Many people I know don’t have life insurance. I’m not talking just single people with no dependents. I’m talking about people who are the main breadwinners in their families with stay-at-home spouses and kids.
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I recently heard of a situation where a husband died unexpectedly and it was thought he didn’t have life insurance as he repeatedly said he didn’t think it was necessary. There was concern because the spouse was a stay-at-home mom with two little kids.
Thankfully it was found out he had a decent-sized policy through his job so the family is ok moneywise but being exposed to that situation made me an even bigger proponent of having life insurance.
What is life insurance?
Simply put life insurance is a policy that pays out after you die. You make monthly payments and the insurance company provides a previously agreed-upon payout to your beneficiaries.The cost of life insurance is based on a variety of factors such as the type of insurance you get
- The amount of the death benefit
- Your age,
- Your medical history
- Your overall health
- Your lifestyle (e.g. you have risky hobbies or do a lot of travel to places considered dangerous)
As you get older the price of life insurance increases. So it’s better to get it when you’re young and healthy so you can lock in a good rate.
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The benefits of life insurance
Having life insurance is very important, especially if you have a family or people who depend on you and your income. Life insurance can help pay for funeral costs, make sure the mortgage is paid, debts are paid off, the kids have money for college, and the regular household bills are paid.
Even if you don’t have a spouse or kids having life insurance can help your surviving family members pay for the expenses you leave behind should you pass away. Especially if you will be leaving behind debt like student loans, credit cards, or a mortgage.
Even if you don’t have a spouse or kids having life insurance can help your surviving family members pay for the expenses you leave behind should you pass away. Especially if you will be leaving behind debt like student loans, credit cards, or a mortgage.
The thing to remember is that life insurance isn't for you. It's for the people you leave behind. And if you're the main breadwinner, have a spouse and kids you don't have life insurance you are being very selfish. And believe me, if you don't have ample life insurance people will talk about how selfish you were after your gone. I know because I've attended funerals of husbands who left no life insurance and everyone was talking about it.
Where to get life insurance
One place you can get life insurance through your job as many places offer it as a benefit. I personally don’t think that should be your only policy because what happens if you get laid off or are in between jobs when something happens? You likely aren’t covered. While it worked out for that family I mentioned earlier for every one of them there are many more who it didn’t work out for.
I’m a fan of getting your policy outside of your work because it will stay with you throughout your life changes. I have a free policy through my job but I also have a term policy that I got on my own.
- Your financial planner or advisor which is the original route I took
- Through your auto or home insurance provider
- An online insurance broker like Zander Insurance which is what I used to get my new policy
- From your bank or financial institution
What type of life insurance to get
had no idea that there were so many types of life insurance available until I started doing research for this post. I had only heard of term life insurance until a few years ago when I heard about whole life insurance. What I found from my research is there are so, so many more types.
Now I’m not going to go into the detail for all of the types because that would take a while and Ramsey Solutions actually did a good job of breaking each one down on their site.
Some of the different types of life insurance are
- Term life insurance
- Whole life insurance
- Universal life insurance
- Variable life insurance
- Burial insurance/funeral insurance
- Survivorship life insurance/joint life insurance
- Mortgage life insurance
- Credit life insurance
- Supplemental insurance
I have term life which is life insurance that has an end date. Term life insurance policies can be bought in lengths of 10, 15, 20, or 30 years depending on insurance company offerings. During the term of the policy, rates stay the same so you pay the same rate for the length of the policy. The policy can be renewed at the end of the term, usually for higher rates because well, you’re older.
How much life insurance to get
How much life insurance you need can be based on several different factors. Such as- The number of dependents you have
- What the money may be used for
- Your current income
- The amount of your current debts
- If you plan to change your marital status in the near future
Related read: The Types Of Insurance Every Homeowner Should Consider
And that’s not an exhaustive list. As you can see there are multiple factors that can be used to determine the amount of life insurance you need. This may not make it easy for you to figure out what you need on your own.
To simplify it some experts suggest getting 10-12x your income if you’re the main breadwinner. If you’re not getting $250,000 - $500,000 could suffice.
You can also talk to an insurance agent or your financial planner for some advice or use an online tool like this one from State Farm that can give you an idea of how much life insurance you may need.
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For my wife and me it's not about kids since we don't have any, but more so about protecting each other in case of tragedy. You never know how you will react to an unexpected death of a loved one and it may have a dramatic impact on your ability to work and, in turn, your short- and long-term income.
ReplyDeleteSo true. You don't know how you will react. Thanks for sharing!
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