This article is to help you determine if you need life insurance, how much coverage to get, and how long to get it for. Speak to an HMA Advisor today to learn more!
When it comes to life insurance, there are many carriers and products available. It is easy to get lost in the weeds, get information overload and feel like you are unable to make a decision. This is an unfortunate situation to be in because while in the decision stage, you are not protected.
Our goal at HMA is to simplify the life insurance process so you don’t feel overwhelmed and you get coverage quickly so you have the protection you need as soon as possible.
There are 3 main questions we find ourselves answering to clients in our life insurance conversations:
Do you need life insurance?
Let’s start with a few additional questions:
- What are your goals in the coming years?
- Do you hope to raise children? If yes, are you planning to help save for their education?
- Do you want to support a cause or charity?
- If you don’t already, do you want to buy a house?
- Do you have debt to pay off?
- If you were to pass away, would your family be able to accomplish the above goals?
- Would there be enough income to keep paying mortgage payments?
- Could one income support the costs of raising children and could you still contribute towards their education?
- Will your debt be left to your partner?
These are just a few examples of ways to think about needing life insurance. If you don’t have any obligations, you may not need much insurance. That being said, if you think that there may be obligations in the future, we encourage you to think about getting coverage now. You may be insurable now, but your health could change in the future, so you should think about preparing in advance.
How much coverage do I need?
The easiest way to get an estimate of how much life insurance you should purchase is to break down expenses that you would want to provide for if you were to pass away.
- Income Replacement
- Funeral Expenses, Legal Fees
- Any other debt?
- Registered Education Savings Plans
- Charitable Giving
- Investment for Taxes or Retirement
Reach out to an HMA The Benefits People advisor today and we will walk you through a quick, no-pressure needs analysis to help figure out the right amount of coverage for you.
How long do I need coverage for?
There are two main categories of life insurance that you’re able to purchase, with multiple options within each category.
Term insurance, the first category we will look at, is kind of like renting a house. You have coverage for the length of your term, but after the term expires, you no longer have coverage. The trade off for this limited coverage is that term insurance is significantly less expensive than permanent coverage.
Some examples of time frames are Term 10, Term 15, Term 20, Term 25, and Term 30. These numbers stand for how many years the initial rate for your insurance coverage is guaranteed. For example, if you had $500k of Term 20 coverage, you may pay $52/month for your coverage (rates based on age, gender, smoking status and term length), which is guaranteed to stay the same for 20 years. At the end of 20 years, your policy may renew at a higher rate and you will want to re-evaluate your needs as they will have changed in that term. Rates are based on age, gender, smoking status and term length.
On the other hand, permanent insurance is more like owning a house. When you purchase the coverage, you can choose to pay for the coverage for a set number of years or your entire life, but you own the policy forever. The policy may have also have a built-in option for the coverage amounts to grow over its lifetime.
If you are unsure if you can afford permanent insurance as part of your plan today, but you have an interest in getting permanent coverage in the future, rest assured that there are many convertible term policies available. You can convert all of your policy or just a small piece that fits within your budget and needs.