This article is sponsored by the Haven Life Insurance Agency.
Life insurance is one of the most elusive principles of a healthy financial life: we have heard of it, we know how important it can be, we think we probably need it … but how does it work? When we make monthly payments to our policies, what are we actually paying for? And do we really need life insurance if we are single and don't have children?
When it comes to this, getting life insurance is one of the most responsible financial choices you can make – and getting it when you're young and healthy can mean a cheaper rate on your policy. To clear up any confusion about choosing a policy and requesting coverage, we spoke to Paya Schlass-Epstein, customer success manager at Haven Life, licensed life insurance agent and mother of one. Haven Life is an innovative life insurance agency, fully supported by MassMutual, which is making the process of obtaining simple and inexpensive life insurance. Here's what he said about the importance of getting life insurance coverage.
1. What are the different types of life insurance and which one do I need?
Paya: There are essentially two types of life insurance you can get: term vs. permanent.
A permanent life insurance policy (a common and well-known type being "whole life") lasts for a lifetime, while a long-term life insurance policy lasts for a specified period of time, i.e. the duration of the policy. Normally they will be 10, 15, 20 or 30 years old. Typically, lifetime is a simple and affordable type of life insurance that is easy to buy and manage.
The main differences between the two types are the complexity, the price and the component of the cash value. Permanent life insurance has a cash value component that can grow over time and be borrowed while you live. This component of cash value and lifetime coverage make permanent life insurance more expensive and more complex to manage.
Typically with term life insurance, you request to have coverage in place up to a clear end point in your life when you no longer need coverage, such as your children becoming adults or your mortgage coming paid. The main purpose of term life is to protect your loved ones in the event of the premature death of your (or your spouse), while a permanent life policy can also be used as a vehicle for the accumulation of money and / or wealth planning. For most people, term life insurance is a solid and affordable choice that protects your loved ones in the years when they need it most.
2. Do I need life insurance if I don't have children? What if I was single?
Life insurance is good to have if you have some kind of financial obligation – which could be a mortgage, student loans, other co-signed debts, etc. – that someone else may have to pay for you in the event of death. And remember that if you have a partner, regardless of whether you are married or have children, you have shared financial responsibilities. You want to think about how those responsibilities should take over if something should happen to you. Your life insurance is a way to protect your loved ones and designate your beneficiaries yourself.
3. Do my spouse and we both need life insurance?
Yes, usually both spouses have a life insurance policy with their partner listed as a beneficiary. The last thing anyone would want is for their partner to be in mourning and also have to worry about coping with shared financial responsibilities.
Another misconception about life insurance is that home parents don't need coverage, since they aren't generating an income. A home parent has a huge and irreplaceable impact on a family. If he or she dies, the surviving spouse should find additional space in the childcare budget, family needs, and more. In general, the home parent should still have lifetime coverage.
4. How much life insurance do I need?
A common rule of thumb is to have coverage that is 5-10 times your income. But of course, the "right" amount of life insurance depends on the specific circumstances. Haven Life has a life insurance calculator that allows you to enter important financial details to understand your needs, such as age, marital status, details of dependents, debts and more. You want to make sure that the amount of the policy is sufficient to cover the greater expenses that would become the responsibility of your loved ones following your death.
5. How long should my life insurance policy be?
It really depends on how long your loved ones need a financial safety net. For example, if you recently purchased a home and have a 30 year mortgage, you would like the policy to last until it is paid off. You also want to think about how long you would need your beneficiaries to be covered – how many years before your children are financially independent? How long did you leave to pay off student loans? These are some points to consider when choosing a term and are all taken into consideration when using a life insurance calculator.
6. What kind of costs should life insurance cover if my loved ones ever get paid?
Your loved ones can use a life insurance term payment to help cover anything they want, like funeral and other end-of-life costs; : mortgage payments; childcare or care for dependents; health costs for dependents; your children's current or future taxes, or just everyday living expenses.
When buying a life insurance, you should use it as an opportunity to talk to your beneficiary about the amount of coverage and how you think the proceeds are being used. Nothing says "I love you" enough to help ensure the financial comfort of your loved ones, no matter what happens to you.
7. How can I talk to a spouse or family member of life insurance?
We totally understand that death is not something people love to talk about. For me, this changed when I was pregnant, and the possibility and impact of my spouse or my death became more real.
Some life events definitely help stimulate conversation. It could be buying a house, taking on new student debts for elementary school or having a child like me. I would suggest using those great life events to follow this great conversation. That way, it doesn't have to focus on death – it could be more about protecting your loved ones if something happens, which is ultimately a positive thing to plan for.
There is also something truly powerful about having conversations with your partner or loved one about how prepared you are, no matter what happens. Frame the discussion so that you want to prepare financially everything that could potentially happen in your life, not just death. Just like having emergency savings, life insurance is an emergency plan. And it's something you need to think about alongside the most exciting parts of life.
8. What are the main things insurance companies take into consideration when determining your rate?
Life insurance companies will take into account age, gender (rates are cheaper for women!), Health, the amount of coverage and some other elements to determine premium prices. In general, the younger and healthier you are, the cheaper the prices will be.
You can use the Haven Life calculator to determine what coverage is needed and get a life insurance quote – for example, a 30-year, $ 500,000 Haven Term policy issued by MassMutual for a 30-year-old woman in good health is around $ 27 per month.
9. Can I ever change my life insurance policy?
Once you have purchased a term life insurance policy, it is a good idea to periodically check your coverage needs, especially if there is a major life change that affects your financial situation. If you feel you need a longer term or a higher coverage amount, you will usually need to repeat the sign up process. In general, it is a good idea to maintain this policy since you were younger and healthier and to purchase an additional and additional policy that bridges the coverage gap.
Also, if you find that you actually need less coverage, you can always contact your life insurance provider and ask them to reduce the amount of coverage (which will also reduce monthly premiums).
10. Finally, what do I look for in a life insurance company when I decide it is time to get covered?
One thing to consider when applying for coverage is the company with which you are applying and their financial rating: you want to make sure that you choose a life insurance company with a long history of financial strength and claims settlement. Do your research and read the ratings of the companies, especially those of the third-party rating provider AM Best * and customer reviews. (You can read Haven Life's solid customer ratings here.)
We hope you answer any questions you may have about term life insurance – and if you have any more questions for the Haven Life team, be sure to leave them in the comments.
Haven Term is a term life insurance policy (DTC and ICC17DTC in some states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively by Haven Life Insurance Agency, LLC. The numbers and characteristics of the policy and pilot modules may vary by state and may not be available in all states. In New York, Haven Term is DTC-NY. In CA, Haven Term is DTC-CA. Our agency's license number in California is OK71922 and Arkansas, 100139527.
* MassMutual and its C.M. The life insurance company and the life insurance company MML Bay State are classified by A.M. Best company like A ++ (top; top category of 15). The valuation is as of June 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Image via Unsplash
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This article is sponsored by the Haven Life Insurance Agency.