Life insurance - you might have heard about it, you may even have it, but do you really understand what it is? IMO, insurance is unsexy, boring and sometimes frustrating. But it’s also a necessity. Understanding it will give you the chance to make sure you’re covered in an emergency - for you, your significant other and for your larger family.
Let’s break it down.
A life insurance policy is an effective way to guarantee that even when you’re not around, your family will be able to replace your financial contribution. We’re talking full-on, proactive coverage so your loved ones aren’t scrambling to stay afloat if you passed away suddenly. By design, life insurance helps your loved ones pay for a variety of expenses that you leave behind. Not only does it cover funeral expenses (which averages around $7,360), but it also helps pay for expenses that you were helping to pay for prior to passing such as your mortgage, car payments, even groceries. In short, a life insurance policy makes up for the lost income that comes with a death.
Ask yourself this question - if you were to die, say tomorrow, would anyone in your life suffer financially because of it? Notice, we said financially. Of course your family and friends would be terribly sad, but would any of them be responsible for expenses you leave behind? If you answered yes to that question, life insurance should be on your radar. Leaving a financial burden on those you love is probably the last thing you’d want to do following your death.
Life insurance is good to have, no matter who you are. But if you fall into any of the following groups, you’ll certainly want to consider a policy:
**The breadwinner and their significant other **
Being the breadwinner means that your household is dependent on your income to survive financially. If anything were to happen to you next week, what would your family do without you? Alden’s family was put in this unfortunate situation with the untimely passing of her father. It took an incredible blow to their family; emotionally, physically and financially. But their ability to keep up on all their bills was all thanks to having a good life insurance policy in place. So, if your S/O or kids rely on the money you bring in each month, life insurance is an incredible way to mitigate risk.
Anyone in a long-term relationship
Married or in a committed relationship? If you are, we can almost guarantee you’re splitting the bills with each other to get by. Meaning, you’re dependent on your significant other’s income to maintain a living. Even if one of you makes a little bit more income than the other, money may be tight for your partner if you were to unexpectedly pass away and left them with all the expenses. What most people don’t know is that you don’t need to be married to share life insurance benefits with your partner!
Don’t forget your biz partners!
When you think of long-term relationship, you probably think of your significant other. But on the other side of the spectrum is your business partner. If you’re in on a business with someone and suddenly pass away, it’s likely you will leave them in a bind. The last thing you want your business partner to go through is a complete shutdown of the empire you’ve built together - no matter the size.
All the parents out there
Let’s just put it this way, if you have any dependents (your children, your siblings, your aging parents, etc.) that rely on you financially, life insurance is a must. Single parents and expecting mommas, we’re looking at you! With a little planning ahead of time, parents can ensure that their families are taken care of with a good life insurance policy.
First-time homeowners If you’ve decided to level up to the next stage of adulthood and buy a home with your significant other, you may want to consider a life insurance policy. Based on U.S. home price averages, you’ll likely have a mortgage worth a few hundred thousand dollars that comes with your purchase. With a bill like that, it’s not unlikely that your S/O will need help to pay it off if you were to pass away. You may want to add life insurance to your running checklist of new homeowner responsibilities.
Now that you know if and why you may need life insurance, let’s dive into what it covers, how to get a policy, and how much coverage you’ll need.
A lot more than you’d think! Here’s what you can expect a good life insurance policies to typically cover:
While it may seem complex, life insurance is actually straightforward. Put simply, you choose a policy, pay for that policy on a regular basis, and the insurance company will pay your designated beneficiaries a sum of money (called the death benefit) if you pass away. Whether you obtain life insurance through your employer, or seek one out on your own, you’ll want to be sure that you choose the best policy for your specific circumstances. But finding the perfect policy requires some research. You can search and compare different life insurance providers online or go directly to a life insurance company (our friends over at Bestow know their stuff).
