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My Take on Life Insurance

Today, I am participating in the huge Life Insurance Movement in the blogging world that was started by Good Financial Cents:-)

Our Life Insurance History

When Mr. BFS and I first started out together after college, we did not buy extra life insurance.  We didn’t own anything, we had maybe $5000 to our names by the end of the year we graduated, and we had no dependents.  It made sense to us to just take the $10,000 policies our jobs provided and move on.  We figured if one of us died, the other could afford our cheap lifestyle on our own and the $10,000 would cover the funeral.  We left it that way for the next 3 years out of pure laziness.

In 2008, we realized that we had a house, some investments, cash, and were living on about $35,000 a year instead of $20,000 a year.  So we each bought some extra term insurance through our jobs to cover ourselves for $100,000 each.  That could pay off our remaining mortgage and cover a year of expenses.  It cost like $15 a month total, so it seemed more than worth it.

But this year, in January 2012, my husband joined me in self-employment.  Seeing as we both need each other to get all the work done, we knew we would need to increase our coverage to cover all of our mortgage debt, at least 2 years of basic expenses, and the funeral expenses.  So we are both covered with a term insurance policy for $250,000 for about $35 a month total.

Why I Think Life Insurance is Worth It

Do I think I’m going to keel over tomorrow or that Mr. BFS is going to die for sure next time he officiates a highschool football game?  No.  But what if one of us did just die?  The other one would be completely screwed.

We don’t have kids, but we will soon own two homes and we’ve split our online ad business responsibilities pretty evenly.  So the person left behind needs a little help to allow themselves time to grieve.  $250,000 will cover our living expenses for 3-5 years depending on how the survivor continues to live.  That should buy the survivor enough time to hopefully take some deep breaths, rebuild their life, and find their stride.  Since we’ve been together since we were 18 years old, that would probably be necessary.

Overall, paying a few hundred dollars a year for the peace of mind is totally worth it to me.  I would never want my husband or me to have to handle a HUGE loss and be stuck in a financially sucky position too.  Did we want to pay a premium for a million dollar policy?  No.  But we both knew we needed at least 3-4 years of expenses covered if the worst ever happened.

What’s your take on life insurance?

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28 comments to My Take on Life Insurance

  • We’re in the process of looking for a home to buy so we can stop throwing away money on rent. We’ve also been discussing when kids will come into the picture. We brought this up to our financial advisor when we met for the first time so we’ll be setting up some kind of life insurance soon, I’ll try to remember updating you on what that looks like.

  • People tend to forget that even when they are in absolutely perfect health, they could have a fatal accident through no one’s fault, their own or others, even at a very young age! Life insurance is absolutely worth it and it’s a good thing to have.

  • As long as we don’t have kids, I figure we’ve got more than enough savings for funerals and I don’t see myself with a mortgage any time soon.

    With kids, we’ll probably want to make different decisions.

  • As a mortician, I see people die every day. Some are old and expected. Many are young and unexpected. Although we may not think it can happen to us, it definitely can…and sometimes does. Life insurance is essential to providing your family with financial security in the event that something bad does happen. I recommend that everybody carry a term policy. It is so cheap that its should be a no-brainer.

    Thanks for taking part today Crystal! I’m proud to be part of the Life Insurance Movement as well. It is such an important topic, and we all need to spread the word!

  • We need a “LIKE” button! Greg, people really HATE to think they they, too, will actually have to, you know….die (said in a whispered aside). So, they often just don’t think about it.

    Good words.

  • I wrote about why I don’t need life insurance right now on my blog today. I know that will change when I have kids but it is so important to think about your current and future situations! Great take on why you guys.need it even though you don’t have kids.

  • We’ve got a similar level of protection but we get it paid for by our employers. It’s enough that all the debts would be wiped out, and the remaining spouse would be left with plenty of assets (both liquid and less liquid) to figure out how they wanted to move forward with their life.

  • Crystal, you bring up a great point about needing time to grieve. While not the same situation, I lost a close relative last year and the stress and grief over the last year has been more than I ever expected. It is hard to work full time and manage a large estate, not to mention the personal sadness and stress you feel that can just knock you down for days at a time. I can imagine it is 10x worse when the deceased is a spouse. I think your life insurance plan is a great one. And I hope you don’t need it for many, many, many decades!

  • Personally, I think you 2 are WOEFULLY underinsured – but more so you. I don’t remember your finances, but you have two mortgages that should be paid off (or can be for pennies on the dollar).

