This post is sponsored by Haven Life and was originally published on Havenlife.com.
Marriage, kids, Googling “affordable term life insurance” options— there are some milestones you reach where you realize, wow, I’m a grown up. Are you having that feeling now?
There’s usually a question that lingers when you’re going through the researching and buying process: Is life insurance really worth it? If you’ve reached the point where a spouse, children, or family member relies on you financially, then the answer is pretty simple: It’s absolutely worth it.
Here we’ll help you understand what you need to know about life insurance: if it’s worth the monthly premium, how it works, how to buy it, and how it can help financially protect your family in case of a worst-case scenario.
Why is life insurance necessary?
If you’re in your twenties, thirties, or older, and have a family who is financially dependent on you, then buying life insurance is a smart idea. The payout from a life insurance policy can provide a financial safety net that helps your loved ones pay for expenses such as a mortgage, childcare, and many other day-to-day bills that come with adulthood.
You have to approach buying life insurance like you would any aspect of your life that poses a risk and ask yourself, “What’s the worst case scenario?”
Most people would agree that, without a financial cushion from life insurance, their family might face a dire money situation. That’s why term life insurance is so valuable. It’s an affordable way to protect the people you love most financially.
So, what exactly does life insurance cover? Many use a policy to help with some of the following so that your family doesn’t have to deplete savings:
- Replace lost income and pay living expenses, like rent or a mortgage
- Pay debts you leave behind
- Provide for your kids’ care if you are a stay-at-home parent
- Cover burial, estate taxes, and other final expenses
- Fund college expenses
- Pay unpaid medical bills or taxes
- Create an inheritance
Even if you’re living the single life with no spouse or kids, term life insurance may still be necessary. If your parents or others co-signed a loan with you, for a mortgage, student or credit card debt, or even a car loan, the proceeds of a life insurance policy could help them pay loans that you leave behind. Life insurance is also a good idea if you’re taking time off work to go to grad school and want financial protection in place to help pay student loan debt if you were no longer around.
How term life insurance works
Term life insurance is one of the simplest (in a good way) and most affordable types of life insurance. It insures your life for a period of time that you choose from the coverage lengths available in your policy. You can choose a term length to last until your mortgage is paid in full or your kids are adults. This helps ensure that none of your financial obligations will burden your family if you were to die unexpectedly during the term length.
Most insurers offer term lengths of 10, 15, 20, 25, and 30 years. You make monthly or yearly payments for the duration of the policy term, and if you were to die during that time, the policy would pay out a death benefit to your beneficiaries.
If you are young and have many working years ahead of you or you recently bought a house, then a long-term policy (30 years) might make more sense.
“When my husband and I bought a Haven Term policy, we both opted for 30-year term lengths,” said Brittney Burgett, communications director at Haven Life. “We knew we were going to buy a house soon and that we have many, many years until retirement. A 30-year term enabled us to lock in a low price for the several years and life milestones that we have to look forward to.”
If you have young kids and have paid on your mortgage for several years, then a 20-year term life insurance policy might be a better fit.
Determining which term length you need is actually very easy. You can use an online life insurance calculator to receive a recommendation on a coverage amount and term length that best fits your financial situation.
How much does term life insurance cost?
Many people don’t realize how affordable term life insurance can be. For example, LIMRA research found that many adults overestimate the cost of life insurance to be 5 times more than it actually is.
Term life insurance usually provides ample coverage at a much lower premium amount than many other types of life insurance.
Here are some sample term life insurance quotes for healthy individuals:
- 30-year, $500,000 policy for a 30-year-old woman: $27.40 per month
- 20-year, $750,000 policy for a 35-year-old man: $28.57 per month
- 20-year, $1 million policy for a 40-year-old woman: $45.40 per month
Your individual rates will depend on a range of factors including your age, health and term length you choose. If you’re what your premiums might be, you can get a free estimate online.
Term versus permanent life insurance: which is best?
The Beatles vs. Elvis. Star Wars vs. Star Trek. Term vs. Whole. When it comes to shopping for life insurance, the decision on whether to get a term or permanent policy really comes down to your personal preferences and situation.
Term life insurance might be the right choice if you:
- Are looking for an affordable way to financially protect your family
- Are seeking coverage to help your partner pay the day-to-day bills if you were no longer around
- Need coverage until your children are financially independent
- Need a policy to help pay specific cosigned debts (i.e., a mortgage or student loans)
- Have, or plan to have, substantial money saved for retirement
Permanent life insurance might be the right choice if you:
- Seek coverage that lasts a lifetime and won’t expire before you pass away
- Are seeking a product that offers a cash value component
- Understand that permanent life insurance can involve significantly higher monthly premiums than term life insurance
- Want life insurance to be part of your long term-financial strategies
- Are interested in the tax advantages that are particular to whole life insurance
Why term life insurance through work may not be sufficient
Many people assume that if they have life insurance through work, they’re set. While it’s a great work perk, if you have kids or have a significant debt like a mortgage, then you’re probably underinsured.