A big part of choosing the best policy for you is knowing how to pick between the different types that are available. For the sake of time (and your sanity), we’ll focus on the most common types including term life, whole life and universal life
Whole life insurance
When it comes to whole life insurance (also known as permanent life insurance) Here’s what you need to know:
Whole life insurance could be the right option for those in absolute need of a death benefit, no matter the age or situation of your dependents. Some people also use it as an investment vehicle.
Universal life insurance
Universal life insurance is sort of like whole life insurance, but it comes with more flexibility.
If you’re looking to cover your dependents no matter the circumstance and have flexibility with payments and death benefit amounts, this may be right for you. You could also use this policy as a tool for investment planning. Keep in mind though, universal life comes at a price tag in-line with whole life insurance.
Term life insurance
Term life insurance is the simplest and least expensive form of life insurance there is -- ie. what you buy is exactly what you get.
Here’s the scoop:
The thought behind term life insurance is that you provide the coverage for only the amount of time you think you’ll need it. A length of time until our children are all grown up, your house may be paid off and there just aren’t too many people dependent on your income anymore. You won’t get any cash value back after your policy ends, which is another reason why it is far less expensive than alternatives. So do this if you need something cheap that covers you for a certain period of time, like until your dependents are in a place where they can support themselves financially. But this insurance option won’t create any value for you beyond this point (in terms of an investment vehicle).
As soon as you’ve determined which type of policy is best for you, you’ll want to decide how much coverage you’ll need. This obviously will change from one person to the next since everyone’s situations are not the same, but you’ll want to consider a variety of factors:
When you’re deciding on how much coverage you’ll need, try to think of everything your loved ones may need help with financially after you’ve passed. Make sure the amount you choose covers all the bases. A good rule of thumb to use is 7-10X your annual salary to determine your target amount.
Ready to get life insurance? You’re not alone! Here are some options to get you going:
START WITH RESEARCHING YOUR OPTIONS
NerdWallet is a great resource for you to compare policies and prices across different providers. They have a network of companies that they’ve included and grow the list daily.
GO WITH A DIGITAL INSURER
We’re personally big fans of Bestow because of their simple online application process, customizable options for insurance policies and affordable rates. See what they’re all about and get life insurance coverage in a wink.
GO WITH A LOCAL INSURANCE BROKER
If you prefer the personal touch of discussing with someone over the phone, google an insurance broker in your area that specializes in life insurance. Insurance brokers typically offer you multiple different product options and can provide hands-on advice on which insurance product might be best for you.
Do it together on Zeta - A (totally free!) online tool to help couples manage their money.
Ready to open up financially to your partner? These tips will help get you on your way.READ MORE
Keeping track of your personal finances with a budgeting app is the smart move, but which one do you pick? We’ve got the lowdown on the most popular ones.READ MORE
A newsletter designed to help
you achieve relationship goals.
A newsletter designed to help you achieve relationship goals.
To safely consume this site, we recommend reading this disclaimer. Any outbound links will take you away from Zeta, to external sites in the world wide web. Just so you know, Zeta doesn’t endorse any linked websites nor do we pay/bribe anyone to appear on here. Any reference to prices on the site are just estimates; actual prices are up to specific merchants and their current desire to charge you for things. Also, nothing on this website should be construed as investment advice. We’re here to share our favorite tools, tactics and tips for managing your money together. This content is for your responsible consumption. Please don’t see this as a recommendation to buy specific investments or go on a crypto-binge. Lastly, we 100% believe that personal finance is exactly that, personal. We may sometimes publish content on this website that has been created by affiliated or unaffiliated partners such as employees, advisors or writers. Unless we explicitly say so, these post do not necessarily represent the actual views or opinions of Zeta.
The Zeta Joint Card and Joint Account is offered by LendingClub Bank, N.A., Member FDIC. Zeta Help Inc. is a service provider of the issuing bank. All deposit accounts of the same ownership and/or vesting held at the issuing bank are combined and insured under an FDIC Certificate, up to $500,000. The Zeta Joint Debit Card, provided by MasterCard, may be used everywhere where MasterCard Debit Cards are accepted.