How to Take Control of Your Life Insurance Policy
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Most people think of life insurance as just another employer-sponsored benefit they can easily sign up for—but there’s a lot more to life insurance than that. As more people start nontraditional careers—whether it’s working as a freelancer, starting a small business or choosing a flexible work-from-home gig—fewer people are receiving a benefits package with a life insurance policy in it.
Whether working in an office or not, it’s clear that you need to take charge of your life insurance. Defining what you need from a life insurance policy and learning the logistics of signing up for one have become more imperative than ever. So how do you gain control over your life insurance?
If employer-sponsored insurance is an option:
A good thing about employer-sponsored life insurance policies is that there’s no medical exam to qualify, so you can easily enroll; however, these policies are owned by the employer that’s paying the premiums, whether partially or in full, so you will lose your coverage immediately should you leave your job.
On average, employer-provided coverage is limited to a payout of one to two times your annual income.1 It’s important to check if this is enough to cover your family’s overall needs, like your mortgage or your kids’ school tuition. If you need help, the following formula will allow you to determine how big a policy you may need.
Life insurance coverage formula:
Annual salary - Annual additional income (savings, investments, assets, etc.) = Annual shortfall
Annual shortfall x 10 = Life insurance coverage needed2
Some employers allow you to buy additional coverage if you need it, but it can sometimes be more expensive than buying an individual policy directly from a life insurance company. Additionally, that coverage is frequently capped at a level that’s still not enough to meet your needs. If that’s the case for you, then an individual policy may be an option.
While employment is a factor when applying for an individual life insurance policy, being unemployed doesn’t automatically disqualify you. If you lose your job, don’t wait to apply for an individual policy. The shorter the period of unemployment, the better it looks to the insurance company.3
If you need to go beyond an employer-sponsored plan:
Most people see life insurance as a pricey expense that may blow up their already tight budget. But the reality is that it can be a lot more affordable than most people expect.
Individual life insurance policies are often less expensive than the supplemental policies provided through an employer.1 Because premiums on certain types of individual policies do not increase as you get older, you can pay less if you get a policy sooner rather than later. For example, a healthy, nonsmoking, 40-something male may pay less than $500 per year for a 20-year term policy with a million-dollar death benefit.1
Determine your coverage needs based on your family’s overall needs, not just your income
Freelancers and small business owners don’t often have set salaries, so annual income isn’t a reliable measure to determine their life insurance policy coverage needs. And what about stay-at-home parents? The services they provide their family on a daily basis can cost a small fortune if they have to hire help and go back to work.
That’s why it’s important to determine coverage based on your family’s overall needs. For example, the average annual cost of full-time infant care in Massachusetts is $17,062.4 Then there’s school tuition to consider, not to mention housing, transportation and groceries. Your life insurance policy can help cover all those expenses in your absence.
Different policies have different advantages
A Term Life Insurance policy covers you for a certain period of time, while a Permanent Life Insurance policy covers you for life. Term policies tend to be less expensive, depending on the amount of time covered (10, 20 or 30 years). Permanent policies cost a bit more, but they accumulate cash value.
A solid life insurance policy doesn’t just help protect your family in your absence. It gives you peace of mind every day. And with John Hancock, adding Vitality Plus to your policy can help you save even more on your life insurance cost just by living a healthy lifestyle.
Citations:
1 Forbes: “7 Myths about life insurance” by Erik Carter, June 6, 2014 https://www.forbes.com/sites/financialfinesse/2014/06/06/7-myths-about-life-insurance/#36f464407585
3 Quotacy: “I’m Unemployed. Can I Get Life Insurance?” by Natasha Cornelius, November 16, 2020 https://www.quotacy.com/unemployed-still-get-life-insurance/
4 Mass Live: “Massachusetts has the highest state average cost of child care in the nation” by Michelle Williams, February 14, 2017 https://www.masslive.com/news/2017/02/the_64000_question_what_child.html
This material is not intended to provide advice. It is intended to promote awareness and is for educational purposes only.
Insurance policies and/or associated riders and features may not be available in all states.
Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock.
Insurance products are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA 02210 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.
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