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Life Insurance Guide

What Is Life Insurance?

Life insurance is a contract between the policyholder and an insurance company. In exchange for premiums, the insurer agrees to make a lump sum payment to the person or persons of your choosing (the “life insurance beneficiary”).

What Is Life Insurance Used For?

Life insurance can help provide a secure financial future for your family after you’ve passed away. Many people start by estimating how much money their family would need in order to help replace their lost income and make debt payments in their absence. Life insurance can also help offset specific expenses like funeral costs or additional childcare.

Who Might Want Life Insurance?

We’ve all thought about what would happen to our families if the primary wage-earner were to unexpectedly pass away. The main purpose of life insurance is the death benefit, or lump sum that would get sent to the beneficiary of the policy. This money can be used for various things, including helping them make ends meet.

Purchasing life insurance shouldn’t just be about the lost income of the “breadwinner.” It’s also worth considering how much child care would cost if a non-earning spouse, who takes on the responsibility of staying home with the children, were to pass away.

Note that to receive the death benefit, the policy needs to remain active and in force. Additionally, the cause of death needs to be covered by the specific policy in order for your beneficiary to receive the benefit.

What Is Term Life Insurance, Specifically?

Term life insurance provides money to your beneficiary if you die during a certain time span. That’s called your “term.” If you had a 20-year term policy, for example, you'd be covered for those 20 years.

A big appeal of term life insurance is that it’s typically an affordable way to help cover you during a specific, high-need time. Often, people choose a term that corresponds with the time when they’re raising kids. After 20 years, for example, your kids might be out of the house and your need for life insurance might be lower.

Term life insurance is often medically underwritten and requires a physical exam. It also tends to get more expensive to purchase as you age. With Fabric, you can apply for term life insurance in just five minutes without having to leave your house.

If I Buy a Policy Today and Pass Away Tomorrow . . .

For most instances, one hundred percent of your policy would get paid. As long as the event leading to your mortality is covered by your policy, and the premiums are paid. End of story.

That said, there are exclusions that would result in the claim being denied. For Fabric Premium, that would be death by suicide within the first two years, as well as if it was determined you misrepresented yourself on the application.

How Does Term Life Insurance Compare to Whole Life?

Whole life insurance, also called permanent life insurance, offers coverage for your entire life. Its premiums include a mix of insurance and savings components. That savings component builds accumulated cash value that can be borrowed against or withdrawn before you pass away.

Whole life insurance policies are more expensive and complex than term life insurance because they provide lifetime protection and cash value accumulation. Certain fees and expenses will reduce the cash value. That can, in turn, affect and even reduce the benefit amounts. For many people, whole life may be more complex and fee-laden than their financial situations require. Term life insurance can often provide a good level of coverage for a lower monthly price.

Note that you can convert up to the amount of insurance of your Fabric Premium term life insurance policy into a whole life policy,without evidence of insurability, at any time prior to the policy anniversary following your 65th birthday. Note that pricing will be based on your age at the time of conversion.

Understanding Term Life Insurance Rates

The cost of life insurance varies based on a number of factors: the kind of life insurance you're looking for, your age, gender, health, whether you smoke, how risky your hobbies are and more. In some cases, you'll need to undergo a health exam to receive a final rate. That said, your application with Fabric may be able to be fast-tracked without needing a health exam.

How Do You Calculate My Term Life Insurance Quote?

Fabric Premium is a term life insurance policy. Term life insurance from Fabric covers you at time of death from natural causes or accidents. Because of that, its pricing depends in part on your age, health, family history, and lifestyle. There are five corresponding levels, from lowest to highest risk:

  • Ultra Select: Excellent health and family history, no tobacco use within 5 years, low-risk lifestyle.
  • Select Plus: Very good health and family history, no tobacco use within 3 years, low-risk lifestyle.
  • Select: Good health and family history, no tobacco use within 2 years, low-risk lifestyle.
  • Standard: Acceptable health and family history, no tobacco use within 1 year, moderate-risk lifestyle.
  • Tobacco User: Acceptable health and family history, tobacco use within a year, moderate-risk lifestyle.

What’s the Difference Between Term Life Insurance Quotes and Approved Term Life Insurance Rates?

A term life insurance quote is an estimate of how much your policy might cost, based on information you’ve given us. This is meant to give you a general sense of how much it might cost to get you insured. That said, our application asks for a much higher level of detail, like your health history and professional details. Based on this deeper dive, your final term life insurance rate may be higher or lower than our initial quote. Even if you find the approved rate higher than you expected, we give you the option to reduce the coverage amount, and in a number of states, the term length. This can help lower the monthly cost to be in line with your budget.

Do I Really Need Term Life Insurance?

Here are some common reasons people choose term life insurance:

  • People depend on you financially. If you were gone, life insurance could give your loved ones more breathing room when it comes to money.
  • You’ve got a mortgage.If you want to help ease the burden of mortgage payments, life insurance might be a good choice.
  • Your may want to supplement any employer-sponsored coverage. Having employer-sponsored life insurance coverage can be a great benefit! That said, there are also pros to having your own policy as well. For example, does your employer’s plans provide sufficient coverage for your needs? An individual policy can be a way to ensure you have enough coverage. Have you reviewed what would happen if your employment situation changes? There may be restrictions on taking that coverage with you.
  • You’ve got student loans.Your cosigner (and in some cases, your spouse) may be on the hook for your debt if you pass away. Life insurance could potentially pay it all off so they don’t need to deal.
  • You’ve got credit card or other debt.First, joint account holders would continue to owe money after you pass away. And even without joint account holders, any outstanding debts could reduce how much you pass on to heirs (for example, if your estate can’t pay off your car loan, the car could be repossessed).
  • You co-own a business. If you die unexpectedly, your business partner could face financial challenges. Funds from a term life insurance payout could help cover your share of any business debts, protect your personal property if you put it up as collateral and give your partner a little more time to decide what to do next.
  • You’re under 40. The older you are when you purchase a policy, the higher your monthly term life insurance rate will likely be. Locking in today’s rates could mean savings down the road.

How Much Coverage Do I Need?

Experts often recommend a coverage amount that’s five or more times your annual salary. Think through your family’s financial needs. How will they be impacted if you or your spouse were to suddenly pass away?

A solid rule is to read, and understand, all of the information that’s available to you on any type of insurance policy before buying it. If you’re unsure where to start, here are some questions to help get the ball rolling:

  • How long should I have insurance coverage?
  • Do I need the cash accumulation features of a whole life policy?
  • Am I willing to take a medical exam?
  • Are there any limitations and/or exclusions in this policy? If so, what are they?

© 2019 Fabric Insurance Agency, LLC

Fabric Instant is an Accidental Death Insurance Policy (Form VL-ADH1 with state variations where applicable) and Fabric Premium is a Term Life Insurance Policy (Form ICC16-VLT and CMP 0501 with state variations where applicable). Policies are issued by Vantis Life Insurance Company. (Vantis Life), Windsor, CT (all states except NY), and by Vantis Life Insurance Company of New York, Brewster, NY (NY only). Coverage may not be available in all states. Issuance of coverage for Fabric Premium is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.

Fabric Insurance Agency, LLC (FIA) is an insurance agency licensed to sell life, accident, and health insurance products. FIA will receive compensation from Vantis Life for such sales. The NAIC Company Code for Vantis Life is 68632. See the Terms of Use for additional information regarding FIA.‬‬