I’m sitting here writing a check for my life insurance premium. I’m so glad to have this process over with. As most of my regular readers know I’ve been talking about getting life insurance since the birth of our first child, seven months ago. The process has been a long one. But I’m finally done. The receipt of this payment will seal the deal on a $500,000 20-year term life insurance policy.
When I first started this blog I was clueless about life insurance. It’s just one of those products no one wants to talk about. I started caring about it about the time I found out we were having a baby. Over the past year or so I’ve picked up a lot of good information and formed an opinion about what type and how much life insurance product works best for me. I actually have a small policy through work, but it’s only for a small amount. I knew I needed more.
Why Term Life Insurance?
I decided term life insurance was the way to go (vs whole life insurance or some other product) for the following reasons:
1. I plan to self-insure in the future. Twenty years from now I won’t need life insurance. I’m planning on having at least $500,000 of my own at that point. I’m taking serious steps with my retirement and short-term savings so that as soon as I’m able I can drop life insurance and rely on my own stash.
2. I’m of the opinion that investing and life insurance are two separate things. Why the heck did investing and life insurance ever get involved? Insurance products that promise investing returns are just an expensive waste. Keep investing simple, inexpensive, and separate from your insurance goals.
3. It’s inexpensive now. I was able to get my term life, 20 year, $500k policy for around $45 a month. For what it’s worth, I’m in my mid 30s, a non-smoker, and in good health. My weight was the only thing that took me down from the elite to the standard rates.
4. I don’t have a child with special needs. People with children with special needs should consider a whole life insurance policy since they may have a dependent for the rest of their lives.
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Why 20 Years?
I decided on 20 years vs 25 or 30 because, again, I plan to be self-insured in 20 years. And, I expect all my kids to be close to adulthood by that point. They are why I’m getting life insurance, so it makes sense that I drop the insurance about the time they don’t need me anymore.
I decided on $500k because that would be enough to replace a good portion of my income. If I passed, my wife would still have to work (which she plans to do anyway), but the extra income would allow her to breath easy and not put our home, her retirement, or our kid’s education at risk. Life insurance is all about replacement of income. But no one says it needs to be 100%. Especially for a couple that already lives well below their means.
Editor’s note: I realize my choice to go without life insurance on my stay-at-home wife is not the best answer for most people.
You Should Buy Life Insurance
As you can tell from my thoughts above, I’m of the belief that purchasing life insurance is a good thing for those who need it. If you aren’t self-insured and you have someone other than yourself dependent on your income (and they will be for some time), then it’s probably wise to get yourself some life insurance. A good term policy can be had for the price of Internet service each month. So if you are reading this blog post, you can likely afford it.
Be sure to read my experience with actually getting the insurance – this includes getting quotes, selecting a company, taking exams, filling out applications, and a lot of waiting.