomes more explicit as more systems are connected to automation. All potential actions, such as newsletter clicks and website visits, can be compiled into the customer’s CRM profile.

As a result, sales may communicate strategically, and customer interactions are more productive. Marketing gains a clearer understanding of the messages that resonate the most with leads and the information they find most useful.

Streamlined customer service and increased sales

You will be able to better service your present and potential consumers due to the integration of marketing automation and CRM. You may more readily look into and evaluate client behavior to inform your future decisions.

As a result, you may send marketing communications to your customers at the proper time they would find interesting, increasing up- and cross-selling and customer happiness. The sales cycle may also be reduced as a result of consistently meeting the needs of clients and prospects at the right moment.

Giving points for a prospect’s behavior is possible with contemporary automation technology. Sales understand that a lead is warm enough to be approached after a particular threshold of points is met. In the best-case scenario, sales have a ton of information in CRM about the prospect’s behaviors and want before making any calls or sending any emails.

How to get started

We now know why it is crucial to combine these tools, but how to achieve so is still a mystery. The steps are listed below.

Purchase the equipment. Invest in top-notch products that are already integrated.

Organize the steps. Bring sales and marketing together to map out the entire purchase process, make notes along the way, and determine necessary actions. Add pre-sales marketing, sales touch points, and new customer onboarding to the roadmap.

Arrange the customization. Choose the data points you’ll utilize to tailor the customer experience. There are several options, including geography, age distribution, the types of things bought, and the volume of purchases. Use subscription forms, for instance, to ensure you gather all the required information.

Develop automated work processes. Start developing the automated workflows for various tasks, such as rekindling the customer relationship, onboarding, and warming up the lead. Use our free guidebook of marketing automation examples as inspiration to improve your business.

Examine and adjust. After developing and launching the automation, you must keep an eye on the outcomes and, if necessary, tweak them. You can experiment to see how the results change if you tweak the automated letters’ headlines, content, or scheduling.

Examples of real-world usage cases

Let’s look at a few instances where marketing automation and CRM have increased sales.

Onboarding

CRM as a data source

Email/push notification channel

Trigger: First purchase or new sign-up

One of the most common marketing automation applications is onboarding, and CRM gives the procedure a lot of strength.

When sales record a deal as won in CRM, marketing automation receives a trigger to begin the onboarding process for the new customer. Educate and instruct your customers while assisting them in using your items.

You can start to drive more purchases later in the onboarding messages. Running a referral campaign, as Dropbox did, is one clever method to accomplish this. Dropbox grew by 3,900% in just 15 months by giving users who invited their friends to use the platform free data storage.

Upsell

CRM as a data source

Message: Email

Customer segment: devoted customers

Customers that make several purchases show interest in your business and are frequently prepared to make additional purchases. They are a fantastic segment group for your upselling campaign because of this. The required information can be extracted from CRM, such as a list of clients who have made at least three purchases from you.

Send an appealing coupon together with a tailored campaign letter. Set a deadline to ensure that customers respond quickly, and make it obvious what benefits the offer will bring to the recipient and why they should take advantage of it.

Customers who didn’t purchase the first email can be reminded that the campaign ends in three days after a few days have passed.

The upsell campaign also provides a possibility for more precise segmentation. If a consumer doesn’t purchase the campaign, you can separate them into platinum-level customers and lower their status.

Birthday presents

CRM as a data source

Channel: SMS/email

The customer’s birthday is the trigger

On their special day, remember your customer with a thoughtful gesture! In B2B marketing, the first purchase anniversary is celebrated, whereas, in B2C marketing, the customer’s birthday is honored.

Set the automation to regularly monitor the CRM for persons with birthdays coming up in the next ten days. Send these clients a personalized note to commemorate the forthcoming event.

Being proactive while sending anniversary texts is a fantastic idea because many of us like to organize the celebration in advance. The customer is more likely to accept your offer if the benefits are clear in advance.

Reawakening Inactive Customers

CRM as a data source

Channel: SMS or email

trigger: circumstance

Encourage your passive customers to do business with you once more. Get a segment of customers from CRM who haven’t purchased in a specific amount of time. Send them individualized messages to reacquaint and entice them to return to you.

It’s crucial to convey the value in these messages as well. Show the customer the advantages of coming back to you. For instance, you may SMS customers and offer them a complimentary delivery.

Although this automation chain has a different target market, it is similar to upsell automation. The automation can be carried out in the background and repeated monthly or on any other schedule that works best for your company.

Return the data to CRM.

CRM and marketing automation needs to communicate back and forth. You must ensure that the data isn’t just delivered to the CRM; it is also pulled back from the automation platform.

Giving the contacts scores depending on how they respond to your marketing communications is a practical technique to ensure this. You can award different points to contacts at various points throughout the automation chain, such as one point for viewing the message, five points for selecting the aggressive CTA, and so forth.

The scoring system allows you to distinguish between hot and excellent leads. Every morning, send all contacts with lead scores greater than 5 to sales using CRM filtering.

Try the CRM that Increases Closing Rates by 28 Percent on Average

Only when a wealth of client data is available can an efficient automated chain of communications be built. Therefore, a dependable CRM system is essential. After using Pipedrive’s CRM for a year, users average a 28 percent increase in transaction closings. Pipedrive can help you gain customers and encourage upsells with targeted marketing automation campaigns.

In your 30s, a lot can happen. You might be planning a wedding, beginning a family, or searching for your first house to purchase. But have you given life insurance any thought?

In your 30s, life starts to get quite real. You might settle down, get married, start a family, own a home, and bring home the golden retriever you’ve always wanted. That is a lot. Because of this, now is a wonderful time to begin making plans for the future of your family.

Even though it could be difficult, you might need to think about what would happen to your family if something happened to you. The decisions you make today may have a profound impact on the people you care about the most.

In your 30s, consider buying life insurance for the following five reasons:

You Need to Pay Your Monthly Bills

Your life is a series of monthly bills.

Your salary is probably heavily invested in these costs, which may include your rent or mortgage, auto payments, utilities, credit card bills, and student loans. Despite all odds, you’ve been able to save some money for that Blink-182 reunion tour, but your finances are still tight. Another reason a life insurance policy can be a good idea is this one.

