Life Insurance — Coverage, Rates and Quotes
State Farm® Life Insurance Company (Not licensed in MA, NY or WI) or State Farm Life and Accident Assurance Company (Licensed in NY and WI) can help you find coverage that’s right for you and your loved ones. Our life planning videos and calculator can help you understand your options, and figure out how much and what kind is right for you, before getting your life insurance quote.
Get aLife Quote
Why State Farm?
If you’re considering life insurance to help protect your family’s financial future, it’s also important to look into the level of service your provider is committed to delivering. With a policy from State Farm, you’ll be getting more than financial security. You’ll also get the assurance of knowing that, in 2017, our current life insurance customers helped award State Farm with «Highest Customer Satisfaction among Life Insurance Providers, Four Years in a Row» by J.D. Power.
Term Life Insurance
Life insurance protects your loved ones from financial catastrophe.
If your family depends on your income, you might want to consider life insurance to cover against the financial consequences of your passing.
This is most commonly done by setting an amount to be paid out, upon death, coveringa chosen period. €200,000 at any given time during 20 years, for example.
How should you calculate the amount of the insurance?
This can be quite a personal decision, depending on what your family needs and how much money is already available. It´s good to have at least 12 months expenditure covered, more if you have a dependent spouse caring for children, more again for very young children. A rule of the thumb says that the main earner of income should be covered at least for 3 times his or her yearly income.
The payout should also allow the family to pay off your mortgage, if you have one, so they do not need to worry about losing their home. You can decide to keep the insurance amount at the same level throughout the specified period, increase it regularly to keep pace with inflation, or reduce it regularly as your mortgage is paid off.
Tax optimisation of a term life insurance
There are ways under German tax law to make sure that the pay-out for the life insurance is tax-free. Ideally, one partner sets up the contract to insure the other partner´s life, so that the payout can be made directly to the survivor without being subject to inheritance tax. This can be especially important for unmarried couples, since the inheritance tax allowance for unmarried couples is only €20,000.
Finding life insurance at the right price.
Premiums are kept broadly stable throughout the contract period, but most German term life insurances make a difference between the net premium, which you pay in the first year, and the gross premium, which is the maximum you could end up paying during the period, if the insurance company´s calculations need adjusting. An offer which looks cheap now might not be so attractive in the long run. A few companies fix the premium for the whole period.
There are also special benefits that can make a difference. We recomend, for instance, to chose an insurance tariff that will pay out up to 1 year in advance if you are found to be terminally ill. That can give you the peace of mind to help investing the money in such a way that your family is taken care off, well. Or to spend some quality time travelling with your family while you still can.
As your independent broker, we will find term insurance with a reliable and stable price for many years to come.
What is ‘Life Insurance’
Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. The insurance company promises a death benefit in consideration of the payment of premium by the insured.
BREAKING DOWN ‘Life Insurance’
The purpose of life insurance is to provide financial protection to surviving dependents after the death of an insured. It is essential for applicants to analyze their financial situation and determine the standard of living needed for their surviving dependents before purchasing a life insurance policy. Life insurance agents or brokers are instrumental in assessing needs and establishing the type of life insurance most suitable to address those needs. Several life insurance channels are available including, whole life, term life, universal life, and variable universal life (VUL) policies. It is prudent to re-evaluate life insurance needs annually, or after significant life events like marriage, divorce, the birth or adoption of a child, and major purchases, like a house.
How Life Insurance Works
There are three major components of a life insurance policy.
- Death Benefit is the amount of money the insurance company guarantees to the beneficiaries identified in the policy upon the death of the insured. The insured will choose their desired death benefit amount based on estimated future needs of surviving heirs. The insurance company will determine whether there is an insurable interest and if the insured qualifies for the coverage based on the company’s underwriting requirements.
- Premium payments are set using actuarially based statistics. The insurer will determine the cost of insurance (COI), or the amount required to cover mortality costs, administrative fees, and other policy maintenance fees. Other factors that influence the premium are the insured’s age, medical history, occupational hazards, and personal risk propensity. The insurer will remain obligated to pay the death benefit if premiums are submitted as required. With term policies, the premium amount includes the cost of insurance (COI). For permanent or universal policies, the premium amount consists of the COI and a cash value amount.