Typically, employer-provided policies only cover, at most, two to three times your income, while the often-recommended amount is at least five to ten times. Another important consideration is that coverage usually ends when you leave your job, which could leave your family without a policy. Your best option is to hold an individual policy to ensure you have enough coverage and to lock in an affordable rate while you’re young and healthy.
Keep in mind, it’s perfectly acceptable to have an individual term policy on top of the coverage offered by your employer. More coverage means more protection for your family. However, when many people realize they need additional coverage, they usually think it would be easier to add on more coverage to their existing work policy. Employer-provided policies are at group coverage rates, which means insurers charge everyone the same amount of money. If you’re young and healthy, you’ll likely be paying significantly more for coverage than if you were to receive an individual rate because you’re making up for the risk insurers take on some of the older, less healthy people at your company.
No matter what your employer offers, it’s worth it to carry your own coverage that keeps you covered no matter where you work.
Thinking about life insurance? Why it’s smart to act now
“Buying life insurance” can sometimes feel like one of those to-dos on par with “renovating kitchen” or “buying a new car.” It’s something you know needs to be done eventually, but the time and expense involved may make you feel like there’s never a “right” time to do it.
Fortunately, it’s easier than ever to buy a policy thanks to modern technology (and we’ve already established that coverage can be affordable.) Buying term life insurance no longer requires you to find a fax machine, scan documents, or print out pages of information can make the process as seamless as possible. Now, you can apply online and find out instantly if you’re approved. If so, you can start your coverage that day.
Six steps to buying life insurance online
Step 1: Fill out a life insurance calculator
Not sure how much life insurance you need? The best way to get a general idea is to toy around with a life insurance calculator. By entering details like your age, income, overall health, and family status, you can find out how much term life insurance coverage is suggested for your family and compare quotes to top insurers. Check out our free term life insurance calculator.
Step 2: Get a term life insurance quote for coverage
The beauty of now being able to buy life insurance online is that there are numerous free tools available. When shopping for life insurance, always cost compare by using quote tools. Price comparing will help ensure that you’re not only getting the best price but that you’re also getting the best value regarding face amount, term length and limited exclusions.
Step 3: Check the rating of the provider.
A rating company such as A.M. Best does the homework on an insurer’s claims-paying ability and financial strength, to help determine whether the provider is considered reliable and in good financial standing. We’d recommend providers rated A+ or better. Our Haven Term policy is issued by MassMutual, an A++ rated insurer by A.M Best.*
Step 4: Get the coverage you need
Once you’ve decided how much coverage you need, how you want to purchase it and from which insurer, it’s time to get covered. With online life insurance agencies like Haven Life, you can apply online for coverage — from your phone or laptop and from wherever is convenient for you. In some cases, you can even get an immediate decision on coverage eligibility. There’s no need to wait 4-6 weeks while your application is reviewed.
Step 5: Take a life insurance medical exam (if needed)
In many cases, a medical exam will be needed to finalize coverage on a medically underwritten term life insurance policy. Often, you can still have temporary life insurance coverage while you wait for the medical exam results and a decision on your application.
With Haven Life’s InstantTerm process, some applicants will qualify to skip the medical exam. That’s because, in partnership with MassMutual, Haven Life has built technology that can analyze application information in real time. If the insurer has a good enough understanding of your health and risk, the formality of an exam may not be needed. However, it’s very important to be honest when completing the application. The issuance of the policy or payment of benefits may depend upon the answers given in the application and their truthfulness.
Step 6: Assess your policy every few years or after a life event.
Even though your term and coverage are locked as soon as you purchase a policy and continue paying premiums, it’s smart to continually assess your life insurance needs. Life can change rapidly — you could have another child, buy a new, bigger home or get married. If that’s the case, you may need to purchase additional coverage or change your designated beneficiary.
Peace of mind: So worth it
Those nagging to-dos can drag you down. Getting “buy term life insurance” crossed off your list is worth it for peace of mind. And unlike, say, renovating your kitchen, purchasing term life insurance is an affordable way to provide a financial safety net for your loved ones long into the future, if you were to die. Term life insurance can be an affordable option for you and your family, with a straightforward application process that allows you to stay locked into rates for the length of your term.
So is term life insurance worth it? While there’s no monetary value on peace of mind, for many, knowing you’ve put financial protection in place for your family is everything. And of course, the fact that you can provide this for little more than the cost of your monthly music or TV streaming service can only make the value more clearly. Term life insurance may not have a big monthly impact on your budget, which is a good thing, but it can have a huge impact on feeling settled and confident that your family is financially protected, now and in the future.
*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 July 1, 2018 and is subject to change. MassMutual has received different ratings from other rating agencies.