How will your family assist in paying off your mortgage or outstanding loans after you pass away? Your loved ones’ ability to pay the bills you leave behind may be aided by a life insurance policy.

You Have a Family to Support

To create their own families, many are delaying parenthood till they are older. It’s possible that your grandparents and parents were married and had children when they were in their 20s. But more people today are delaying marriage until their 30s or later. Why not, then? It’s simpler than ever to play the field and wait for that ideal match thanks to dating apps like Bumble, Hinge, and the rest.

In fact, women in their early 30s are giving birth to more children than those in their 20s for the first time ever.

Does that circumstance ring a bell for you? If so, you might want to consider what will happen to your family when you pass away. Purchasing life insurance in your 30s could provide your family with financial security in the future.

You are Financing your Kids’ Education

No matter if you’re talking about a four-year college, associate degree, or vocational school these days, getting a credential is very pricey. And it won’t get any simpler with soaring tuition costs. Even enrolling your children in a public, in-state school can be expensive: the average yearly cost after accounting for tuition, room and board, fees, and other costs is more than $20,000.

Most people’s personal funds just won’t be enough to pay for their education. Although they are an option, student loans could leave borrowers with long-term debt.

If you are unable to provide for your children on your own, the payoff from a life insurance policy may help.

Insurance may be more affordable when you’re young

Age is one of several variables that insurance companies take into account when determining premiums, but it is one of the most crucial. With all the health tracking apps, recreational sports leagues, and 5ks with pals, young people frequently have fewer health issues, and insurers are aware of this. That might work in your favor.

Purchasing life insurance when you’re still young may enable you to locate a plan that both suits your financial needs and your urgent demands. For those in their 30s, a term life insurance policy is frequently the best option. Compared to a whole life policy, coverage quantities are frequently higher, and costs are created to be reasonable. It’s frequently the best kind of life insurance coverage for a 30-year-old.

Your Loans were Co-signed by Your Parents

Without a perfect credit history, getting a loan to establish a business or purchase a new home is difficult. You might have asked your parents to co-sign your mortgage or other loan, like many other 30-somethings. In the event that something were to happen to you, they would still be responsible for making those payments.

Life insurance can let you pay them back for their assistance when you most need it. Your home, business, or investment might be protected and your debts could be paid without depleting your parents’ financial resources by using the payoff from an insurance policy.

A CRM Software’s Definition

An application used to manage and store customer data is known as CRM software. This data may include personal information, preferences, buying patterns, interactions with the business and other customers, and other things.

What Advantages Do CRM Software Offer?

Businesses use CRM software to cultivate and preserve relationships with their current clientele. CRM software enables businesses to better understand the needs of their customers, respond to those needs by improving services and products, attract new clients, and more.

What Purpose Does Customer Relations Management Software Serve?

Now let’s talk about some of the main objectives of CRM software. Including the following:

Find New Clients

CRM software is widely used by businesses to attract new clients. A business that sells goods and services online, for instance, can use its CRM software to entice new clients by emailing them and providing them with special discounts, coupons, and other offers.

Identify and Keep Your Customers

CRM software can assist businesses in learning more about their clients’ requirements so that they can enhance their products, services, and other aspects. In other words, by offering customers goods and services that are on par with or better than their expectations, CRM software can aid a business in keeping its current clientele.

Encourage Customer Loyalty

Many businesses use CRM software to reward existing customers for their loyalty by sending them emails with rewards, discounts, etc. These programs are also being used to collect customer feedback so that changes can be made in response to it.

How Does a CRM Software Operate?

Through the following three steps, customer relationship management software assists businesses in developing customer relationships:

Step 1: Gather Data on Customers. The first step of this process entails gathering data on clients using a variety of techniques. This data may include specifics like the client’s name, contact information (such as a phone number, email address, and mailing address), gender, age group, purchasing patterns, and preferences, among other things. It may also contain information about previous interactions between the business and the client (such as the most recent time the client purchased goods or services from the business).

Step 2: Store Information in a Database. In order to make the information easily retrievable at any time, the collected data is stored in a database in the second step. A company should be able to easily access this information from its database at any time during this six-month period, for instance, if it wants to send marketing materials to new customers once a month for the first six months after acquiring them.

Step 3: Produce Reports from Database Data. The third step entails obtaining pertinent data from the database for additional analysis and decision-making. For instance, if a business wants to analyze customer behavior to attract new ones (see step 1) or customer feedback to improve its business processes (see step 3), it should create reports based on the data stored in its database so that it can use such reports for analysis.

The ability to obtain standard life insurance will often be hampered if you have recently received a cancer diagnosis or treatment. A cancer diagnosis is not necessarily a surefire roadblock to buying life insurance.

After receiving a cancer diagnosis, is life insurance still an option?

Even though it could be pricey and restricted, you can still get some forms of life insurance if you presently have cancer.

Having a diagnosis of cancer usually makes it impossible to obtain insurance.

Basal cell carcinoma is a condition for which most insurers do not impose restrictions, according to Travis Price, an independent senior market insurance agent in Manton, Michigan (skin cancer).

However, given the nature of small cell lung cancer, there is a good chance that no life insurance would ever be placed with you.

What Kinds of Life Insurance Are Available to Cancer Patients?

Following a cancer diagnosis, you will probably be able to qualify for a guaranteed issue, group life, and final expenditure life insurance policy, which provides coverage for last expenses and burial fees. However, with a cancer diagnosis, you could not be eligible for the two most popular forms of life insurance — term and whole.

These forms of life insurance often don’t allow for application rejection, and the applications don’t typically even include any health-related questions.

The possibility of limited coverage quantities is one compromise. The fact that guaranteed issue and final expense life insurance sometimes have graded death benefits means that your beneficiaries won’t receive the total payout if you die away within two or three years of purchasing the policy. (The timetable will be specified and depend on the policy.) The nature of your disease will also impact what coverage you may qualify for.

How Long Does It Take to Regain Life Insurance Eligibility After Cancer?

