We're living through a time period of great uncertainty, both for our overall health as well as for our finances. Many people happen to be let go, furloughed or have lost work hours because of the COVID-19 pandemic, and day-to-day life is becoming increasingly unpredictable. What does that mean for something similar to life insurance coverage? Could it be even worth thinking about trying to get life insurance coverage if you are unemployed, or worried which you may lose your work soon?
Aneesha Deshpande, Head of Product Innovation at Haven Life, says yes, running out of energy still get life insurance if they're unemployed. “In these unstable conditions, it's more essential than ever to make sure that your dependents are financially protected. For those who have a need for life insurance and you haven't purchased it yet, this really is still a lot of fun to buy coverage.”
When may be the right time to buy life insurance coverage? Deshpande advises people to consider a term life insurance policy any time they experience a “me-to-we” moment: a marriage, a home purchase, or even the birth of the child, for example. These moments happen whether there's a global pandemic or perhaps a nationwide recession or not, and they happen whether or not you're working – so let's look at the best way to successfully make an application for life insurance coverage when unemployed.
Why you need to apply for life insurance coverage – even if unemployed
You should buy life insurance coverage when you're unemployed for the similar reasons you buy life insurance when you are employed: since you want to protect and supply for your loved ones inside a worst-case scenario. “You should get coverage in position once you require it,” Deshpande advises. “Life insurance premium pricing is lower younger and healthier you're.” A healthy 35-year-old woman can purchase a 20-year, $500,000 term life insurance policy for about $20 monthly.
If you and your partner just were built with a baby, for example, it's a good time to get life insurance coverage regardless of what your employment status is. Company, stay-at-home parents can (and really should!) get insurance coverage that belongs to them, even when their co-parent is already covered. For stay-at-home parents in particular, remember that a partner's income and coverage amount will be considered when determining coverage eligibility.
Likewise, should you recently got married, just obtained a home or are presently reducing co-signed student loans, you might want to consider a life insurance policy. If you were to die before paying off your mortgage or perhaps your co-signed private loans, the lack of a life insurance policy could leave your loved ones with significant financial stress. An inexpensive term life policy from a reputable insurance company provides reassurance, and you don't have to be employed to get some of this peace on your own.
How much insurance coverage does an unemployed person need?
When wondering just how much life insurance coverage you'll need, two factors are usually considered: your earnings and your dependents' long-term needs. “Generally speaking, the coverage that you need is really a function of both your financial contribution towards the household and assets in addition to what expenses your dependents will need to cover going forward,” Deshpande says.
While that may sound complicated to find out, a web-based life insurance calculator can help you out A calculator will take into account factors such as age, family structure and debts that will help you confidently determine your insurance policy needs. Income is a factor, too, so if you're currently unemployed, list a current salary to get a more accurate estimate.
You should also ask yourself whether your loved ones will need enough money to pay for funeral expenses, repay debts (including mortgages) or pay for college, and how that might affect the amount of life insurance coverage you buy.
You might have seen life insurance “rules of thumb” that suggest your lifetime insurance policy should be between 5 and 10 times your salary. That can be a type of broad estimate can be a nice beginning, an existence insurance calculator will help you think of a more specific number that really reflects your beneficiaries' needs.
It's also important to avoid buying too much coverage, especially if you are experiencing a brief income reduction. Even when your career gets back on the right track, having too much life insurance coverage could be a hindrance, not a help. For those who have more life insurance than all your family members actually need, you'll end up paying higher premiums – which isn't best use of your hard-earned cash. “That extra cash will go into an urgent situation fund, or you can invest. It shouldn't visit excess life insurance” Deshpande explains
Is it harder to purchase life insurance coverage when you're unemployed?
Applying for term life is relatively simple, particularly if you begin the process online. Deshpande notes that unemployed applicants is going to be asked some additional questions regarding household income, prior occupations and potentially just how much insurance coverage their partner currently has. “The questions are rather straightforward and won't occupy an excessive amount of your time and effort,” says Deshpande.
The underwriter will make sure your household has income to pay for the life insurance premiums associated with your coverage. She or he will even take a look at the amount of coverage you've requested and evaluate whether it's appropriate given your income history and earning potential. In some instances, unemployed life insurance coverage applicants can request the same quantity of coverage as their income-earning spouse or partner; in others, unemployed applicants are restricted to a certain degree of coverage (often up to a $1 Million).
The coronavirus pandemic has prompted life insurers to produce new choices for temporarily unemployed applicants. For example, Haven Life, which sells policies that are from MassMutual, happens to be accepting temporarily unemployed applicants and won't require them to possess a partner who already has life insurance. An underwriter will probably inquire about their prior income and occupation, as well as when they expect to return to work – which information will determine just how much coverage they are able to purchase
Should you buy life insurance if you feel you may lose your work?
The right time to purchase life insurance coverage is when you've people who depend on you financially. The benefit of buying life insurance outside of sort out a company like Haven Life is that coverage isn't job dependent. After you have coverage in position, you can maintain that coverage even when your employment status changes – as long as you can keep making your monthly premium payments.
Additionally, buying coverage while you are still employed will reduce the likelihood of questions regarding income from an underwriter. One less step in the world of simple, digital life insurance coverage.
What happens if you cannot keep up with your lifetime insurance costs?
What if your financial situation changes and you can no longer maintain your life insurance costs? This can be an issue whether you're working or unemployed. As most people have recently learned, life can throw you into some truly unexpected situations – and you might end up in a position in which you no longer have enough money to cover all the expenses in your budget.
One option is to take down life insurance coverage. This lets you continue protecting your dependents and beneficiaries while cutting your monthly premiums to some more affordable level. Remember that it's much easier to reduce coverage than it is to increase it (which usually needs a new application and it is susceptible to medical underwriting.)
Another choice is to take benefit of payment grace periods. If you can't create a life insurance premium payment on its deadline but could cover the cost after an upcoming payday, you may be able to use a grace period to postpone your payment. Haven Life, for example, provides a grace duration of at least 31-days where your insurance policy will stay active as long as you make your payment per month within the period.
MassMutual, which issues the policies sold by Haven Life, provides special help people affected by the COVID-19 pandemic. Contact Haven Life's customer success team to learn more and request an accommodation.
Whatever your circumstances, it is really an unprecedented time. Ideally, your term life policy could be affordable enough that you could make the monthly obligations regardless of changes for your finances. But if you do have to request a postponement or adjust your coverage, talk to your insurer. Most reputable insurance companies are well aware that individuals are struggling financially at this time and are ready to do everything they are able to to assist.