What are some alternatives to life insurance?

Not everyone qualifies for standard life insurance policies or wants to set aside the time to apply for a term or permanent life insurance plan. If you have a pre-existing medical condition, your age makes you ineligible for coverage, or you do not want an underwriter meddling in your business, it is time to learn about the alternatives to life insurance. While life insurance is a great financial tool for many who are estate planning, not everyone wants to pay a company to provide their beneficiaries with a death benefit if they are to pass away. Start comparing life insurance rates now by using our FREE tool above!

Even if you do not want to take the gamble associated with buying term life insurance, you do need some form of protection. Anyone with dependents or financial obligations needs to plan for the future so that their loved ones can live comfortably without taking on the burden of paying for debt or mortgage balances. Not every alternative is ideal for every individual. Here are some ideas and also some of the reasons why you should have second thoughts about choosing not to buy at least a small life insurance policy while you are still able to.

Accumulating Money in your Savings or Investing

Accumulating your savings may take time, but it is an alternative to help provide your family with the money that your family needs to live comfortably even when you are not around. Some individuals buy life insurance so that they do not have to worry about putting away a significant amount of money for both retirement and expenses.

The idea of having to sacrifice their lifestyle to save for the generations that are going to outlive them may be difficult to fathom, but it is a responsible choice when life insurance is not an option.

No one knows when they are going to pass and this makes it difficult to decide how much money to put aside or what type of investment to put money into for high yields. Your age at the time that you start to save will help dictate which move is best when you are accumulating money to replace a life insurance death benefit. If you are young and you are making it a priority to put away a portion of your paycheck every time a check is cut amassing enough to pay off your mortgage or other debt may be possible.

If you have waited, you need to be a smart investor and choose the right vehicles that offer high returns and low levels of risk to really make an investment replace the need. Investing the money that you would have used to pay for permanent life insurance premiums can help you avoid the fees that come with holding cash value life insurance so that you can watch your money grow quickly. This is why you need to sit down and discuss your choice to accumulate the money with a financial planner so that you have a plan and you can stay committed to following your plan.

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Buying a Specialized Mortgage Insurance Plan

Traditional life insurance may not strike your fancy, but there are specialized types of insurance policies that will provide protection for the things that are most important to a majority of families.A mortgage is a huge financial burden and generally the biggest debt account that people who own homes have in their names.

If you are most concerned about passing away and leaving the burden of paying for mortgage payments on your spouse or partner, mortgage insurance helps prevent a mortgage default. Instead of savings hundreds of thousands of dollars, you can purchase an insurance plan that erases your need to pay down the mortgage with your own money. It is a specialized form of life and disability coverage that is based on the balance of your mortgage and not on your health or your lifestyle.

What is the difference between mortgage insurance and life insurance?

While it may sound like the two are the same, there are major differences between mortgage protection and standard life insurance. Mortgage insurance is typically purchased through the mortgage company or your bank, but can also be offered by insurance companies that sell life insurance products. Most of the time, you are offered the plan when you buy a new home or refinance your loan. You may be eligible to secure protection for up to 24 months after your loan has closed with some providers.

Instead of allowing you to choose a death benefit like you would with a regular policy, when you buy mortgage protection the amount of the benefit will be based on the principal of your loan.

The benefit, instead of being paid to a beneficiary, will be paid to your mortgage company. As you pay down the loan, the benefit that will be paid will go down, making your premiums go down in the process. This is because the plan only covers your mortgage obligations and these will not stay level. If you are looking for broader protection that pays a family member or friend, you should be purchasing term or permanent life.

Another major difference is how you will qualify for coverage. If you were to apply for a life insurance plan, you typically need to answer medical questions and take a physical exam as part of the underwriting process. If you have a medical condition or your records show that you were not honest on your application, your rates can go up or you could be denied coverage. The underwriting process is not nearly as strict for a mortgage insurance plan. You can generally qualify without a physical exam and without the intruding questions that you are not comfortable answering. Those who do not like being poking and prodded tend to choose mortgage protection.

Premiums for mortgage protection are based on the loan balance of your home. Because the coverage is not as broad as life insurance, the premiums may be a bit cheaper. It can be convenient to pay for the premiums as well because most of the time the premiums will be charged with the monthly note. Sometimes, when policies are purchased through an insurer, you will pay a separate bill.

Prepaying Funeral Expenses and Education Costs

There is a long list of reasons why people buy life insurance. Some of the common reasons to purchase coverage include: paying for final expenses, paying off their mortgage, paying off credit card debt, paying for dependent education costs, and replacing income. If you choose to live without life insurance, you are going to need to address every life stage and plan for the stages and scenarios individually.

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What is a prepaid funeral?

Many people buy life insurance to pay for the rising cost of burials and funerals. According to the National Funeral Directors Association, the average cost of a funeral when you choose to bury your loved one in a casket is $7045. Since social security only pays $255 for burial costs, you are going to need to save up so that your family is not left struggling to find the funds to celebrate your life.

Prepaid contracts are becoming a good alternative when you do not want your heirs to make difficult decisions about burial when they are grieving.

One option would be to prepay your funeral expenses. This is a popular option for people who want to be buried because the cost of plots is always going up and most people want to be buried by their spouses for eternity. When you prepay funeral expenses, you work with a specific funeral home and you pay for the entire expense while you are living. You will then have a contract that shows that you have paid and the fixed price is honored.

What is prepaid tuition?

Saving for your child’s education is important, and it is even more important when you do not have life insurance. One alternative would be to invest in a prepaid tuition plan when you are planning to have kids. These plans will lock tuition in at current rates so that you are not a victim of inflation. The money you put in the plan can be used to attend participating public schools in your state.

Now that you know the alternatives, it is time to consider the product you have been avoiding. There are traditional and no medical underwriting life insurance plans that are so small that they only cover burial or so large that they cover estate taxes for the wealthy. Be sure to price the cost of life insurance and review the eligibility requirements. You can do this by using an online rate comparison tool quickly and easily from home. Enter your information, answer questions honestly, and then you might find that life insurance is cheaper than you initially thought. Start comparing life insurance rates now by entering your zip code in our FREE tool below!

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