Although each insurance provider is unique, you usually need to have been cancer-free for at least five years to be eligible for freshly issued term life insurance, whole life insurance, or other forms of coverage.

Depending on the type of cancer, its invasiveness, and the likelihood that it may return, there may be a waiting time for life insurance after cancer.

Waiting periods for life insurance following cancer. Certain insurers have higher underwriting requirements for specific diseases that need remission for at least a decade.

Life insurance waiting periods after different cancer types

Here are sample waiting periods for various types of cancer from Trusted Choice, a network of independent insurance agents:

Bladder cancer: 2 years

Bone cancer: 5 years

Breast cancer: 2 years

Cervical cancer: 1 year

Colon cancer: 2 years

Kidney cancer: 3 years

Leukemia: 10 years

Lung cancer: 3 years

Lymphoma: 2 years

Metastatic cancer: 5 years

Ovarian cancer: 3 years

Prostate: 1 year

Rectal cancer: 2 years

Skin melanoma: 1 year

What Kind of Life Insurance Is Best After Cancer?

Traditional life insurance may be possible if you have had cancer for at least five years. Here are a few potential choices.

Long-term care insurance If you’re eligible, term life insurance is often the least expensive method to get protection. You’ll probably have to undergo a life insurance medical examination, so be ready to discuss your prior cancer diagnosis and treatment when questioned.

You may lock in prices for term life insurance for a predetermined amount of time, such as 10 or 20 years.

Permanent life insurance Whole life insurance and universal life insurance are two options for permanent life insurance. If you pay the premiums, these plans can offer life insurance as long as you live.

streamlined life insurance issues While simple issue life insurance does not need a medical exam, you might be required to complete a brief health questionnaire.

A simplified issue might be an excellent decision if you are cancer-free but not in perfect health.

Life insurance with a guaranteed issue You cannot be refused guaranteed life insurance because of a medical exam, health standards, or medical history requirements. That may seem enticing, but the cost of the coverage you receive will be high, and the policy’s death benefits will be low.

Life insurance for burial Burial insurance, intended for life insurance purchasers over 50, is designed to cover expenditures associated with the end of life, such as funeral fees and unpaid medical bills. Obtaining this coverage doesn’t need a medical checkup.

How Does Cancer Affect the Price of Life Insurance?

For all plans, including those for cancer patients and survivors, most life insurance firms employ a categorization method to calculate the prices for life insurance. Following cancer, some suggestions to improve your chances of finding life insurance.

Work with a knowledgeable independent life insurance agent first and foremost. Independent brokers deal with various insurance providers and will be aware of those more receptive to covering cancer patients. Find an independent agent that specializes in impaired risk underwriting in particular.

With these techniques, you might be able to get affordable life insurance no matter when you become eligible for it after cancer.

By eating well and exercising, you may improve your general health. Avoid using tobacco. Quotes for life insurance are often substantially more expensive for smokers.

Choose a profession with less risk. Police officers, firefighters, pilots, and construction workers are among the occupations that might see increased costs.

Avoid dangerous pastimes, including scuba diving, skydiving, and mountain climbing. Your quotations will take them into account and increase the Price. Maintain a spotless driving and criminal history. DUIs, prior arrests, and other criminal convictions may impact your rate or ban you from coverage.

We can’t prevent the unexpected from happening, but sometimes we can protect ourselves and our families from the worst of the financial fallout. Many types of insurance are available, but nobody wants to spend more than they really need to.

Selecting the right type and amount of insurance must always be based on your specific situation. Factors such as children, age, lifestyle, and employment benefits play a role.

Nevertheless, there are four types of insurance that most financial experts recommend everybody have: life, health, auto, and long-term disability.

1. Life Insurance

Life insurance provides for your family if you unexpectedly die. This is especially important if your family is dependent on your salary.

Industry experts suggest a policy that pays out 10 times your yearly income. But not everyone can afford the cost. When estimating the amount of life insurance you need, factor in funeral expenses. Then calculate your family’s daily living expenses. These may include mortgage payments, outstanding loans, credit card debt, taxes, child care, and future college costs.

Don’t forget to consider any other sources of family income. According to a 2021 study by LIMRA, formerly known as the Life Insurance and Market Research Association, more than half of U.S. households rely on dual incomes. The study also found that a quarter of families would experience financial hardship within one month of a wage earner’s death.

The two basic types of life insurance are traditional whole life and term life.

Whole life can be used as an income tool as well as an insurance instrument. As long as you continue to pay the monthly premiums, your whole life policy covers you until you die.

Term life covers you for a set amount of time.

There are other considerable differences between the two types of insurance, so you may want to seek the advice of a financial expert before you decide which is best for you. Factors to consider include your age, occupation, and number of dependent children.

2. Health Insurance

Only about 9.2% of the American population had no health insurance coverage in 2021, the Centers for Disease Control (CDC) reports in its National Center for Health Statistics. More than 60% got their coverage through an employer or in the private insurance marketplace while the rest were covered by government-subsidized programs including Medicare and Medicaid, veterans’ benefits programs, and the federal marketplace commonly known as Obamacare.

Having medical insurance means that you have no reason to avoid an annual wellness visit or a doctor’s visit for an occasional ailment. And you won’t get stuck with a massive bill if you or a member of your family have an accident or develop a chronic disease.

If you’re on a very tight budget, even a minimal policy is better than none. If your income is low, you may be one of the 80 million Americans who are eligible for Medicaid. If your income is moderate but doesn’t stretch to insurance coverage, you may be eligible for subsidized coverage under the federal Affordable Care Act.

The best and least expensive option for salaried employees is usually participating in your employer’s insurance program, if your employer has one. The average annual premium cost to the employee in an employer-sponsored health care program was $7,739 for single coverage and $22,221 for a family plan in 2021, according to research published by the Kaiser Family Foundation.

3. Long-Term Disability Coverage

Long-term disability insurance is the one type of insurance most of us think we will never need. Yet, according to statistics from the Social Security Administration, one in four workers entering the workforce will become disabled and will be unable to work before they reach the age of retirement.

