Archive for August 22, 2012

Confessions for a Life Insurance Movement

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Our friend Jeff at Good Financial Cents is at it again with another movement; this time it’s about life insurance.

In order to help spread the word about how important it is for most people to have some life insurance, I’m writing about it today as part of the Life Insurance Movement.

Jeff asks: “Why do you think life insurance is important for your family?

Well, life insurance is a way to make good on the life you would have delivered had you not passed. Life really is a social contract between people, and life insurance is a cost-effective way to insure against income loss.

I thought I’d offer up some confessions rather than much advice, since I’m not what the experts would call “suitably covered.”

 

CONFESSION: I’ve only had life insurance for about a year (and I’m “underinsured.”)

I had to be dragged, almost kicking and screaming, to life insurance.

When I was young (maybe I still am), I couldn’t bring myself to get it. I had a small policy through my job, but it was only equal to one year of my salary. It wasn’t anywhere near what we would need to pay off our debts or leave anything left over.

I can say now that as of one year ago I have additional coverage, more than we owe on our house – but not enough to provide any type of long-term stability. It is roughly three times my income. If you listen to those who sell life insurance, they recommend ten times your income.

If you’ve been reading lately, you know that we are debt free minus the house. The amount of coverage we have on a 20 year term will pay off the house, provide enough for a burial at sea (kidding), and leave a little left over.

It is not enough to allow my wife to retire. That is not my goal. Instead of sending money to an insurance policy, I worked hard the past few years to get us to the point of debt freedom. We have no credit card debt, no student loan debt, only a mortgage with some equity. I will work equally hard to build wealth while I’m alive.

To me, life insurance is important because I don’t want to be that guy who is possibly leaving money on the table. Term life insurance is fairly cheap. For less than $20 per month, you can get over $100,000 in term life insurance. Even if you pay for 20 years without needing it, you’ve made a fairly decent trade: peace of mind for less than $200 per year.

 

CONFESSION: I pay more for life insurance because I hate needles.

One of the main things keeping me from getting more coverage is my visceral hatred for needles.

I won’t give blood, nor submit to a blood draw that may be needed for a life insurance policy.

This has caused me to have to pay a higher monthly premium for a policy from American Family Insurance that provides coverage without a medical exam. I know it’s stupid, especially since I don’t mind the needle of a tattoo gun.

In the long run it’s an extra $60 per year so maybe it doesn’t bother me that much, but I know I will eventually have to face up to the need to get a better policy.

 

READERS: Do you have any life insurance confessions?

 

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