- Cash value of permanent or universal life insurance is a component which serves two purposes. It is a savings account, which can be used by the policyholder, during the life of the insured, with cash accumulated on a tax-deferred basis. Some policies may have restrictions on withdrawals depending on the use of the money withdrawn. The second purpose of the cash value is to offset the rising cost or to provide insurance as the insured ages.
Life Insurance Riders
Many insurance companies offer policyholders the option to customize their policies to accommodate their personal needs. Riders are the most common way a policyholder may modify their plan. There are many riders, but availability depends on the provider.
- The accidental death benefit rider provides additional life insurance coverage in the event the insured’s death is accidental.
- The waiver of premium rider ensures the waiving of premiums if the policyholder becomes disabled and unable to work.
- The disability income rider pays a monthly income in the event the policyholder becomes disabled.
- Upon diagnosis of terminal illness, the accelerated death benefit rider (ADB) allows the insured to collect a portion or all of the death benefit.
Each policy is unique to the insured and insurer. Reviewing the policy document is necessary to understand coverages in force and if additional coverage is needed.
Term Life Insurance Calculator
Find an Affordable Term Life Insurance Quote!
The amount of life insurance you may need can increase or decrease with all the different changes in your life, such as getting married, buying a home, starting a family or getting a raise at your job. Planning for your family’s future is an important one, so you should have all the information you need before you buy a term life insurance policy. Before you get a term life insurance quote or buy a term life insurance policy, use our term life insurance calculator to make sure you are covered appropriately.
Our term life insurance calculator includes economic forecasting which models income growth and growth of money you put in savings. So you’ll have more information when it’s time to get your term life insurance quote and buy your term life insurance policy.
“We Germans like to be safe,” the moderator says in opening his talk show on prime-time television. “There are more life insurance policies in the country than people alive.” In most countries, the subject of life insurance would hardly be considered a winner in TV ratings. In Germany, it is. That’s because “the business model of life insurance will collapse,” as Sven Enger, one of the panelists says. A former insurance executive and author, he predicts that “savings will be lost, old people will be in poverty. My advice: Get out of your policies.”
These anxieties on the part of policyholders have a mirror image in the troubles of the German insurance industry. They explain why Germans, unlike many other Europeans, are almost uniformly against the low interest-rate policy of the European Central Bank (ECB), which they blame for their insurance crisis. But the German insurance crisis is also an opportunity for many investors in Germany and abroad, as old and loss-making policies become investment opportunities akin to distress sales.
The German-speaking lands, including Switzerland, played a big role in the development of the insurance industry. Germany’s first insurers sprang from the bosom of the merchant guilds of Schleswig-Holstein in the 16th century, when members pooled resources to protect against catastrophic fires. The earliest German commercial insurers appeared in the late 1700s, for marine transport. When Hamburg’s city center went up in flames in 1842, a back-up market was born, to be known as reinsurance. The most famous German insurance innovator was “Iron Chancellor” Otto Bismarck, who introduced the first-ever national schemes for old-age pensions, health care and accident insurance in the 1880s.
Today, Germany is the world’s fourth-largest insurance provider. It has Europe’s largest insurer, Allianz, and the world’s second-largest reinsurer, Munich Re. According to a trade association called GDV, German insurers held assets of nearly €1.5 trillion ($1.84 trillion) in 2016 – about the same size as Italy’s entire GDP.
But for decades German insurers led a coddled existence that led them into trouble, especially in life insurance, which accounts for more than one-third of premiums (see chart). After World War II, German life insurance evolved differently than it did in English-speaking countries. In the US or the UK, plain vanilla term-life policies were the norm, which paid widows and orphans in case of a breadwinner’s death. Then “unit-linked” policies became popular, which resemble investment vehicles such as mutual funds, although the policyholder bears the risk of the investments performing badly.
In Germany, a different type of policy, the Kapitallebensversicherung(capital life insurance) became the standard. These policies are complex and confusing to many savers, because they contain a risk element (as with term life), a guaranteed return, and a discretionary return. In practice, these policies were marketed to savers as promises of a fixed pension, either as a lump sum or an annuity. In this style of retirement planning, Germany is fairly unusual; only Japan comes close.