Often, even workers who have great health insurance, a nice nest egg, and a good life insurance policy don’t prepare for the day when they might not be able to work for weeks, months, or ever again. While health insurance pays for hospitalization and medical bills, you’re still left with all of the expenses that your paycheck had covered.

Many employers offer both short- and long-term disability insurance as part of their benefits package. This would be the best option for securing affordable disability coverage.

If your employer doesn’t offer long-term coverage, here are some things to consider before purchasing insurance on your own:

A policy that guarantees income replacement is optimal. Many policies pay 40% to 70% of your income.

The cost of disability insurance is based on many factors, including age, lifestyle, and health. The average cost is 1% to 3% of your annual salary.

Before you buy, read the fine print. Many plans require a three-month waiting period before the coverage kicks in, provide a maximum of three years’ worth of coverage, and have significant policy exclusions.

4. Auto Insurance

Despite years of improvements in auto safety, an estimated 31,720 people died in traffic accidents on U.S. roads and highways in the first nine months of 2021, according to the National Highway Traffic Safety Administration.

Almost all states require drivers to have auto insurance, and the few that don’t still hold drivers financially responsible for any damage or injuries they cause.

Auto insurance will cover the expenses and help guard you against any litigation that might result from the accident. It also protects your vehicle against theft, vandalism, or a natural disaster like a hurricane.

As with all insurance, your individual circumstances will determine the cost. Compare several rate quotes and the coverage provided, and check periodically to see if you qualify for a lower rate based on your age, driving record, or the area where you live.

The Bottom Line

Most experts agree that life, health, long-term disability, and auto insurance are the four types of insurance you must have. Always check with your employer first. Employer coverage is often the best option.

For your other insurance needs, obtain quotes from several providers. Some provide discounts if you purchase more than one type of coverage.

If you are unable to afford private health care insurance, check to see whether you are eligible for subsidized insurance under the Affordable Care Act.

Younger generations seem to have a knack for disrupting the status quo, and life insurance may be next on the list. As Generation Z and millennial workers challenge the concept of a traditional career and drive an increase in freelancing, the role of workplace group life insurance in long-term financial plans is likely to change.

Freelancers understand that they need to take 100% responsibility for their finances, says Jessica Lepore, founder of Surevested, a New York-based life insurance agency. “It’s not all packaged like if you were to work for a corporation.”

Less reliance on group life policies

Many people in their 40s and 50s depend on life insurance provided through an employer, says Grant Dunn, vice president of financial services at Lakenan, an insurance brokerage in St. Louis. But younger generations prefer to look for coverage outside the workplace, he says. Last year, life insurance application activity grew more than twice as fast for Americans 44 and younger compared to those 45–59, according to MIB Group, an information-sharing service for insurers.

“They’re going more to outside markets rather than just trusting what they have through their employer, because they know that their employer is going to change a lot in the next 30 years,” Dunn says.

Younger workers typically do not stay at jobs as long as older workers, the most recent data from the Bureau of Labor Statistics shows. In January 2020, median job tenure was 2.8 years for workers 25 to 34 years old, compared to 9.9 years for workers 55 to 64.

Workers can’t always convert group life to an individual policy to avoid losing coverage when they leave a job. “What I would suggest to millennials that plan on job-hopping around is just get it outside of your employer so you don’t have to worry about it,” Dunn says. This is perhaps even more necessary for long-term freelancers, who do not have an employer to provide coverage.

Plus, basic group life insurance may be free to employees, but it often tops out at one or two times a worker’s annual salary. That’s typically not enough to provide a financial safety net, Dunn says.

How life insurance planning differs for freelancers

A simple way to estimate how much life insurance you need is to multiply your income by the number of years your beneficiaries will need financial support. This calculation can be tricky for freelancers with unpredictable incomes, but they can follow the lead of workers in commission-based jobs like real estate, where monthly income may not be consistent, Dunn says.

He suggests looking at what you earn on average, as well as what people at your skill level in the industry make over time. Once you estimate your annual salary, you can figure out how much your life insurance policy would need to cover if you die.

If you’re unsure of your future needs, Lepore recommends getting a policy that allows you to adjust coverage over time, such as a term life policy you can convert to permanent coverage later.

“The best thing to ever do is get at least one policy going,” Lepore says, “because that can confirm your eligibility at a later time in your life if you decide you need more coverage.”

Changes to how Americans shop for life insurance

Traditionally, getting life insurance can take several weeks and often requires a medical exam. “With all the technology today, the younger generation can’t wrap their minds around it taking 45 days to get a policy in force,” Dunn says.

Some insurers have already responded to this issue by using big data algorithms to process applications online in minutes. So if you’re looking for fast coverage, these products may be your best bet. However, whether you shop online or not, the type of life insurance you buy should align with your overall coverage goals.

Permanent policies, such as whole life, generally stay in force until you die and include an investment account. You can withdraw or borrow against the policy’s cash value while you’re still alive. The growing popularity of digital investments can make traditional whole life policies less enticing as investment opportunities to the younger generations, Dunn says. If you just want your life insurance to cover your death and not act as an investment vehicle, you may want to consider term life insurance. Term life covers you for a set number of years, does not have an investment component, tends to be less expensive than permanent policies and is typically sufficient for most people.

As a young adult, getting life insurance may not be at the top of your priority list. After all, you’re more likely to be healthy, not married, and don’t yet have children who depend on you. And with an entry-level job, you could be on a tight budget. Why pay unnecessary life insurance premiums at this point in your life?

Investing in life insurance in your 20s or 30s can be a savvy financial move. Here are a few reasons you should consider buying life insurance young.

1. Lock-in great rates When you buy life insurance, your premiums remain the same for the duration of your policy, unless you change the amount of coverage. Buying Life insurance at a younger age locks in lower premiums and reduces the total amount you’ll spend on life insurance over the course of your lifetime. You simply can’t beat the life insurance rates you receive in your 20s and 30s.

Along with your age, your health is another determining factor in how much you pay for life insurance. Getting insured before any health conditions develop, such as high cholesterol or high blood pressure, lets you lock-in very affordable premiums for decades to come.

