- Life insurance covers the expenses that arise when somebody passes away.
- Life insurance can cover your final expenses like funeral costs, health care, and debts.
- California life insurance companies can help you find a policy to suit your needs and budget.
California is known as the Golden State and is located on the west coast of the United States. It’s bordered by Oregon to the north, Nevada to the east, and Arizona to the southeast. With a population of 39.95 million people, it’s the most populous state in the U.S. The largest city in California is Los Angeles which has a population of just over 4 million people. The state capital is Sacramento which has a population of 1.58 million residents.
According to the Center for Disease Control and Prevention (CDC), the average life expectancy in California is approximately 79.0 years which is around the national average life expectancy, which is currently 79.05 years in the United States. Over the past few years, the leading causes of death in California have been heart disease, cancer, and Covid-19. The homicide rate in California is around 6.1 homicides per 100,000 residents, which is slightly lower than the national average of 7.5.
According to the U.S. Bureau of Labor Statistics, in California, the 90th percentile income is currently $130,430. The median income in the state is approximately $47,920. Most financial advisors recommend purchasing a life insurance policy that covers your loved ones for between 10X and 20X your annual salary. In California, this works out to around $1,304,300 – $2,608,600 dollars for most people.
How life insurance works in California
There are many types of insurance products you could buy in the insurance industry from an insurance agency, including health insurance and disability insurance. Life insurance is one of the best ways that you can protect your loved ones when you pass away. The idea is pretty simple. You pay a monthly premium in exchange for a death benefit which is paid out to your beneficiaries when you die. That said, there are a few different types of life insurance policies.
Whole life insurance is one of the two main types of permanent life insurance (the other being term life insurance). Unlike term life insurance, which only covers you for a specific period of time, whole life insurance covers you for your entire life. This means that as long as you pay your premiums, your beneficiaries are guaranteed to receive your death benefit, no matter when you die.
Whole life insurance also has a cash value component. When you purchase a whole life insurance policy, part of your premium goes into a cash account that you can access while you’re alive. You can take out loans against the cash value of your policy or use it to pay your premiums if you run into financial difficulties. Because it mixes insurance and investing, whole life insurance policies are often not the best deal.
Term life insurance is a bit different. It’s a temporary life insurance policy that only covers you for a specific period of time, typically 10, 20, or 30 years. If you die during that time frame, your beneficiaries will receive your death benefit. If you don’t die during that time frame, the policy expires, and your beneficiaries don’t receive anything.
Universal life insurance is another option. Universal life insurance policies have a death benefit and a cash value component, like whole life insurance policies. However, the cash value component grows at a faster rate than it does with whole life insurance. This means that you can access your cash value sooner and use it for things like supplemental retirement income or to pay your premiums. However, you are probably better off buying term life insurance and investing the money saved from the cheaper premiums into a regular investment account.
You must buy life insurance coverage from a licenced insurance agent. They can help you run life insurance quotes and determine what type of financial security and financial protection you are looking for, and how much insurance benefit or payout you want your beneficiaries to receive.
10 Biggest life insurance companies in California
California life insurance companies ranked by premiums written in the state.
|1||New York Life||$1,815,778,583||8.64%|
|3||Aegon Us Holding||$1,100,416,217||5.24%|
|4||Mass Mut Life Ins||$1,051,969,471||5.00%|
How much life insurance do you need in California?
The 90th percentile salary in California is approximately $130,430 as of 2022. As mentioned, most financial advisors recommend that you purchase a life insurance policy that will cover your beneficiary for at least 10X – 20X your average annual income. In California that works out to around $1,304,300 – $2,608,600. This amount will ensure that your loved ones can continue to pay their bills, settle your debts, and cover the cost of your final expenses.
You may also want to purchase additional life insurance to cover:
- Your mortgage (if you want your spouse and kids to be able to live in the home without worrying about mortgage payments)
- Children’s education costs (if you want your child’s education to be covered without any additional stress to your spouse)
- Bereavement therapy costs for your spouse and children (if you want them to spend time with a therapist after your unexpected death)
- Any other expenses that may be unique to your family or lifestyle
California life insurance laws
There are a few unique features with respect to California Life Insurance Laws that have an impact on your enrollment in a specific policy if you are a resident of the state. You can also learn more directly from the California department of insurance.
Here’s what you need to know:
- The “free look period”: This is the required time period in which a new policy owner can terminate the policy without any penalties. In California, the free look period extends up to 10 days.
- The grace period: This is the amount of time a policyholder has to pay a missing premium without paying a penalty. During this time, the insurance coverage remains active. Insurers in California must give policyholders a minimum grace period of 60 days.
- Time period for claim settlement: Once life insurance companies in California receive satisfactory proof of death documents, they have to settle the payment within 30 days. If they fail to make the payment, they will have to pay interest on the unpaid amount.
- Contestable period: The contestable period is the amount of time an insurer can challenge any potentially fraudulent or misrepresented claims on the coverage application. After this period ends, the policy is usually considered incontestible. Life insurance policies in California become incontestable, except for nonpayment of premiums, after a maximum of two years.
- Under the California Insurance Code, you can always require your agent to provide you a copy of the presentation of policy offered to you (CIC 10509.4) as well as an undersigned document whenever there are any changes in your policy (CIC 10509.6).
When most people think about life insurance, they think about death. But life insurance is not just about death; it’s about living. Life insurance is a contract between you and an insurance company in which you agree to pay premiums and the insurance company agrees to pay a specified amount of money to your beneficiaries when you die. This money can protect your family financially after you pass away and ensure that they have the funds needed to settle your final affairs and continue paying their bills.
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Joshua Holt is a licensed insurance agent (License #2785989) and founder of Biglaw Investor and Sidebar Insurance LLC, an insurance agency created by lawyers, for lawyers. His insurance expertise lies in the areas of life and disability insurance, particularly covering lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.