Life Insurance: The Ultimate Emergency Fund For Your Family

As we grow older, we start to begin to think more in the long-term. With the YOLO mentality of our twenties firmly in the rearview mirror, we must consider how our money decisions impact our spouse, partners, and all of our loved ones.  

That includes financially preparing for our death.

It’s never too early to get organized with your paperwork, assign beneficiaries on your accounts, create a basic will, and consider purchasing a life insurance policy.

Think about it like this: on a scale of 1-10, how much of a financial burden would your unexpected death cause loved ones? Consider funeral and other end of life costs, covering day-to-day expenses for financial dependence, and even co-signed loans.

Losing a family member is never easy. Why make things more painful when so many issues can be easily and inexpensively avoided?

This article was sponsored by Haven Life, but all opinions are 100% my own.

Life Insurance: The Ultimate Emergency Fund For Your Family

If you have managed to scrape together a healthy emergency fund, you may have experienced firsthand just how important it can be. Whether it’s quitting a job, changing careers, or surviving a layoff, an emergency fund can help you stay debt-free in the face of financial hardship. However, an emergency fund isn’t meant to last forever.

Many financial planners recommend saving three to six months of living expenses to help navigate life’s unexpected financial curveballs. But the purpose isn’t it keep you financially afloat for years; it’s meant to assist you temporarily while you are getting back on your feet.  

But if you were no longer around, would loved ones be left with a financial burden in your absence? If you have children, a partner who relies on you, or even cosigned student loans, a life insurance policy may be the additional blanket of financial security you need that a small emergency fund alone can’t cover.

Understanding the Different Types of Life Insurance

Is purchasing a life insurance policy right for you?

When weighing the pros and cons of life insurance, it’s helpful to understand the key differences between the two different types—term life insurance and permanent life insurance.

Term life insurance lasts for a specific amount of time, typically 10, 15, 20 or 30 years, based on which term length you choose. Monthly premiums are affordable, and your policyholder receives a guaranteed death benefit (the amount paid when you die). You are covered for the term length as long as you continue to pay your monthly premiums.

Permanent life insurance comes in either whole or universal form and lasts a lifetime. As you may expect, the monthly premiums for this type of life insurance are significantly more expensive. Additionally, it is more complicated because it has a cash value that can fluctuate over time. Because of its complexity, it’s worth reviewing the details with a financial planner who isn’t earning commission on the product.

It’s possible you have already been exposed to insurance salespeople trying to “help you” decide which option is best. When it comes to high-pressure sales environments, a little education can go a long way. For many people, term life insurance is a sufficient, simple, and affordable choice. And luckily, there are a lot of options for doing research online. Haven Life, the sponsor of this post, allows you to get a free online quote and compare pricing to other top insurers.

How Much Life Insurance Actually Costs

Most people who haven’t purchased life insurance have avoided it because they think it costs too much or have other financial priorities. Life Happens, a nonprofit consumer group formed by insurance providers, found consumers tend to overestimate the price.

This year’s Insurance Barometer Study, found the median consumer estimate for a healthy 30-year-old to purchase a $250,000 term life insurance policy was more than twice the actual cost.

So what’s the truth? I did some research through Haven Life. Haven Life is life insurance startup that’s backed by MassMutual and offering the ability to purchase a term life insurance policy 100% online.

Haven Life’s first-of-its-kind InstantTerm process allows you to apply through their website and find out right away if you are approved. The coverage begins immediately, and some qualified, healthy applicants won’t even need to take a medical exam.  

Here’s an example Haven Life quote for a healthy 32-year-old, nonsmoking female living in Nashville who is looking for a $250,000 term life insurance policy lasting 30 years.

screen shot of Haven Life application

After you have filled in these fields, you will be redirected to a page to create an account and fill out an application. Once you submit the application, you’ll immediately know whether or not you’re approved for coverage – all with no obligation to purchase. If you decide to move forward, you can eSign your application and coverage will begin immediately.

Is Life Insurance Right For Your Family?

Growing older often means putting others’ wants and needs before our own. Most of us wouldn’t want our parents to be stuck with unpaid private student loans, our children to be unprovided for, or our partners to struggle with covering basic expenses like the mortgage, electric bill, or groceries.

If you are the type of person who prefers to be protected against the worst case scenario, you may want to consider purchasing a life insurance policy. It’s never fun to talk about or prepare for your own death, but fortunately, there are options to make the entire process faster—and much easier—than ever before.

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Discussions — 12 Responses

  • The Green Swan December 5, 2016 on 6:12 am

    Hi Kate, nice post! Looks like Life Haven is a nice and easy to use resource. Coincidentally I just posted today on reassessing my life insurance needs with the second kid expected to arrive in a few months. I’m not sure it is necessary in our situation but would love to hear your thoughts on any considerations I may have missed. Thanks again for the great post!

    Reply
    • Kate Dore The Green Swan December 5, 2016 on 9:05 am

      It’s a personal decision! If I had children, I would definitely purchase term life insurance while I’m still in my early 30s and I can lock in super low premiums.

      Reply
  • Holly Johnson December 5, 2016 on 6:55 am

    We just got a quote for another policy on me. I’m not sure we 100% need more, but we feel like we short in me compared to my income. The best thing about term life insurance is that it’s cheap if you’re super healthy. A $1 million dollar policy on me is only like $50 per month, and I’m almost 37.

    Reply
    • Kate Dore Holly Johnson December 5, 2016 on 9:06 am

      That’s amazing, Holly. $50 per month is still very affordable and you’ll have piece of mind knowing your daughters are covered for $1 million.

      Reply
  • David @ Thinking Thrifty December 5, 2016 on 8:33 am

    We have a great provider in the UK called Vitality which encourages you into a healthier active lifestyle in order to drive down your premiums. If you also take advantage of all the freebies they offer like I do, they actually end up paying you for it!

    Reply
    • Kate Dore David @ Thinking Thrifty December 5, 2016 on 9:07 am

      Interesting, David. Adopting a healthier lifestyle for lower premiums would definitely motivate me!

      Reply
  • TJ December 5, 2016 on 11:02 pm

    I put a 30 year Million dollar policy in place right before I turned 29. If I hit age 40 or something without kids or a spouse, then I’ll just cancel it. I feel like it’s so cheap, there’s no reason not to have it. When one bad diagnosis makes you uninsurable or drastically increases your rates. I understand now everyone shares that opinion and that’s cool.

    Reply
    • Kate Dore TJ December 6, 2016 on 10:30 am

      Interesting idea, TJ. If the premiums are low, you don’t have a lot to lose. Is it a term life insurance policy?

      Reply
  • Deacon December 7, 2016 on 2:24 pm

    Life insurance is so important and I love how you said it was the ultimate emergency fund for your family. We have one kid and another on the way, so I definitely want to make sure that they are covered if anything ever was to happen to me.

    Reply
    • Kate Dore Deacon December 7, 2016 on 5:28 pm

      Absolutely, Deacon! If someone else were relying on me, I’d definitely have a policy.

      Reply
  • Predictable Snowball March 13, 2017 on 12:29 pm

    I’ve been doing a lot of research on this and have found like probably a lot of folks – ive put this off too long. You are right that its such a critical component of over financial health. Term makes so much sense for almost everyone, but whole life is very tricky. I try and not co-mingle insurance products with investments (annuities, whole life insurance, etc) so these are generally not for me.

    Reply
    • Kate Dore Predictable Snowball March 14, 2017 on 11:35 am

      Thanks for reading! Yes, I tend to stay away from these types of products, as well. Term life insurance seems to be more appropriate for most people.

      Reply