2. Protect your loved ones You may have student loans, credit card debt or financing for a new car — and perhaps you’re considering buying your first place. If you were to die, life insurance can protect your parents or loan co-signers from the burden of paying off your debts.

If you’re in a relationship and have a mortgage, life insurance can protect the surviving partner from having to cover the remaining amount themselves, or losing the home entirely. Many young couples on a tight budget prefer a term life policy as an affordable way to get coverage for a set length of time — such as the length of your mortgage.

3. Build credit If you opt for a permanent policy, you’re also building credit you can bank on. As the cash value of your policy grows, you’ll be able to borrow against it. The younger you buy a policy, the more time your policy will have to grow in value.

4. Put protection in place for the future You may not have dependents now, but that could change in a few years. Investing now means you’ll have protection in place when your children, spouse or aging parents rely on your income. If you wait, it may be more difficult and expensive to get coverage.

5. Take advantage of discounts If you have other insurance policies with The Co-operators, such as Auto or Home insurance, adding Life insurance can increase the discount you get on those policies, saving you money on your other insurance costs.

To learn more about life insurance, contact your Financial Advisor to discuss a plan that meets your needs now and in years to come.

One of the primary reasons to buy life insurance is to help replace your income if your family counts on your paycheck. But if you’re not working at a paying job, should you bother getting coverage? In a word, yes.

Because couples might assume that only an income-earning parent needs life insurance, they often skip coverage for the stay-at-home parent, says Jason Hill, founder and president of Client Focused Advisors. It’s a mistake to overlook the financial support a stay-at-home parent provides. “If I had to replace what my wife is doing, it would cost me a fortune,” says Hill, whose wife is a stay-at-home mom.

How Stay-at-Home Parents Provide Financial Support

Although stay-at-home parents don’t bring home a paycheck, they provide substantial support for their families. If they weren’t around to take care of children, make meals, run errands or manage other household tasks, someone might need to be hired to fill those roles.

Salary.com estimates that the median annual salary for all of the jobs that stay-at-home moms perform is $184,820. Granted, you wouldn’t necessarily have to hire someone to handle some of the jobs that Salary.com included in its estimate — such as a logistics analyst, consumer loan officer or conflicts manager.

But you might need to pay for daycare or a nanny if something were to happen to the stay-at-home parent in your family. And that’s a pretty hefty expense by itself.

According to Care.com’s Cost of Care Survey, the average weekly cost for a child care center was $226 in 2021. The average weekly cost for after-school care was $261 and the average weekly cost for a nanny was $694. Based on these figures, a family could pay an average of $11,752 to $36,088 a year per child for childcare. And child care costs are only rising over time.

That’s a cost the working parent might have to shoulder if something happened to the stay-at-home parent. If that parent had ample life insurance, the death benefit could cover the cost of childcare so the family’s finances wouldn’t take a hit.

What a stay-at-home parent may provide

Beyond child care, stay-at-home parents cover a lot of other household tasks that a working parent may not be able to take on. The surviving spouse may need to pay for additional services to keep the house running, such as:

Housekeeper

Laundry service

Gardener

Pet sitter or dog walker

Meal service

Tutor

Driver

Some seemingly little things stay-at-home parents handle would add up if you had to pay someone to replace these household duties.

Other Reasons to Consider Life Insurance

Not only will a life insurance payout provide the surviving parent with the funds to cover child care costs, but it can also help cover final expenses. The median cost of a funeral with burial is $7,848, according to the National Funeral Directors Association. This does not include cemetery, monument or marker costs. Plus, there could be lingering medical bills or other expenses that need to be covered.

In addition to providing a financial safety net, the stay-at-home parent might also want a life insurance policy to leave a legacy for the children, says Stephen F. Lovell, president of Lovell Wealth Management. By putting life insurance in a trust for your children, you can pass on an inheritance to them.

And while it’s not a reason that people buy coverage, having life insurance in case of a divorce is valuable. It’s better to get coverage while you’re young and healthy because you can qualify for a lower rate, says Lovell, no matter what your reason is for buying coverage. If a divorce happens later, either parent without a policy might find it difficult to find affordable coverage at that point — or even get coverage if she or he has developed health issues.

How Much Coverage Do Stay-at-Home Parents Need?

When figuring out how much life insurance you need, income often is a key consideration. That’s because you want a death benefit that will replace your salary for a certain period of time that you choose.

Coming up with a coverage amount might seem like more of a challenge if you’re a stay-at-home parent without an income. There is no one-size fits all approach, Hill says. But there are a few key questions you can ask yourself to determine how much coverage you need.

How many children do you have?

“The bigger the family, the bigger the life insurance policy that family should have,” Hills says. That’s because child care costs will be higher. Find out the cost of childcare facilities, after-school care or a full- or part-time babysitter where you live.

You’ll want to have a life insurance amount that’s large enough to cover that cost for all of your children until they’re old enough to no longer need care. If your spouse will need to hire a house cleaner, lawn mower or others to handle the tasks you currently manage, factor those costs into your life insurance calculation, too.

Will you return to work?

If the stay-at-home parent plans to return to a paying job, consider what their income likely will be. That’s because your household spending will likely rise as your household income does, Hill says.

You’ll want enough life insurance to replace the income you expect when you return to the workforce so your family can continue living the lifestyle they’re accustomed to. By getting ample coverage now, you can lock in a lower rate than what you’d pay if you waited to buy more coverage upon returning to work.

Ideally, you should work with a financial advisor who can help you review your household assets and expenses to calculate how much coverage you need. You can find a fee-only planner through the National Association of Personal Financial Advisors or a planner who charges by the hour through the Garrett Planning Network.

What Type of Life Insurance Should You Buy?

There are two primary types of life insurance: term life and permanent life. A term life policy provides coverage for a certain period of time — typically 10, 15, 20 or 30 years. A permanent life insurance policy provides lifelong coverage. The type you choose will depend on your family’s financial situation and goals.

The Case for Term Life

Hill says that he typically recommends that stay-at-home parents buy a term life policy because it’s an affordable way for families to get the protection they need. For example, he says a healthy 30- to 35-year-old woman could get a 20-year term life policy with a $500,000 death benefit for about $20 to $30 a month.

