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Life insurance 101: because you asked
When you’ve been in the insurance business as long as John Hancock, you hear a lot of questions. And give a lot of answers. So we decided to share with you the Top 7.
Do I need life insurance?
Allow us to answer your question with a question: Will someone (a family member especially) suffer financially if you die? If the answer’s yes, then YES. You may need life insurance.
The cash benefit of your life insurance will be needed to help replace your income so that your family and those left behind can continue on with their lives. Taking care of their immediate financial needs and hopefully their long-term ones, too. Losing you would be tragic enough. You don’t want them to have to make even more drastic changes to their future plans as well.
Don’t I already have life insurance through work?
It’s true that many employers offer life insurance as part of their benefits package at no cost. It’s usually a “term policy” (more on that below) that’s equal to one or two times your annual salary. This is called group insurance and it’s a really nice benefit to have. But it’s typically not enough to meet most peoples’ needs — especially if you have or plan on starting a family.
How much insurance coverage do I need?
Everyone’s financial goals and needs are different, so there’s no hard and fast rule of thumb. Depending upon the size of your family and their ages, you’ll want to take into account their many financial needs. From day-to-day basic living expenses to longer term needs like paying for college, paying off the mortgage and retirement for your spouse. When you consider all those needs, you may find you actually need somewhere between 5 to 10 times your current salary in coverage. Maybe more.
What kinds of life insurance are there?
The short answer to this is this: There are many different kinds of life insurance products, each offering varying benefits. That said, there are two main categories: Term and Permanent.
Term Insurance — As the name implies, Term Insurance provides protection/coverage for a specified period of time. A term policy for 20 years is common, but you can get term protection for anywhere from 1 to 30 years. This type of coverage might make the most sense when you need coverage for a set period of time, say until your kids graduate college or the mortgage is paid off.
Term insurance offers the greatest amount of coverage for the lowest initial cost (premium), making it a good choice for young families or people on a tight budget. But it only pays a benefit if you die during that term. It does not offer any potential internal cash value build up like you could get with a Permanent policy.
Permanent Insurance — This type of policy offers you lifelong protection, including a death benefit and the added advantage of accumulating in cash value tax-deferred. (It’s like having insurance and an investment in one policy.) And any cash accrued from the policy can be withdrawn to pay for personal expenses or bills, or as a supplement to your retirement income.1
So why doesn’t everyone just choose Permanent insurance? Cost. The initial premiums you pay for Permanent are much higher than those for the same amount of coverage of a Term policy.
But no matter which type of policy you consider choosing from us, they all come with the John Hancock Vitality Program. It’s the only life insurance that helps protect your family into the future and rewards you today for the things you do to live a longer, healthier life. Like going for a walk, buying healthy food, getting a good night’s sleep and more. Learn all the ways you can benefit from the John Hancock Vitality Program here.
How can I get life insurance?
In addition to your employer-provided life insurance, you can purchase insurance directly from a provider (via online, over the phone or by mail), or through an intermediary, such as an insurance broker or advisor.
Many people need help determining how much coverage they really need, and which type of policy is best for them. They usually start by talking with friends and family members or a trusted advisor, like an accountant or lawyer.
If you need more help, you may want to consider working with an insurance professional (a broker or agent). Unless you have a personal reference, it’s best to talk to at least two before choosing who to work with so you have a point of comparison. Be sure to ask about their education and experience, any special training, professional designations and/or associations they belong to. And feel free to ask them how much they expect to make or charge you for their services.
How much does life insurance cost?
Insurance rates (premiums) are based primarily on life expectancy. And there are a lot of factors that go into figuring that out. These include your gender, current age, health and health history, as well as lifestyle (smoking, alcohol consumption, etc.). That’s why it’s a good idea to buy life insurance as early as possible. The longer you wait, the more rates will increase based solely on your age.
What does life insurance cover?
Should something tragic happen to you, your life insurance proceeds would go to your beneficiaries (the family/friends) named on your policy. Those funds can be used for anything they need to pay for:
Outstanding debt, like the mortgage, credit cards, car payments
Household bills, including rent, utilities, healthcare and more
Maintaining the continuation of a family business
Funding a spouse’ retirement plan
Life insurance that rewards you for living a healthy life.
1 Loans and withdrawals will reduce the death benefit and the cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2.
Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock. Vitality rewards are subject to change and are not guaranteed to remain the same for the life of the policy.
Insurance policies and/or associated riders and features may not be available in all states.
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.