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Freedomplus newsletter

RJ Hamster

August 2021

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 Dashboard Invite Coming Your WayWe’ve been sending out invites for the new dashboard. Don’t worry if you haven’t gotten your invitation yet—you will soon! Just keep an eye on your inbox.

Once you have access to your new dashboard, you’ll be able to: 

 How Much Does Life Insurance Cost
(and How Much Do I Need)?Note: This is Part 2 of a three-part series discussing life insurance, how much it costs, and which type might be best for you with helpful resource links from Haven Life Insurance Agency (Haven Life). Don’t miss next month’s newsletter for Part 3!

A common roadblock that prevents people from buying life insurance is a misconception that it’s expensive. In reality, the majority of Americans tend to overestimate the cost of a term life insurance policy—sometimes by as much as five times the actual cost.1

How much would a life insurance policy cost for you? It depends, but it’s probably not as expensive as you think. In this article, we’ll break down the cost of life insurance and how to figure out how much coverage you need.
Haven Term Sample Rates*

20-year term life policy for a healthy, non-smoking 35 year oldDeath BenefitMale Monthly PremiumFemale Monthly Premium$250K$13.11$11.86$500K$20.72$17.50$750K$27.95$23.13$1M$34.08$29.03
20-year term life policy for a healthy, non-smoking 55 year oldDeath BenefitMale Monthly PremiumFemale Monthly Premium$250K$76.77$56.64$500K$151.05$109.56$750K$223.44$161.22$1M$296.79$216.69
Policy factors
The price you pay for life insurance depends on your policy, which can vary based on: 

Generally, higher coverage, a longer term length, and more add-ons will raise the cost of a policy. Similarly, policies that cover you for the rest of your life (like whole life or other types of permanent policies) are more expensive than policies whose term ends after 10, 20, or 30 years.

Personal factors
You can easily get an online estimate of your cost from Haven Life. But in general, the insurance company that issues a policy you apply for will need to get to know you before giving you an exact rate. When calculating your final rate, most insurers will factor these categories: 

These factors help the insurance company understand your health, which can determine your risk. Generally speaking, the younger and healthier you are, the lower your rates will be since you present a lower risk. Women also tend to pay less, since they have longer life expectancies than men.

Your lifestyle can affect your rate, too. Smoking carries a hefty price tag, as tobacco users pay considerably more for life insurance than their nonsmoking counterparts. High-risk hobbyists like rock climbers, scuba divers, and BASE jumpers will either pay more or be denied a policy altogether.

Traditionally, life insurance policies are medically underwritten. With a medically underwritten policy, the life insurance company often requires a medical exam which can include blood and urine samples, a blood pressure check, and other measurements of your health. Medical exams can lengthen the time it takes to get a policy, but might lower your rates if you’re relatively healthy. Sometimes, insurers will even waive the in-person medical exam if you’re healthy enough, which is the case for some Haven Termapplicants. But if you’re not interested in that extra step, you could look into a no-exam policy such as Haven Simple, which has slightly higher rates.

Figuring out how much coverage you need

There’s an old rule of thumb that says you should get five to ten times your annual salary in coverage, but that may not give you the most accurate estimate. You could also use Haven Life’s calculator to quickly figure out an estimate. To be the more accurate, you should calculate the expenses your dependents will need to cover in your absence, such as:

Debt
Do you have debt that would get transferred to a dependent? Perhaps you have private student loans, a mortgage, or your significant other cosigned on an auto loan. Add up all the debt that your dependents would need to repay without you.

Income replacement
If you want your dependents to keep their standard of living, you’ll need to account for your lost income. Take your annual salary and multiply it by the amount of years you want to replace your income for. As an example, maybe your spouse is a stay-at-home parent. In that case, you could multiply your salary by the number of years until your youngest is out of the house.

Higher education
If you plan on socking away money for your kids’ college expenses, tally that expected cost into the total as well.

Final expenses
Nobody likes this fact, but funerals and end-of-life preparations are expensive. In 2019, the median cost of a funeral with a viewing and burial was $7,640 ($5,150 for cremation).2Unless your family wants to go DIY with your burial (which is technically possible), you might want to account for these costs.

What if I have life insurance from my work?

Many people get coverage from their employer, which is a nice perk (and it’s often free). Unfortunately, it’s often not enough coverage for your dependents, especially if you plan through all the scenarios above. And if you leave your employer, you leave that insurance behind too, unless you want to pay a high price to convert it to a permanent policy that you can take with you.

If for some reason you can’t get an individual life insurance policy (like if you’ve been denied a policy because of health), your employer might be the best place to get life insurance. Group policies aren’t medically underwritten, so people who might not otherwise get coverage could up their coverage amounts through work.

How do I decide which life insurance is best for me?

In the final post in this series, we’ll dive deep into the biggest differences between term life insurance and whole (or permanent) life insurance. That way, you can make an informed decision about your life insurance and, once you get a policy, rest easy knowing you made the right choice.