You can choose a term that’s long enough to cover the years until all of your children have graduated high school or even college. Then you’ll know that funds will be available to pay for your children’s care if something were to happen to you while they were young.

The Case for Permanent Life

A permanent life insurance policy — such as whole life or universal life — will cost more than a term life policy.

Permanent life insurance can make sense for higher-income families who have covered other financial planning bases, such as maxing out retirement savings, having an emergency fund and saving for children’s college education.

One benefit of a permanent life insurance policy is that it builds cash value. It’s money you can use later in life if the policy builds up enough cash value. For example, you could tap a policy for retirement income — which might be appealing for stay-at-home parents who can’t contribute to a workplace retirement savings plan.

“That cash value policy will give them planning flexibility later in life,” Lovell says.

Still, the high cost of a permanent life insurance policy that will build substantial cash value can be a deterrent to a young family that’s juggling other expenses.

If you are interested in a permanent life insurance policy but can’t afford one now, be aware that term life policies typically offer a term life conversion option that lets you switch to a permanent life policy.

You might be able to take advantage of that option if you go back to work and have a bigger household budget.

Buying a Life Insurance Policy

It’s best to work with an independent insurance broker who can get you quotes and compare policies from several insurance companies. If you prefer to take a DIY approach, shop around for the best policy at the best price.

You will have to provide a lot of information about yourself during the application process so insurers can calculate your rate.

Your lack of income shouldn’t hurt your ability to get coverage as long as your spouse has life insurance. Where you’ll run into problems is if you’re trying to buy a policy, but the income-earning spouse doesn’t have one or isn’t also applying for coverage, Hill says.

You’ll also raise a red flag if you’re trying to get more coverage than your spouse has. Typically, insurers will issue a policy for a dependent spouse that’s worth 75% to 100% of an in-force policy on the employed spouse, he says.

If you do run into problems getting coverage, having an independent insurance broker on your side can help. That broker can write a letter to the insurer explaining your situation and why you need life insurance even though you’re not the household income earner.

There are different types of insurance and coverage options for real estate investors to help cover you against a partial or full loss, claims from a tenant, or even costs arising from a lawsuit. Having the wrong insurance for your rental property could result in you losing your business and personal funds, putting a sudden end to your real estate investing career.

With the right rental property insurance, you can reduce the risk of unexpected losses without paying for coverage that you may not need.

Types of Insurance Coverage for Rental Property

Here are 14 of the most common types of insurance policy and additional coverage options for real estate investors.

Although the list is long, there are other items you may want to consider as well, depending on where your investment property is located. That’s why it’s important to talk to a few different insurance brokers in your local market to have experience working with rental property investors:

1. Landlord insurance

Also known as rental property insurance, landlord insurance bundles together the different types of coverage that most real estate investors typically need. For example, a landlord insurance policy may include insurance for liability, hazard, and loss of income.

One thing that landlord insurance doesn’t cover is the items that belong to your renter. In many states, you can require a tenant to obtain and pay for their own renter’s insurance policy.

2. Liability insurance

Liability insurance covers accidents that happen at your property involving people such as tenants, their guests, and even your repair people. Typical liability coverage may protect you:

If someone gets hurt or something is stolen

If there’s an accident that occured on your property and there are hospital and rehabilitation bills

If someone decides to file a lawsuit, including any damages awarded that you must pay

3. Hazard and fire insurance

Coverage for hazard and fire are typically covered in a basic insurance policy. Hazards may include things such as structural damage from storms, fire, or theft. When you review your hazard and fire insurance coverage for your rental property, many investors prefer to be insured for the replacement cost of the property and not just the current cash value.

4. Sewer and water line backup

Coverage for sewer and water line breaks or backups can usually be added to your insurance coverage. While most clogged lines can be easily cleared, a break in your main plumbing line can be an unexpected expense that you have to pay. In many municipalities, if a break occurs on your side of the property line, you, and not the city, could be responsible for the repair using a licensed contractor.

5. Flood insurance

Flood insurance is required if your property is in a designated flood zone, or if you are concerned about an unexpected catastrophe that could cause flooding that damages your rental property. While a basic insurance policy typically covers water damage from a broken pipe, many policies do not cover water damage from outside sources such as a hurricane or “100-year flood”.

6. Tenant rent default insurance

Also known as rent guarantee insurance, companies such as Rent Rescue and Steady can protect you against a tenant defaulting or ‘skipping out’ on the rent. Rent default insurance helps to prevent interruption to your income by reimbursing you if the tenant doesn’t pay the rent.

7. Pet coverage

Offering a pet-friendly rental property can help you keep vacancy low and rents higher. However, if you do rent to a tenant with a pet, you may want to make sure the tenant has pet coverage in their renters insurance if your local landlord-tenant laws allow. That’s because you might be held liable for any damages or injuries caused by your tenant’s pet.

8. Loss of income coverage

Loss of income insurance protects you if your rental property becomes uninhabitable for an extended period of time, such as if it suffers damage from a fire or a natural disaster. If you only have one rental property and an affordable mortgage, you may be able to cover your expenses even if your property is vacant for several months. But as your rental property portfolio grows and your income depends on the rent received, loss of income insurance may make good business sense (depending on your personal situation).

9. Partnership insurance

As real estate investors scale up their businesses, they often invest in joint ventures or real estate partnerships. Partnership insurance allows you to have insurance on your other partners. That way, if a partner dies you can buy back the investment from the family of the partner and continue the business instead of working with an unknown new partner.

10. Builder’s risk insurance

If you’ve purchased a vacant property and are renovating it, consider whether to obtain builder’s risk insurance. This short-term insurance policy may cover you against vandalism, theft and property damage, and contractor injury claims that your hazard and fire insurance and liability policy may not cover. Some builder’s risk insurance policies may also cover you against loss of income if there is a significant delay in completing the project.

11. General contractor insurance

Active real estate investors who do their own renovation work instead of hiring a contractor may choose to obtain general contractor insurance. This type of insurance covers you if construction equipment is stolen or damaged, or if workers are injured while working on one of your rental properties.

