Life InsuranceTerm Life Insurance

Frank (35, non-smoker) and Angela (34, non-smoker) have two young children, Dana (6) and Mia (4). Both Frank and Angela work full time, earning salaries of $45,000 and $50,000 respectively. It is important to both of them to ensure they are protecting one another, and their kids. They are specifically concerned about the next 30 years while their children grow up and become financially independent, and while they save for their retirement goals. They want to ensure that the following items are taken care of if one of them passes away:

• Mortgage: $300,000
• Loans: $20,000 (includes vehicle loan and line of credit for home renovations)
• Education costs for children (estimate): $15,000/year each = $120,000
• Funeral costs (estimate): $20,000

Total Current Need = $460,000

• As mentioned, Frank & Angela also want to ensure their income is protected for the next 30 years as well:

• Frank’s income = $45,000 x 30 years = $1,350,000
• Angela’s income = $50,000 x 30 years = $1,500,000

Based on this example, Frank would require $1,810,000 of coverage (based on current need and income replacement) and Angela would require $1,960,000 of coverage. Based on the 30 year coverage need, the expected monthly premiums would be approximately $216 for Frank and $161 for Angela – that is less than $13/day combined to ensure their family is protected, by covering all outstanding debts, education costs, funeral expense, and replacing their income for loved ones left behind for the next 30 years!

Brian (27, non-smoker) is single with no dependents. Currently he rents an apartment, but is hoping to purchase a house in the next 3 years, at which point he will have a mortgage of $275,000. He currently earns an income of $60,000/year and wants to ensure the burden of his debts, both now and in the future, aren’t left for his loved ones to deal with:

• Future mortgage: $275,000
• Student loans: $25,000
• Other debts: $15,000 (includes credit card balance and car loan)
• Funeral costs (estimate): $20,000

Total Current Need = $335,000

Based on this example, Brian would require $335,000 of coverage (based on current need and future need). At the current time, Brian doesn’t have anybody relying on his income other than himself, but in the future this could change and require additional insurance coverage as in the example above. The expected monthly premium for this level of coverage would be approximately $20 – less than $0.70/day for a 10 year term policy. This would ensure that his loved ones aren’t left responsible for his outstanding debts, but perhaps more importantly, Brian has locked in his premiums for the next 10 years, no matter any change in his health or age!

Harold (48, non-smoker) and his wife Lorraine (46, smoker) have begun thinking about their retirement. They want to retire at the same time in 18 years, but are concerned whether either of them would be able to retire if the other passed away during that time. They have no children or other dependents, and have identified the following items as things they would want protection from if the other passed away:

• Mortgage: $150,000
• Other loans: $15,000 (includes credit card balance and car loan)
• Funeral costs (estimate): $20,000

Total Current Need = $185,000

• As mentioned, Harold & Lorraine also want to ensure their income is protected for the next 18 years as well. Harold earns $75,000/year and Lorraine earns $50,000/year. Their current lifestyle requires that their entire income is replaced for each of them:

• Harold’s income = $75,000 x 18 years = $1,350,000
• Lorraine’s income = $50,000 x 18 years = $900,000

Based on this example, Harold would require $1,535,000 of life insurance coverage (based on current need and income replacement), and Lorraine would require $1,085,000 of life insurance coverage. For a 20 year term policy (which could be cancelled at no cost after 18 years if they no longer require the coverage), the expected monthly premiums would be approximately $336 for Harold and $320 for Lorraine. Although the premiums are higher at their age (and in Lorraine’s case, because she is a smoker) they are ensuring that both of them will be able to retire on schedule with the funds to support the lifestyle they desire for less than $22/day combined. In the absence of life insurance, if something happened to either of them, the surviving spouse would likely never be able to retire, unless they significantly reduce their lifestyle expectations.

• • Term life insurance is a lower cost option that provides you with coverage for a shorter period. Term is commonly used to provide coverage for a mortgage or outstanding loans, income replacement during your working years if you were to pass away, to help children fund their post-secondary education and any other protection you may need in the short term. Reviewing your insurance need with a licensed advisor will help you understand what type of coverage suits your needs.

• The most common term lengths are 10, 20 or 30 years. The term of your policy should cover you for as long as you require the coverage. For example, if you had 18 years left on your mortgage, you would want to have at least 20 years of term. The most common term is a 20 year term as it is sufficient for many mortgages and provides coverage for families with young children until they are expected to be financially independent. Our Hometown Life Insurance team of licensed professionals will help you find the right coverage for your situation.

• Policies offered by Hometown will offer terms that will automatically renew for another term of the same length. You will receive notice of the new higher premiums you will pay and there is no requirement to complete any new medical tests or questions. However, if you are still healthy, you have the option to apply for a new term policy, which will reduce your monthly premiums to a rate that reflects your current health. Our Hometown team will be in contact with you before your policy renews to discuss your options in more detail!