This article is sponsored by Haven Life Insurance Agency.
Life insurance is one of the more elusive tenets of a healthy financial life: we’ve heard of it, we know how important it can be, we think we probably need it…but how does it work? When we make our monthly payments towards our policies, what are we actually paying for? And do we really need life insurance if we’re single and don’t have kids?
When it comes down to it, getting life insurance is one of the most responsible financial choices you can make — and getting it when you are young and healthy can mean a more affordable rate on your policy. To clear up any confusion about choosing a policy and applying for coverage, we spoke with Paya Schlass-Epstein, customer success manager at Haven Life , licensed life insurance agent and mom of one. Haven Life is an innovative life insurance agency, wholly backed by MassMutual, that’s making the process of getting life insurance simple and affordable. Here’s what she had to say about the importance of getting life insurance coverage.
1. What are the different kinds of life insurance, and which one do I need?
Paya: There are essentially two kinds of life insurance you can get: term vs. permanent.
A permanent life (a common and well-known type being “whole life”) insurance policy lasts your entire life, while a term life insurance policy lasts for a specific period of time — i.e. your policy’s term length. This will typically be 10, 15, 20 or 30 years. Generally, term life is a simple, affordable type of life insurance that’s easy to purchase and manage.
The main differences between the two types are complexity, price point, and the cash value component. Permanent life insurance has a cash value component that can grow over time and be borrowed from while you’re living. This cash value component and the lifetime coverage makes permanent life insurance more expensive and more complex to manage.
Typically with term life insurance, you apply to have coverage in place until a clear end point in your life when you’d no longer need the coverage, such as your children becoming adults, or your mortgage being paid off. The primary purpose of term life is to protect your loved ones in the event of your (or your spouse’s) untimely death, whereas a permanent life policy may also be used as a vehicle for cash accumulation and/or estate planning purposes. For most people, term life insurance is a solid, budget-friendly choice that protects your loved ones during the years they need it most.
2. Do I need life insurance if I don’t have kids? What about if I’m single?
Life insurance is good to have if you have any sort of financial obligation — that could be a mortgage, student loans, other co-signed debt, etc. — that someone else might have to pay off for you in the event of your death. And remember that if you have a partner, whether or not you’re married or have children, you have shared financial responsibilities. You want to think about how they would shoulder those responsibilities should something ever happen to you. Your term life insurance is a way to protect your loved ones, and you designate your beneficiaries yourself.
3. Do my spouse and I both need life insurance?
Yes, usually both spouses have a life insurance policy with their partner listed as the beneficiary. The last thing anyone would want is for their partner to be grieving and also have to worry about meeting shared financial responsibilities.
Another misconception about life insurance is that stay-at-home parents don’t need coverage, since they aren’t bringing in an income. A stay-at-home parent has a huge, irreplaceable impact on a household. If he or she were to pass away, the surviving spouse would have to find extra space in the budget for childcare, household needs and more. Generally, the stay-at-home parent should still have life 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 your specific circumstances. Haven Life has a life insurance calculator that lets you plug in important financial details to understand your needs — for instance, your age, marital status, details about your dependents, debts and more. You want to make sure the policy amount is enough to cover any major expenses that would become your loved ones’ responsibility in the wake of your death.
5. How long should my life insurance policy be for?
It really depends on how long your loved ones need a financial safety net. For example, if you recently purchased a house and have a 30-year mortgage, you’d want the policy to last until that is paid off. You also want to think about how long you’d need your beneficiaries to be covered — how many years until your children are financially independent? How long do you have left paying off your student loans? Those are some points to consider when choosing a term length and are all taken into account when you use a life insurance calculator.
6. What kinds of costs would life insurance cover should my loved ones ever receive a payout?
Your loved ones can use a term life insurance payout to help cover anything they want, such as funeral and other end of life costs; : mortgage payments; childcare or caregiving for your dependents; healthcare costs for your dependents; your children’s current or future tuition, or just everyday living expenses.
When you buy life insurance, you should use it as an opportunity to talk to your beneficiary about the coverage amount and how you envision the proceeds being used. Nothing says “I love you” quite like helping ensure your loved ones’ financial comfort no matter what happens to you.
7. How do I talk to a spouse or family member about life insurance?
We totally understand that death is not a thing people like to talk about. For me, that changed when I was pregnant, and the possibility and impact of either my spouse or I dying felt more real.
Certain life events definitely help spur the conversation. That could be buying a home, taking on new student loan debts for grad school or having a baby like me. I would suggest using those major life events to segue into this major conversation. That way, it doesn’t have to center on death — it could be more about protecting your loved ones if anything happens, which is ultimately a positive thing to plan for.
There’s also something really empowering about having conversations with your partner or loved one about how you’re prepared no matter what happens. Frame the discussion so it’s about wanting to prepare financially for anything that could potentially happen throughout your life, not just death. Just like having emergency savings, life insurance is a contingency plan. And it’s something you need to think about alongside the most exciting parts of life.
8. What are the main things that insurance companies consider when determining your rate?
Life insurance companies will consider your age, gender (rates are more affordable for women!), health, coverage amount and a few other items to determine your premium pricing. Generally, the younger and healthier you are, the more affordable pricing will be.
You can use Haven Life’s calculator to determine what coverage you need and to get a quote for life insurance — for instance, a 30-year, $500,000 Haven Term policy issued by MassMutual for a healthy 30-year-old woman is about $27 per month.
9. Can I ever change my life insurance policy?
Once you buy a term life insurance policy, it’s a good idea to check in on your coverage needs periodically — especially if you go through a major life change that impacts your financial situation. If you find that you’re in need of a longer term length or a higher coverage amount, you’ll usually need to go through the application process again. Generally, it’s a good idea to keep that policy from when you were younger and healthier and purchase an additional, supplemental policy that fills your coverage gap.
Also, if you find that you actually need less coverage, you can always reach out to your life insurance provider and ask to lower your coverage amount (which will also lower your monthly premiums.)
10. Finally, what do I look for in a life insurance company when I decide it’s time to get covered?
One thing to consider when applying for coverage is the company you’re applying with and their financial rating — you want to make sure you’re choosing a life insurance company with a long history of financial strength and claims-paying ability. Do your research and read company ratings, especially those from third-party ratings provider AM Best* as well as reviews from customers. (You can read Haven Life’s solid customer ratings here.)
We hope that answers any questions you may have about getting term life insurance — and if you have any other questions for the team at Haven Life, be sure to leave them in the comments.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In NY, Haven Term is DTC-NY. In CA, Haven Term is DTC-CA. Our Agency license number in California is OK71922 and in Arkansas, 100139527.
*MassMutual and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company are rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of June 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
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