What Does Life Insurance Cover in New Jersey?October 28, 2020
One of the sad realities of life is that no one makes it out alive. But though you can’t take your money with you, fortunately there is a type of insurance to help ensure it ultimately goes where you want it to. Life insurance policies help residents in New Jersey set their families up with college funds or other living expenses, and much more. Working with a New Jersey independent agent is the best way to find the right life insurance policy for your personal wishes.
What Is Life Insurance?
Regardless of where you live, life insurance is basically an agreement between you and an insurance company in which the insurer agrees to deliver a set amount of money, also known as a death benefit, to your designated beneficiary (i.e., the person you choose to inherit your cash) when you die. Residents in New Jersey opt to buy life insurance policies mainly to help secure the financial future of family members, but there are many other uses for this coverage as well.
What Does Life Insurance Cover in New Jersey?
At their core, life insurance policies in New Jersey are designed to deliver a beneficiary of your choosing a set amount of money after you pass, but there are a couple of different types to choose from. While term, whole, and universal life insurance policies have the same ultimate goal, there are some slight differences in the way the policies work.
There are three main types of life insurance coverage available in New Jersey:
- Term life insurance: This type of life insurance policy is targeted towards a younger crowd because it’s designed to only provide coverage for a set amount of time, often 10, 20, or 30 years. If the policyholder dies within the dictated coverage period, their chosen death benefit would be paid out to their selected beneficiary.
- Whole life insurance: This type of life insurance policy is designed to cover the policyholder for the rest of their life. With whole life policies, a savings account is set up and accumulates money paid by the policyholder over time. If the policyholder lives long enough, they may eventually fill that savings account with the same amount of money that would go towards their death benefit, so the insurance company will essentially transfer it back over to the policyholder. Policyholders can also borrow from their savings account if they choose, but must pay it back again to continue having coverage.
- Universal life insurance: This type of life insurance policy is set up a lot like whole life coverage, but offers interest on the savings account, too. Policyholders also have the option to pay more than the required premium payment to build up the savings account (and its interest) faster. Another benefit specific to universal life coverage is that not only can policyholders borrow from the account, they can also skip payments with no penalties as long as the account maintains a positive balance.
The two main factors when selecting the right kind of life insurance policy for you are how long you want your coverage to last, and how much flexibility you want to have over the payments you’re making towards the eventual death benefit. Working closely with a New Jersey independent insurance agent is the best way to get set up with a life insurance policy that works for your needs and desires.
What Does Life Insurance Not Cover in New Jersey?
When it comes to what life insurance policies in New Jersey don’t cover, there are two major exclusions to each type of policy. What’s unique about life insurance is that these exclusions are only in effect for a period of two years, after which they expire.
Life insurance policies in New Jersey come with two major exclusions:
- Contestability clause: The first major exclusion under life insurance policies in New Jersey is what’s known as the contestability clause which states that if an applicant lied to the insurance company about a health issue or lifestyle choice that later leads to their death, the insurer will not pay out the death benefit. However, the insurance company will refund the cost of the policy. If someone lied about being a smoker or a skydiver, for example, and then died within two years of purchasing their policy, this clause would be in effect. After two years, the policyholder can basically get away with the lie.
- Suicide clause: The second major exclusion under life insurance policies in New Jersey is what’s known as the suicide clause which states that if the policyholder commits suicide within two years of purchasing their coverage, the insurance company will refund the cost of the policy but not pay out the death benefit. Similar to the contestability clause, this exclusion expires after two years.
Regardless of the time limits for life insurance exclusion clauses in New Jersey, it’s never a good idea to lie to an insurance company when applying for coverage of any kind. Beyond being dishonest, you run the risk of your coverage becoming invalidated, so it’s best to just play by the rules and tell it like it is.
What Are the Benefits of Life Insurance in New Jersey?
Beyond the obvious death benefit payout, life insurance policies in New Jersey come with several advantages. Though each individual who purchases coverage will have their own unique goals in mind, here are a handful of the most common reasons residents in New Jersey purchase life insurance coverage:
- To secure a spouse’s financial future: A death benefit payout made to a spouse can provide financial security for their future including allowing them to take many years off from working in certain cases. This type of benefit comes in handy especially if the remaining spouse would be left alone to take over parenting young children.
- To pay off outstanding debts: Many people choose to purchase life insurance coverage in order to pay off remaining debts, such as mortgage loans, after they pass away. This benefit allows the deceased’s family to not have to be responsible for covering huge outstanding balances.
- To pay for their children’s education: Life insurance death benefits are often allocated into a savings account intended to pay for a child’s college or graduate school education. Death benefits can also be used to help an adult child who has already completed school to pay off any remaining student loan balances.
- To help their family maintain a standard of living: Families become accustomed to a certain standard of living, and it’s often highly dependent on the income of any supportive parents. Once one of these working parents dies, however, that can create a huge difference in the amount of money being brought into the family. Life insurance death benefits can make up for this gap and allow the family to maintain the same standard of living as before the policyholder passed away.
- To make a charitable contribution: Policyholders can select a charity of their choice, or even their alma matter, to be their designated beneficiary. This option is popular among policyholders who will have no surviving next-of-kin or spouses at the time of their death.
- To cover their final expenses: Death is expensive. Costs associated with death including funerals and burials, on average, easily surpass $10,000. Having life insurance coverage can prevent a policyholder’s family from having to pick up their final tab, so to speak.
Your New Jersey independent insurance agent can help you review your life insurance policy to answer any remaining questions about your coverage. They’ll also be able to help you make sure you’re set up with the right type and amount of coverage.
How Much Does Life Insurance Cost in New Jersey?
The cost of a life insurance policy in New Jersey depends on a number of factors, including your heath and lifestyle choices. Things like age and occupation also factor into premium calculations. Generally speaking, the healthier and safer you are, the lower the cost of your policy. Also, as you age, the cost of life insurance tends to increase.
Someone who has tons of healthy habits, is young, and works a relatively safe job will generally pay much less than an older danger junkie with a high-stress career. So a 30-something organic smoothie barista might only pay around $20 per month, while a 50-something government spy who’s also a chronic smoker might pay up to $1,000 monthly, or even more.
Why Work with a New Jersey Independent Insurance Agent?
In order to get the protection you need and deserve, you’ll want to work with a trusted expert. And who could be better for the job than a local agent who shares your area code? Independent insurance agents act as your own personal insurance shoppers, offering you tons more options than one-policy companies. With just one call, they’ll hook you up with multiple quotes.
New Jersey independent insurance agents are armed with knowledge on what coverage is needed in your area, and they’ll get you set up with just enough of it — not too little, not too much. They’ll handle all the heavy lifting so you can rest assured you’ll be set up with the right coverage at the right price.
Article Reviewed by | Paul Martin
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