When it comes to writing a will or setting up your life insurance policy, it is easy to say, "I'll do that tomorrow." But what if tomorrow ushers in an emergency like the coronavirus pandemic? A living will and a life insurance policy is something every adult should have in place in preparation for the worst-case scenario.
But according to a 2020 study done by Caring.com, a site with information about caring for seniors, only 32% of adults say they have a will — a 25% decrease from the number of people in 2017.
Caring.com CEO Jim Rosenthal finds these numbers troubling. "It's not the most challenging thing out there," he told TODAY. "Anything we can do to nudge people in an empathetic way to start this process is helpful."
To help with your estate planning during this pandemic, TODAY spoke to experts to better understand the ins and outs of wills and the different types of life insurance.
What is a will and what makes it valid?
When it comes to estate planning, there are two key terms to define: a will and life insurance.
A will is a legal document that allows a person to express his or her wishes to family members or loved ones in cases when that individual is unable to express them, like after death.
For the will to become a legal document, it must be signed in front of and initialed by two disinterested witnesses — people who will not benefit from the contents of the will. A notary is not required for a will to be valid, but many include a self-proving affidavit in their wills that proves the witnesses signed the will in the presence of a notary. This is not required for a will but prevents witnesses from testifying in court if there is a question of the validity of the will.
What is life insurance? What's the difference between group, whole and term life insurance?
There are three types of life insurance: group, whole and term.
Group insurance is affordable and very convenient since it is usually included in an employee benefits package. Since this type of insurance is dependent on your job, it most likely will not follow you during a career change. It is often double your salary, or around $250,000, so you'll want to determine if that's enough money for your family to survive on should you pass away. If you want coverage exceeding that amount, it shouldn't be the sole option for you and your family.
Whole life insurance is much more costly as it covers the individual for a lifetime (as long as he or she keeps paying the insurance premiums) and offers cash value that can grow over time. It can be complex and usually requires the help of a financial adviser when purchasing. Coverage for whole life insurance varies; the world record for the most expensive policy is $201 million. The average premium for $500,000 worth of coverage through insurance company State Farm is $561.59/month.
Term life insurance is the most affordable option for new families or young adults. With smaller premiums than whole life insurance, term life insurance covers a predetermined amount of time, such as 20 years, instead of a lifetime. Unlike whole life insurance, term life insurance only pays a death benefit during the time period specified and is really for protection only (a family, for example, could buy a policy that covers the period that sees their children through college and their final mortgage payment). According to life insurance agency Haven Life, which is backed by MassMutual and provides term life insurance that can be purchased online, a healthy 35-year-old woman could get $500,000 worth of coverage for about $20 a month for 20 years.
"People are often shocked by that," said Yaron Ben-Zvi, the CEO of Haven Life. "It's less than you're spending on your coffee budget for the month."
"Term insurance — in particular for young people who are just starting out and having a family — is incredibly inexpensive," said Bob Owens, CEO of Owens Group Insurance in New Jersey. "Because the likelihood of a 28-year-old dying, even in the coronavirus time, is pretty low. Buy $1 million for a few hundred dollars a year — why wouldn't you have that for your family from the jump?"
Is there a right time to set up a will and life insurance?
"The right time is as soon as you have financial dependents," said Ben-Zvi. "For a lot of people, that does mean when they first have kids, but there could be other financial dependents as well — if your parents depend on you, if a niece or nephew or if somebody else feels their life is depending on your income."
However, for some, waiting for financial dependents is not soon enough.
"When people usually ask me when the right time is to set up your estate, I usually say it was yesterday," said Chas Rampenthal, general counsel for Legal Zoom, a legal technology company that allows customers to create documents such as a will without necessarily having to hire a lawyer.
According to Rampenthal, short-term natural disasters tend to remind people of this really important thing that they have been putting off.
"Making a will and making an estate plan is something you should be doing no matter what," he said. "Whether you are 18, 88 or 188, it doesn't really matter. You should be able to tell people what your wishes are in the case you can't tell people yourself."
How can I start estate planning while social distancing?