    And lets get real you are the oil that makes the machine work. Your self employment business relies on CRYSTAL being alive. Without you your husband would all but have to close up shop eventually. What is that worth? I am not sure but at the very least more than a 1 or 2 multiple of what the income of the business.

  • @Jessica, if you have to find a policy on your own, I do highly suggest trying esurance when you are quote hunting. :-)

    @Gharkness, as a hospice volunteer, the idea that I could die even though I am okay is always right there…

    @W, yeah, kids would make us increase our policy.

    @Greg, very well said! I’m going to try to pop over to all of the participant sites, but you’re first on the list. :-)

    @Lance, yeah, assets and dependents…when either number increases, it’s time to get a policy, hehehe.

    @Mrs. Pop, nice employers! My last one gave us a 1 year of income policy, so mine was about $35,000. I paid an extra $2 per paycheck to boost it up.

    @Denise, I hope we don’t need it either. :-)

    @Evan, he never thought he would be doing this long-term, so if I die, the business would definitely die too. That was already a given.

    Also $250,000 is 1-2 times what our business earns a year. I brought in about $90,000 last year and this year is at about $90,000 right now, so I am guessing it will be about $140,000-$150,000 total.

    But more importantly $250,000 could be used to pay all of the bills including both mortgages (one of which is at $24,500 right now and will be paid off in 2013, and one will be about $209,000 starting in 4 weeks and paid off over the next 5-10 years) for more than 4 years. And that is not even taking rental income into account ($1200 a month from our current home and $600 a month from our roommates).

    We aren’t trying to make ourselves financially independent with just one death – we are just trying to have enough coverage to buy our spouse a few years to get back on track.

  • I’m a BIG term life insurance guy. I get a bit angry when I “get going” on life insurance (which you can tell if you check out my submission to the movement today), so I’ll try and keep this short and “sweet.”

    Yesterday I priced out a $1,000,000 20-year-term policy on me and it was like $36 per month. It’s just so cheap that it’s almost a no brainer. Re: timing of buying life insurance: Get it the second someone else depends on you financially and before you wish you bought it because it’s too late or you become uninsurable.

  • I think I’d step up my life insurance plan if/when I get married and have kids. Definitely time to re-evaluate during those big life moments.

  • I think you are right — your situation needs life insurance. Mine does not at this point.

  • In my opinion, if you are married or in a relationship and have no kids, you need enough coverage to make sure your partner can pay off any debts and take at least a year off to deal if they need to. If you have children, you have to account for extra day care costs and maybe even college. If you’re single, I don’t see any need for life insurance unless you want your cat or dog to live the life of luxury!

  • I’m with Nick. I actually should have insured myself sooner, but something about the words “I’m pregnant” made an alarm go off in my head and led me to pull out a $1,000,000 policy on myself. My story on my blog today was a heavy one, but life insurance really hits home with me. With my dad passing when I was 5, things could have gone very bad…

  • My wife and I have term policies to cover loss of income. In these remaining years before retirement I want to max out retirement savings.

  • As I’ve mentioned on other comments, I have a variable universal life. I have no dependents. But the policy doubles as life insurance and retirement. I love the I can invest in real estate & small/mid cap funds in my subaccount—I know it’s pretty agressive, but I can withstand the risk (others may not).

    Also, the cost of my policy has declined the older I got. But I’m not surprised as there is fluctuation in cost.

    My point is that a specific type of life insurance policy is not right for everyone. There different kinds and life insurance serves more purpose than as a death benefit. From some it’s a strategic planning for estate tax, education funding, and supplementing retirement.

    You have to choose a policy that’s flexible and meets your needs. For some term insurance is best for others they need a different type of policy.

  • I didn’t have a ton of life insurance until we had kids.

  • Anna

    Don’t forget that the younger you are when you get the insurance the cheaper it will be, so it’s not a bad idea to check out some term plans even if you’re in your early 20s with no children.

    We’ve always had life insurance,we have a lot more now that we own a house and have two children. I am married to a Marine, we have lost friends in their 20s and 30s; including a fellow spouse who died from brain cancer at 29.

  • Insurance is a necessity for each area. This site would be helpful to you, http://carinsurance.term.org/

  • I dont know… to me, buying life insurance is simply morbid. The thought of it irks me.

    Also, when you are dead, you are dead. You cannot care from the grave whether or not your loved ones are taken care of.

    It’s a huge risk to buy a life insurance policy. What are the odds you will die prematurely and unexpected?

  • I think life insurance is a great investment for peace of mind. We have free life insurance coverage from work for like 50K but you have to opt in. Also you can look into places like your credit union for more group rates.

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