These policies – in effect savings accounts and private pensions – had long contract periods, with an average lifespan of 20 years. Asset managers invested the premiums in government and corporate bonds, which are about 85 percent of their portfolios. This business model worked as long as the yield, or annual interest rate, of the bonds remained above the rates of return promised to policyholders. In the 1990s, life insurers offered customers annualized returns of up to 4 percent, and still made a profit.
For decades German insurers led a coddled existence that led them into trouble, especially in life insurance.
But then the financial crisis struck in 2008, followed by the euro crisis, and central banks slashed interest rates. They have since stayed puny. After flirting with zero percent last year, German bond yields have risen to only 0.6 percent. As the old bonds held by insurers matured, they were thus replaced by new ones yielding a pittance. The capital-life policies became a millstone as payouts, both current and future, rose above investment returns.
On top of everything else, tighter EU capital requirements for insurers took effect in 2016, leaving some of the firms meant to insure against crises instead teetering on the edge of one. One in three German life insurers now passes stress-test criteria only with the help of temporary bridging funds, according to Bafin, the German financial watchdog. The pressures on earnings and capital have caused the number of life insurers to shrink from 123 firms in 2000 to 84 in 2017.
How can life insurers stop the rot? One answer is to peddle more variable products, such as British-style unit-linked policies. Another is to focus on purely profit-sharing life policies, which also eschew guarantees and shift risk back to the customer. Some nimble insurers such as Gothaer or HanseMerkur have moved into better-paying but riskier investments, such as real estate.
Many insurers are simply heading for the exits. They are no longer underwriting new life policies and are selling their existing portfolios to administrators, who squeeze out synergies of as much as 30 percent by using turbo-charged IT to process the legacy policies. These so-called runoffs are old hat in the US and UK but still fairly new to Germany.
Runoff specialists include Hamburg’s Darag, Viridium (a German firm owned by UK investment giant Cinven and reinsurer Hannover Re), and Frankfurter Leben (backed by Chinese investor Fosun). They have bought hundreds of thousands of life policies in recent years. In one mega-deal in 2017, Frankfurter Leben snapped up 322,000 life contracts with €2.8 billion in assets under management for an undisclosed sum. Viridium even bought 100,000 policies of defunct life insurer Mannheimer Leben from Protektor, which is ironically the industry’s rescue fund.
Some insurers shy away from quitting out of fear for their reputation. Ergo, a subsidiary of Munich Re, mulled but ultimately rejected a runoff of life policies late last year, saying it preferred to do it in-house. Allianz has ruled it out altogether.
But consumer advocates and politicians are argus-eyed. Ralph Brinkhaus, a conservative leader in parliament, has vowed to protect policyholders from the downside of runoffs and to consider government regulation. The worst of this crisis is yet to come, as policyholders begin to retire en masse, and find themselves poor and angry.
Do you even need life insurance?
Even if you don’t have kids, you may still need some insurance, says Cliff Wilson, an insurance agent in the Phoenix area and former chair of LifeHappens.org.
Perhaps you run your own company? You should have life insurance (your employees are counting on you). Or you could have massive debts you don’t want to saddle your parents with when you’re gone.
Maybe you’re a young and single financial overachiever making maximum contributions to your retirement account and sitting on a fully-funded emergency account — go ahead get life insurance.
The price will be driven down by the two things you’ve got going for you (besides being on top of your financial game): you’re definitely younger and probably healthier now than you will be later.
So while it may not be necessary, if it’s within your means why not help out your family members to cover your funeral costs and go through a grieving process without worry?
Calculating your family’s needs
One guideline about how much life insurance you need is to calculate 10 times your yearly income.
But Wilson cautions against such generalities. «I stay away from rules of thumb,» he says. «There is a lot of information that has to be taken into account like your income, your debt, any businesses, the number of children, if there’s credit card debt, mortgages.»
Estimates based on income also don’t give much guidance to people who are not employed. Particularly a parent who primarily cares for children. That parent needs life insurance, too, so that — at the very least — the surviving parent can cover the childcare and home maintenance costs that had been provided for free.
