Aug 30, 2010

Life Insurance is a Priority (Carole)

You probably hate it when a salesman calls to sell you a life insurance policy, but in reality it is some of the most important money you will ever spend.  Part of any healthy financial plan includes sufficient life insurance.

Here are the basics:

1.  Buy Term life insurance.  It's the least expensive for the best coverage --  it costs a small fraction of a Whole Life insurance plan (which also contains a lousy investment vehicle).
2.  Each wage earner should be insured for ten times what they earn in a year.
3.  If you are a stay-at-home mom (or dad) you should probably have about $500,000 in life insurance on yourself.  It costs a lot to raise children to adulthood if the primary care-giver is no longer around.  If your children are nearing adulthood, you could lower this amount a bit.  But I wouldn't.  How nice to have significant money to help your young adult children with college expenses and weddings.
4.  Buy a rider on your policy for each of your children.  I would recommend at least $10,000 each.  Our youngest son passed away from cancer when he was three.  The $5,000 policy we had on him didn't come close to covering his funeral costs -- and that was 10 years ago.  We never thought it would happen to us either.

It's difficult to even think about anyone in your immediate family dying.  But this is an uncertain world we live in and it is better to be well-prepared, just in case the unthinkable happens.  I'm 48 (today, in fact) and  already I've known dozens of friends and family members who have lost a spouse or child -- or both.  It happens every day.  You have absolutely no guarantee it won't happen to you.

Certainly a life insurance check for $500,000 or $1,000,000 (tax free, I might add) will not replace a loved one who has died, but it would certainly make your family's financial future much easier to manage.  Believe me, you'll have enough to deal with if a family member dies.  What a blessing it would be to pay off your house and invest the rest to live off of for the rest of your life.

This is a priority, and term life insurance is pretty inexpensive when you consider the incredible safety-net it provides for your loved ones.


The Liddells said...

We have always thought this was a good idea. We have life insurance. If my husband dies, I get 750,000 and if I die, he gets 500,000. I've thought before about what I would do if he died and I didn't have that life insurance. I don't know how I would pay the bills.

Happy Birthday, by the way! Hope you have a great day!

Carly said...

Happy Birthday!

We've been in the process of getting life insurance... and it feels so good to know it's there.

And speaking of insurance, we were talked just last night about how worth it it is to have renters insurance. It's very inexpensive, but seriously gives me peace of mind every time we go out of town.

amber waves of grain said...

Happy Birthday!

This is something my husband and I have recently been discussing. Thanks for the info and the links.

Packrat said...

Happy Birthday!

This is long, sorry.

I have to disagree on the type of insurance to purchase. Term insurance stops at the end of the term. Capoot. Done. Gone. Nothing left. I recommend Whole or Universal life, but that is something each family has to decide for themselves.

Our whole life and universal life insurance policies have a higher earning rate than what our IRA, mutual funds, and money market accounts are earning right now.

As you said life insurance is tax free, so have some life insurance to leave for your children so that they can pay your expenses when you pass away. Having had four very close family members pass away in the last 3 years, I am very aware how much money funerals and all the other associated expenditures cost. In Idaho, the heirs have to pay all the deceased bills (mortgage, car payments, electric, possibly medical, etc.) until the estate is settled. This can take more than nine months. Believe me, it can break you if you aren't prepared.

My husband and I own all three kinds (universal, whole, and term) of policies. My husband has a term policy on him that is good while our daughter is in college, has loans to pay, and until our house mortgage is paid.

Hints: Buy while you are young to lock in the lower rates. About 25 years ago, we added $150,000 for my husband thinking that there would never be a time that we'd need that much. Now, because of his age, we can't afford much more.

Also, don't let the insurance agent tell you that the wife/females don't need as much as the men. The agent tried to tell us that since she was single and likely to get married, she didn't need very much. Well, he was wrong. If anything happened to her now, there would be student loans to pay, a lease to get out of, plus all those other things that pop up.

Oh, purchase your insurance from a well established company.

Packrat said...

PS: She in the next to last paragraph would be my 23 year old daughter.

Sort of random, but hope you are doing something fun for your birthday.

Ashley said...

Happy Birthday! And thank you for this enlightening post - I didn't realize there were cheaper ways to go about getting life insurance...we may be changing our policy!