Life is marked by many precious moments. Some that you plan for and some that are unexpected. Whatever the moment is though, you want to make sure you’re fully protected so you can always provide for yourself and your loved ones.
September is Life Insurance Awareness Month, which is a great opportunity to talk about an uncomfortable topic. Most people associate life insurance as coverage for your friends and family in case there is a death. While this is a motivator, there are many more benefits to life insurance coverage.
While it used to be the norm for most adults, especially parents, to have life insurance, a recent study shows that only 25% of millennial parents have this important policy. That statistic seems to contradict a population that is generally financially responsible, so we decided to talk to two millennials in the minority, who both have life insurance but don’t have children, to find out why they made this important decision.
Despite working in insurance for nearly a decade, my knowledge of life insurance came exclusively from the commercials I saw while watching The Price Is Right on an occasional sick day. Last fall, a death in the family compelled me to learn more about life insurance and if I really needed it. Spoiler alert — there’s more to it than the commercials would lead you to believe, and I definitely needed it.
Why I Need Life Insurance, and You Might, Too:
I have a family.
While it may not look like the families on the life insurance commercials, I have a family. I have a loving and supporting family that raised me and the best family I could have built. If something were to happen to me, the last thing I would want to do to my loved ones in their time of grief is to add a financial burden. With a life insurance policy, my parents wouldn’t have to feel like they need to pay for a funeral or cover any of my outstanding debts, and my husband wouldn’t have to move from our house or the yard our dog loves so much. Maybe one day we’ll have children, and knowing they would have this level of protection from the moment they come into the world is already a weight off my shoulders.
I want to protect the life I’ve worked so hard for.
Soon after getting married, we bought my husband’s grandparents’ house. It was adorable, in a great location, and in need of some major updating. I’ll never forget staying up until 1 am every weeknight for a month, both of us deep in a painting trance to finish renovations while listening to Red Sox games on the radio.
We said it then and we say it now: “We’re a team.”
So we took on aggressive home payments that we tackle together in hopes to live debt-free later in life. However, eliminating his salary from the equation would make it really hard for me to keep up. With that thought in mind, I began requesting life insurance quotes for my husband as well. If something were ever to happen to him, being able to stay in our home and have a physical reminder of this life we’ve built together would mean the world to me. Both of us having life insurance means that our house can remain our house, even if only one of us is living in it.
What I Purchased and Why:
After learning about all of the different types of Life Insurance on the market, my husband and I decided to go with a 30-Year Term policy for each of us. Several factors influenced our decision, such as simplicity, length of coverage, amount of coverage, and cost.
Simplicity: With the policy we selected, we pay one flat rate every month for the next 30 years, and if tragedy struck and one of us passed away, the other would receive the total benefit amount we mutually agreed upon from day one.
Length of Coverage: When discussing our coverage goals, our top concerns were paying off the mortgage on our house and getting any potential children through college. 30 years from now, we hope that these current concerns won’t even be a thought, and we will have a healthy savings and retirement fund.
Amount of Coverage: In some scenarios, you can be limited to the amount of coverage you can buy based on your income. My husband and I felt it was important that we have the same amount of coverage despite a decent size income variation between the two of us. Knowing that we can change those limits in the future if it were necessary was also a big incentive.
Cost: Studies have shown that the number one reason that people do not buy life insurance is because of cost, especially millennials. I’ll admit — the thought of adding a high monthly bill for something we hope we’ll never use deterred us from shopping for a long time. Once we finally started the quoting process, we were pleasantly surprised to find our premiums were lower than expected. Now, my biggest regret is that we didn’t purchase our policies sooner to lock in lower premiums!
I’ve had a savings account since I first started working when I was 16-years-old. My grandmother and mother always encouraged me to have a strong financial safety net and those habits have followed me through college and into my career.
I remember before going to college, I would contribute half of my paycheck each week from my job as a cashier at a local market in Boston to my savings account. I worked throughout college and with the help of my mother, set myself up financially with loans so I didn’t have a lot of debt upon graduation. After two years of working in a corporate job, I was able to pay off all of my student loans! Because I didn’t have these debts to pay, I started looking into ways I could invest my money. I always knew that life insurance was important to have, but never realized the financial benefits of the coverage until I sat down with an advisor. Not only would my life insurance policy provide financial assistance to my family, especially my mother, if something were to happen to me, but it also provides an additional financial safety net for me at a young age.
What I Purchased and Why:
I decided to purchase a Variable-Universal Life Insurance plan. My life insurance plan provides coverage like a death benefit, but also acts like a savings account. My premium amount is invested in stocks, bond, and mutual funds. There is an element of risk with the policy because it is dependent on market changes, but I’ve had the policy for more than two years now and have only seen it grow!
There were a couple of reasons why this was an attractive option for me. First, I was able to lock-in the lowest monthly premium since I am young and healthy and don’t have any dependents. This means that my premium will be the same now as it will be when I’m older and may have health problems. My plan also lets me adjust the premium cost, so if I can’t commit to the monthly payments in the future, it won’t be an issue to make financial adjustments. Basically, I have my premium payments on auto-pay so I don’t think about the payment each month and am excited to see that I have “extra” money in another account for when I need it.
My Variable-Universal Life Insurance policy also acts as an additional savings account. This means that I can access my cash value amount when I need it. For example, if I need extra money to pay for a down-payment when I am in the market to purchase a home, I will be able to tap into the account to assist with this payment.
For me, life insurance was a great way for me to diversify my investments and to develop an additional financial safety net for both myself and my family.
Life Insurance 101 — The Main Types of Coverage
Now that you know a few different reasons to consider a life insurance plan, here is some detailed information regarding the main types of coverage you can have:
Term: The simplest term policies are extremely straightforward — you pay a monthly premium for the duration of the established term of the policy (ranging from 5-30 years), for a benefit amount that you choose. If the insured dies at any point after the effective date and prior to the end of the policy term, their beneficiaries will receive the benefit amount. If the insured outlives the policy, there is no money back.
- Whole Life/Permanent: While it is more expensive than Term Life Insurance, Whole Life Insurance offers protection for your entire life, meaning that as long as you pay the premium your beneficiary will receive a benefit whenever you pass on. This type of insurance has four sub-categories offering varying flexibility and benefits:
- Whole or Ordinary Life: The most common type of Whole Life, it also offers a savings aspect to it.
- Universal or Adjustable Life: More flexible than Ordinary Life, you may be able to increase the benefit amount or decrease premium payments after a certain amount of time.
- Variable Life: More like a 401k, but for death. Your policy value could grow quickly as your premium amount is invested in stocks, bonds, and money market mutual funds. There is an element of risk with this policy, but some have a guarantee that your benefit will never fall below a certain amount.
- Variable-Universal Life: As implied by the name, this policy combines the features of both Variable Life and Universal Life policies. Your investment risks and rewards remain, but you may also be able to adjust your premiums or death benefit.
Life Insurance is a key component of a comprehensive insurance portfolio. If you’d like to learn more about this valuable coverage, please call 1-800-333-7234 or visit our website.