She Strengthens

The Importance of Life Insurance: Clearing Up Common Misconceptions

When it comes to managing our finances, life insurance is often an afterthought. We know it’s essential, but we’re not entirely sure how it works or why we need it. To demystify the process, we spoke with Paya Schlass-Epstein, a licensed life insurance agent and customer success manager at Haven Life, an innovative life insurance agency backed by MassMutual.

Understanding the Different Types of Life Insurance

There are two primary types of life insurance: term and permanent. Term life insurance provides coverage for a specific period, usually 10, 15, 20, or 30 years, and is often more affordable and easier to manage. Permanent life insurance, on the other hand, lasts a lifetime and has a cash value component that can grow over time. While permanent life insurance is more complex and expensive, it can be used for cash accumulation and estate planning purposes.

Do You Need Life Insurance if You’re Single or Don’t Have Kids?

Life insurance is not just for parents or married couples. If you have any financial obligations, such as a mortgage, student loans, or co-signed debt, life insurance can provide a safety net for your loved ones in the event of your death. Additionally, if you have a partner, you’ll want to consider how they would manage shared financial responsibilities if something were to happen to you.

How Much Life Insurance Do You Need?

The amount of life insurance you need depends on your individual circumstances. A common rule of thumb is to have coverage that’s 5-10 times your income. However, you’ll want to consider factors such as your age, marital status, dependents, debts, and more. Haven Life’s life insurance calculator can help you determine the right amount of coverage for your needs.

Choosing the Right Term Length

The length of your life insurance policy should align with the period when your loved ones need a financial safety net. For example, if you have a 30-year mortgage, you’ll want a policy that lasts until it’s paid off. You should also consider how long your beneficiaries will need coverage, such as until your children are financially independent or your student loans are paid off.

What Does Life Insurance Cover?

In the event of your death, your loved ones can use a term life insurance payout to cover various expenses, including funeral costs, mortgage payments, childcare, healthcare expenses, tuition, and everyday living expenses. It’s essential to discuss your coverage amount and how you envision the proceeds being used with your beneficiary.

Talking to Your Spouse or Family Member About Life Insurance

Discussing life insurance with your loved ones can be uncomfortable, but it’s crucial to plan for the unexpected. Use major life events, such as buying a home or having a baby, as opportunities to start the conversation. Frame the discussion around protecting your loved ones and planning for the future, rather than focusing on death.

Factors Affecting Your Life Insurance Rate

Life insurance companies consider several factors when determining your premium, including your age, gender, health, coverage amount, and more. Generally, the younger and healthier you are, the more affordable your rate will be.

Can You Change Your Life Insurance Policy?

Once you purchase a term life insurance policy, it’s essential to review your coverage needs periodically, especially if you experience a major life change. If you find that you need more coverage, you can usually apply for a new policy. If you need less coverage, you can reach out to your provider to lower your coverage amount and premium.

What to Look for in a Life Insurance Company

When selecting a life insurance company, consider their financial rating, claims-paying ability, and customer reviews. Research the company’s history and read ratings from third-party providers, such as AM Best.

By understanding the importance of life insurance and how it works, you can make informed decisions about protecting your loved ones’ financial future.