12. Worker’s compensation coverage

Some real estate investors get to the point where they have so many rental properties they need to hire employees. Worker’s compensation insurance protects you against things like medical expenses for injured employees or being sued for causing an employee’s injury.

13. Umbrella insurance

Umbrella insurance is a type of secondary coverage that protects you once the limits on your standard liability policy have been exceeded. For example, if you’re involved in a lawsuit, legal defense costs and expenses related to an injured person’s medical expenses, therapy, and lost wages may be covered by an umbrella insurance policy.

Tips for Choosing the Right Insurance

Choosing the wrong insurance coverage for a rental property can be an expensive mistake in more ways than one. Selecting the wrong policy could mean you’re not covered when a natural disaster strikes, or hurt your cash flow by overpaying for extra coverage that you really don’t need.

Here are some important tips for choosing the right insurance and additional coverage for your rental property:

1. Be honest

Insurance for a rental property generally costs more than for an owner-occupied residence. Because of this, some investors try to cut corners and save a few dollars by not telling the insurance company the property is a rental.

This can result in a claim not being paid or the policy being canceled. Always keep in mind there are two ways insurance companies make money: collecting premiums and not paying claims.

2. Actual cash value vs. replacement cost

Actual cash value (ACV) means the insurance company will cover what you paid for the property, less the value of the land. Replacement cost is insurance coverage full cost of any loss, even if you have to rebuild the property.

If you own rental property in a market where prices are rapidly rising, be sure to run sales comparables each year before you renew your policy to make sure you’re fully covered.

3. Type of policy

Property insurance policies fall into three main categories: Landlord for rented property, Vacant for a property you are renovating, and Builder’s Risk for a house undergoing a major rehab. If you’ve just finished updating a property and are ready to rent, update your policy as well and ask your insurance broker about additional coverage for lost rent, tenant liability, and pets.

4. Deductibles matter

A deductible is the amount of money you will pay each time a claim is filed. Insurance companies have deductibles to make sure you have some ‘skin in the game’ and to help limit the number of claims a policyholder makes.

As a rule of thumb, the higher your insurance deductible is, the lower your annual premium will be, and vice versa. Make sure you have money in a reserve account to pay for your deductible when and if a claim is made.

5. Insurance agent vs. broker

Insurance companies work similarly to the way lenders do. An insurance broker can represent several insurance companies and may have ways to creatively insure a difficult property.

On the other hand, insurance agents represent only one carrier, such as State Farm or Liberty Mutual. When you choose an insurance agent or broker, make sure they have experience with rental property and the types of additional insurance coverage real estate investors need.

6. Claims can hurt

Many investors feel that if they’re paying the insurance premium, they should file claims to make sure they get their money’s worth. However, too many claims on a property — or by the same policyholder — can increase your annual insurance premium or cause the carrier not to renew your policy. If your property becomes difficult to insure, your options for insurance will be limited and your policy expenses high.

7. Get policy discounts

Everyone likes to get repeat business, and insurance carriers are no exception. When you shop around for rental property insurance, ask the company that insures your own house or car if they offer insurance for real estate investors. Oftentimes, insurance companies are more than willing to put together a discounted package deal for all of your business.

Final Thoughts

Having the right insurance for your real estate can help protect you against large, unexpected losses while keeping your cash flow healthy by not paying for coverage you don’t need.

It’s important to understand your existing policies and have a trusted insurance broker as part of your real estate team to understand if your insurance coverage needs to be upgraded. If you’re under-insured when a disaster strikes, it’s usually too late to make a change.

Most people think of life insurance in terms of the payout it provides beneficiaries after the policyholder dies. But certain types of life insurance can provide financial benefits, including a stream of income, for the policyholder during his or her lifetime. The main objective of life insurance, though, is to take care of loved ones should you die. So if you don’t have dependents, there are better ways to plan for retirement. At least, life insurance shouldn’t be your main retirement savings vehicle. But if you’re ready to find the right life insurance then you should compare quotes to see what you might qualify for.

Do you have retirement planning questions? Speak with a financial advisor today.

Building Cash Value with Whole Life Insurance

Unlike term life insurance, which covers only a set number of years, whole life insurance is meant to be for life. When you die, your beneficiary will receive a set amount of money, which was determined when you bought the policy and the premium was calculated.

Though it’s also called permanent life insurance, whole life is in force only as long as you make the required payments, of course. If you skip a payment and don’t make it up during the grace period, your policy will be terminated. If you want to continue to be covered, you’ll have to buy a new contract, at which point, you’ll be older and your premium will likely be higher.

Because whole life insurance will definitely pay a death benefit someday, it is significantly more expensive than term life insurance, which may expire before the policyholder dies. But the trade-off is that part of your payments goes toward the policy’s cash value. This cash value belongs to you. Depending on the policy, you may also earn interest or dividends on a tax-deferred basis.

The cash value of your policy is one reserve you can count on in retirement. So if you need a lump sum unexpectedly, you can either withdraw it or borrow it from your life insurance account. Generally, you can borrow against the policy up to the amount of cash value without owing tax. If you’re receiving dividends, you won’t owe tax on them until they exceed the total amount of premiums you’ve paid.

That said, it’s important to be careful about how much you borrow. The interest rate will be high, and though you don’t technically have to repay loans in your lifetime, the outstanding loan balance will come out of the death benefit your heirs receive.

Investing With Universal Life

Universal life insurance is another type of permanent coverage. You also accrue cash value as you pay premiums, but the amount of your premiums can vary. This gives you some flexibility if you’re having a financially tough year. So in good years, you can pay more toward your cash value. In rough years, you can, if you want, pay only the cost of insurance.

Another way universal life insurance is different from whole life is the investment component. After deducting the costs of the policy from your payment, the insurance company credits the rest to you, in the investment vehicle of your choice. The investment returns are yours and go into the cash value of your policy. You can borrow against them tax-free up to the point that withdrawals exceed what you’ve paid.