Footnotes

*These quotes don’t apply to applicants in CA, DE, NY, ND and SD.

As part of our affiliate partnership with Haven Life, we may receive compensation if you visit their site.

Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY), California (DTC-CA), and other states it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.

Haven Simple is a Simplified Issue Term Life Insurance Policy (ICC20 HAVEN SIMPLE in certain states, including NC) issued by C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

Issuing the policy or paying its benefits depends on the applicant’s insurability, based on their answers to the health questions in the application, and their truthfulness.

 Refresh Your Budget for a Post-COVID EconomyThe pandemic changed the world and the financial landscape as we knew it. As such, the budget you created pre-COVID might not hold up very well in a post-pandemic economy.

Granted, there’s uncertainty with new variants of COVID, but in general, businesses are reopening and normal activities are resuming. That means now is the perfect time to revisit and refresh your budget.

Here are a few things to watch out for—both in the economic landscape and your financial habits—as you modify your budget for the “new normal.”

Shortages

First it was toilet paper, but now it seems like pretty much anything could suddenly be hard to find. And when you find it, it’s more expensive than normal. These shortages shouldn’t be permanent, though. More likely, the supply chain just needs to catch up with an increased demand.

What does this mean for your budget? Try to be flexible, especially with the uncertainty of new outbreaks. When there’s a shortage on an item that’s causing a price increase, see if you can hold off on purchasing it until the shortage is over. It’s not possible for everything, but when you can avoid buying a nonessential item, you’ll pay a much fairer price for it once the supply reaches equilibrium with demand.

Real life example: Used and new cars are selling far above MSRP because of a major supply shortage. If you don’t absolutely need a car right now, see if you can hold off buying one until prices get back to normal—it could end up saving you thousands. (On the other hand, if you have an unused car lying around, now’s the time to sell!)

Inflation

It’s no secret: things generally cost more than they used to. On top of watching out for shortages that increase prices temporarily, you need to prepare for the inflation that increases prices in the long run. For example, experts speculate that essentials like food, gas, and rent could be more expensive from now on due to inflation.

If you haven’t done it in a while, track your spending over the next few months. If you notice specific categories getting more expensive than before but you aren’t changing your spending habits, you might need to pad extra room into your budget for the essentials and reevaluate how much you allocate to nonessentials. You could also ask your employer for a cost of living raise if they don’t automatically offer one.

Return-to-normal habits

Saving money was a lot easier when everything was closed. But now that restaurants, theaters, and other businesses are starting to resume normal hours again (at least for now), you might be spending a lot more than before—including before the pandemic.

Some of that is to be expected; It’s normal to want to splurge after holding back for a while! In your budget, you should allocate some money for eating out or entertainment—just be responsible about it. Prices for eating out and entertainment are higher now; make sure they still fit in your spending plan with your other goals of saving or paying down debt.

Lifestyle creep

With life getting back to normal, you might notice yourself making more purchases purely for convenience. Getting lunch out or coffee on the way to work aren’t economical, but they make life easier. Make sure to track how much you’re spending on these convenience purchases and set limits since they can add up over time.

But budgeting isn’t just about cutting back and enduring on less. You might want to intentionally set aside more money for other categories. After a rough year, the best decision could be to take that vacation that you had to put off. Or the gym membership you cancelled could give you the human interaction you missed out on while working out at home.

The point is, you’re likely to make more purchases that you didn’t account for during the pandemic. Make sure they fit within your budget too!

In this rapidly changing economy, being flexible and responding to change could be the most important thing you do for your finances. It’s easier said than done, but in the long run, learning to be responsive to sudden changes in the economy can help you keep financial stability—regardless of what’s happening in the world.   Hyperlinks within this newsletter article will direct you to a third party website. The information presented within this email is for general informational and educational purposes only. Any information contained in this email is not intended, and should not be construed, as legal, investment or financial advice. Your review of this newsletter or use of information contained herein does not constitute or create any relationship between you and Freedom Financial Asset Management, LLC (“FFAM”), or any of its affiliates or partners, and you have sole responsibility for evaluating the information contained in this communication and any decisions you make based on such information. Although the material contained in this email was prepared based on information from public and private sources that FFAM believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and FFAM expressly disclaims any liability for the accuracy and completeness of information contained in this email and/or the associated hyperlinks. You should contact your attorney, financial advisor, accountant or other financial professional to obtain advice with respect to any particular issue or problem discussed herein.Privacy Policy| Unsubscribe

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The information presented within this email is general in nature and is suggested to be used as a starting place for your own research and due diligence. Any information contained in this email is not intended, and should not be construed, as investment or financial advice. Your review of this newsletter or use of information contained herein does not create any fiduciary relationship between you and Freedom Financial Asset Management, LLC or its partners and you have sole responsibility for evaluating the information contained in this communication and any decisions you make based on such information.

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