Before starting to settle your estate, it is important to begin talking to loved ones about the plan you would like to leave in place. From there, gather any documents you need to set up your will or life insurance to speed up the process.
Some states will allow adults to sign legal documents without witnesses immediately present through a self-proving affidavit, however, it still requires the presence of a notary. Even with social distancing, Rampenthal says you don't have to avoid a notary or disinterested witnesses.
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"Typically, you have to sign these things in ink, find a witness and they watch you sign it in ink and they sign it; or the notary has to watch you sign it, witness it and stamp it," Rampenthal said. "Now we are finding there is a rise in online notarizations or remote notaries — not just electronic, there is a difference. A remote notary is someone who can do this over the web, over video and they can watch you sign it and do an electronic notarization of that document."
Several states including Colorado, Connecticut, Florida, Illinois, Iowa, New Hampshire, New York, North Dakota, Vermont and Washington have approved temporary remote notarization, while Alabama has approved video notarization.
For states that don't have electronic notarizations, there is still a way to practice social distancing and make these documents sound by having a mobile notary or witness keep his or her distance, according to Rampenthal.
"They don't need to be 1 foot away from you while you sign; they just need to be watching while you sign."
Many companies like Legal Zoom or Haven Life are moving to the internet to allow people to set up their estates. With so many companies doing this, it is hard to navigate which one is the right one for you.
Suelin Chen is the founder and CEO of Cake, a free end-of-like planning tool that helps adults find the best services for them to create legal and health care documents online. She says that even if you are unable to get a document notarized because of your state's laws, it is always better to have something written down than having nothing.
"We know that this is going to happen," she told TODAY. "And if you don't have a plan in place, it is much more painful for your family. It can be more expensive, it can cause conflict, there can be more suffering that's avoidable."
What happens when you apply for life insurance?
When purchasing life insurance, the first step is to pick the policy that is right for you based on price and length.
The second step is to apply for insurance. Haven Life allows customers to fill out the application online, which consists of answering questions about age, health, lifestyle and medical history.
Some insurance companies will then require a phone or in-person interview with an agent to confirm the contents of your application. Additional questions about hobbies, income and net worth will most likely be asked.
Many customers will then have to take a medical exam to finalize coverage and the insurance rate. A technician will come to your home or place of work to take basic measurements, similar to a physical, including blood pressure and a blood sample.
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On April 9, in response to the COVID-19 outbreak, Haven Life announced three initiatives to increase the number of people who can qualify for instant coverage without a medical exam. The first expands what the company calls "litetouch" underwriting, which means an application can go under further review rather than requiring a medical exam right away. The second uses an applicant's past lab results instead of requiring new exams. The final initiative examines an applicant's medical claims data.
After a medical exam is passed and an application is approved, the individual can receive coverage right away as long as he or she makes the monthly premium payments.
"Oftentimes some people may not get the no-medical exam (offer) right away, but they will get what we call temporary coverage," Ben-Zvi said. "You can get up to $1 million of coverage right away even if you don’t get a no-medical offer. What that does is, you have up to 120 days to actually go get the medical exam, giving you the opportunity to get the coverage today and delay the time for you to be able to complete that hopefully to a point where the world is in a better place."
The 120 days is an extended period of time in light of the coronavirus pandemic. According to Haven Life, the standard time period was 30-90 days.
Are life insurance rates going up because of the coronavirus?
While insurance sales for March at Haven Life were 42% higher in 2020 than they were in 2019, that doesn't mean rates are also going up in light of the pandemic.
"With life insurance, we generally take a long-term view when it comes to proving and do not make changes based on short-term impacts like COVID-19," Ben-Zvi said. "Therefore, premium pricing for term life insurance is not increasing as a result of the evolving COVID-19 situation."
At Legal Zoom, it is reportedly too soon to tell if rates will be affected.
Whether you need to set up your will, life insurance or both, it's best not to wait.
"Taking the time out to make an estate plan is just so important," Rampenthal said. "This is the only way you get to speak to your family and tell them what your wishes are when you can't do it yourself ... If you want to do your family a favor, your loved ones a favor, your beneficiaries a favor, the best thing you can do is speak in writing today so they don't have to fight about it tomorrow."