Of course, the big downside to universal life is that returns aren’t guaranteed. So if you are putting your savings in the policy rather than the stock market because you are worried about risk, you will still have exposure. You may want to review the prospectus carefully before choosing this type of coverage.

Converting Permanent Insurance to an Annuity

So you’ve successfully built up a substantial amount of cash value in a whole life or universal life policy. From there you can convert that to an annuity, creating a regular stream of income.

An annuity is a type of contract that you purchase from a life insurance company. Typically, you fund what’s called an immediate annuity with a lump sum. The insurer then pays you a fixed amount for the duration of your life. A lifetime annuity allows you to receive payments until you die. They may even continue providing benefits, albeit reduced, to your spouse, for an additional cost.

Normally, if you cash out a permanent life policy you’d have to pay taxes on the earnings. However, a 1035 exchange allows you to switch to an annuity tax-free. You will, however, lose the death benefit associated with the policy. So you should make sure this move is the right one for your financial situation before you proceed. On the one hand, making the switch will provide some more cash flow for your golden years. On the other hand, you will not be leaving a life insurance payout to your heirs — and unless you pay extra, your annuity payments end on your death.

Other Tips to Help Pay For Retirement

There is more you can do than just buying a long-term life insurance policy and converting it into an annuity. While that’s a great way to build up your cash value and turn that into a monthly income, there are other ways to save up or receive the income you want during your golden years to enjoy the life you’ve earned. Some other things you can do are:

Create an Emergency Fund: Consider having an emergency fund so that you can use your income how you’d like to without worrying about the unexpected. An emergency fund pads your total cash on hand in case you run into any troubles and you can even earn a little on that money with a high-yield savings account.

Long-Term Disability Insurance: If you become unable to work because of a disability then this type of insurance can provide you with your lost income. It protects you from having to retire too early due to an accident or permanent disability.

Max Out Your Retirement Account: There’s no time to prepare for the future like the present. Max out both your 401(k) and your personal retirement accounts so that you can have the amount you need when it comes time to retire.

The key to paying for retirement is preparing as quickly as you can. If you don’t feel adequately prepared you can speak to a financial advisor who can help set up a plan to get you where you want to be and have the money you need to retire comfortably.

Bottom Line

If you already have a whole life insurance policy where you’ve accrued a sizable cash value, converting it to an annuity will provide a lifetime stream of income. But don’t make the switch if you don’t need the regular payouts. If you just need a cash infusion, it may make more sense to borrow the money from your account or even withdraw it. If you don’t already have whole life insurance, you should consider other savings vehicles first. This is especially the case if you don’t have dependents.

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Should I Get Life Insurance in My 20s?

Most young Americans are not thinking about life insurance policies, but they should. Life insurance is the ultimate financial tool for those big “what if” moments. It can be useful even when the death benefit is not triggered, as long as it is used appropriately. Life insurance is not a panacea, and some younger Americans may not have the resources to devote to large policies. But it is a mistake to assume that only older couples with children and homes need life insurance.

All else being equal, it is always cheaper, and sometimes substantially less expensive, for a younger person to buy insurance than an older person. This means the potential benefits of insurance can be just as large and cost much less or maybe much larger and cost about the same. Without other considerations, life insurance for a 22-year-old is a better proposition than life insurance for a 55-year-old.

Reasons to Buy Life Insurance Young

The most obvious reason to buy life insurance is when you have clear insurable interests and want to be financially protected from a catastrophic accident. For example, you may have large debt obligations from student loans or a mortgage that you do not want to be passed on to someone else.

You might also have a spouse or children who rely on your income, parties who could depend on insurance claims to survive if something unfortunate happened to you.

Insurance can have other features besides a death benefit, however, which means there might be other good reasons to buy a policy. Some policies provide support for certain medical problems, such as cancer or paralysis. Permanent life insurance policies can serve as tax-advantaged savings vehicles through the accumulation of cash value.

Federal law prohibits insurance providers from selling policies on the basis of their cash value, although this almost certainly happens. This does not mean it is always a bad idea to buy insurance for its possible cash value accumulation. In some circumstances, cash value might accumulate money at a faster rate than other investments with less risk and more favorable legal ramifications.

Pros and Cons: How Insurance in Your 20s Can Pay Off

A cash value that builds for decades can amount to hundreds of thousands of dollars in future tax-free income. This can be an important aspect of a comprehensive retirement plan, especially if you already plan on maxing out an IRA. This strategy only works if premiums are paid consistently; permanent life insurance policies lapse if the cash value gets too low, which leaves the policyholder without coverage.

In addition, you’ll have life insurance coverage in the event that you die prematurely, even if you start a family later in life. Even without heirs, you can use the death benefit to leave a legacy to a charitable cause or philanthropic purpose. If you begin accumulating cash value in your 20s, you will see the benefits of compounding that can mean significant value later in life.

On the downside, you may never end up needing the coverage. If you stay single and do not care about leaving a financial legacy, you would be spending money on something you didn’t use. The other con is the idea to buy term and invest the rest. This means that there is an opportunity cost involved in paying costly insurance premiums since that money could have been used elsewhere, such as investing in the stock market. However, the stock market comes with risk, while insurance contracts are extremely low-risk.

Is It Better to Get Term Life Insurance or Whole-Life Insurance in Your 20s?

Because insurance is less expensive in your 20s, it might make sense to consider a permanent policy like whole life. This coverage will last until you die, regardless of age. You can consider structured whole-life payment schemes such as 10-pay or 20-pay policies that become fully funded after just ten or twenty years, and then you have the coverage forever.

In addition, whole-life policies will begin accumulating cash value that compounds over time as dividends are credited. You can borrow against this money or make withdrawals while you are still alive on a tax-advantaged basis.

A term policy may expire while you still need coverage if you buy it young, causing you to purchase an additional, more expensive term policy later on when you are older.

The Bottom Line

Even if you cannot afford a permanent life insurance policy, most 20-somethings can receive very good term policies for very low costs, such as $200,000 to $300,000 in coverage for $15 to $20 a month in some cases. More importantly, some term policies can last for 20, 30, or 40 years; you could be covered at a very low cost throughout your entire working life.

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