To get to your specific number for the amount of life insurance you should have, you’ll need to calculate how much your family will need at the time of your death.
Here’s the formula: take your family’s debt obligations left behind and cash needs going forward then subtract the assets you have.
Debt obligations take into account things like mortgages and other debts. They also include outstanding credit card, personal loan or auto loan debts. These costs should be known now.
But there are also debt obligations that may be unknown. You’ll need to estimate any future education costs and to account for final expenses like medical bills, funeral and estate-settling costs that you leave behind.
The other part of getting to the number of what your family needs, is to determine their cash-flow needs to sustain the household going forward.
Here’s where your income — that your family will lose upon your death — comes in.
«The higher your income, the higher your responsibilities and typically the higher your spending,» says Wilson. Consequently, the more insurance you’ll need to cover its loss.
Offsetting needs with assets
But, the good thing is you have assets. You have liquid assets, right?
What you have available to go toward your family’s ongoing expenses — in cash savings, college savings or other life insurance — should be subtracted from their needs.
Here’s a back-of-the-envelope example. You earn $50,000 a year and are married with 5-year-old and 3-year-old children. You and your spouse owe $100,000 on your mortgage and carry $15,000 of debt on your car and credit cards. You’re looking to get a 15-year life insurance policy that will cover you until your youngest is out of high school.
You’ll take those obligations together with $750,000 in income replacement ($50,000 for 15 years), $200,000 for the anticipated cost of two college educations and $9,000, the average cost of a funeral.
That’s a grand total of $1.074 million.
From that you’re going to subtract what you already have going on.
Maybe you have $15,000 in college savings, $30,000 in cash savings and a $100,000 group life insurance policy through your job (up to two times your $50,000 salary). Those are your assets.
That leaves you with life insurance needs of around $929,000.
You’ll need to conduct your own calculations. Your spouse’s earnings, taxes, earnings from investments and inflation also play a part. Fill in your own numbers using the calculators at LifeHappens.org.
«It is important to protect our families and the people who depend on us,» says Wilson. «Most everyone is responsible and loving, they just don’t act because they think they can put off until later.»
Life insurance, also known as life cover or life assurance is a way to help protect your loved ones financially if you were to die during the length of your policy.
Please remember that life insurance is not a savings or investment product and has no cash value unless a valid claim is made.
You choose the amount of cover you need and how long you need it for and you can pay your premiums monthly or annually. In return, your family has the reassurance of knowing that if you died while covered by the policy they could receive a cash sum pay out if a valid claim is made.
They could use this to help with household bills, child-care costs or covering mortgage payments.
Why do I need life insurance?
Dependents: If you have a partner, children or someone who relies on you for help or income, then you should consider life insurance.
If you earn an income which helps with household bills, either as a sole breadwinner or as part of a couple, then without that money the family might struggle to pay bills like the mortgage or rent.
If you only work part-time, or are a home-maker, your family may find it hard to cover the cost of finding someone to look after the children or another family member if you were no longer around. So anyone who has dependents should consider taking out life insurance.
Debts or mortgage: It could also be important if you have debts, loans or an outstanding mortgage on your home. Life insurance could pay out a cash if you die during the policy term and this could be used to help pay off these debts or it could help your family with every day living expenses or child care costs. It could help cover funeral expenses too.
What types of life insurance do you offer?
- Life insurance is designed to pay out your chosen cash sum if you die during the length of the policy. It could be used to help protect the family’s lifestyle and everyday living expenses or help pay towards an interest only mortgage.
- Decreasing Life Insurance is designed to help protect a repayment mortgage, so the amount of cover reduces roughly in line with the way a repayment mortgage decreases. Meaning your loved ones could continue to live in the family home without worrying about the mortgage.
- You may want to check that the length of the policy is long enough to cover the duration of your mortgage term.
- If you have Decreasing Life insurance you must also check that the interest rate applied to your mortgage does not become higher than the interest rate applied to your policy.
Critical illness cover can be added at an additional cost when taking out life insurance. It could pay out your chosen amount of cover if you’re diagnosed with one of our specified illnesses during the length of your policy