Hey, remember when you were young and carefree and life insurance was for old people? No? That’s because now you’re old and senile. Ha!
Everything I want to tell you today can be summed up in this one sentence: You need to have life insurance. The end.
But if you want to get picky—and more specific—about it, read on.
If you have kids, you need life insurance. If you have a spouse, you need life insurance. If you are a single person old enough to not be on your parents’ health insurance anymore, you need life insurance. Have I covered everyone here, yet? You, in the back! You need life insurance! (The only exception here is children. Children do not need life insurance, no matter how many daytime television commercials tell you otherwise.)
The reasons vary, the amounts vary, how you handle it may vary, but you need it and you need it now. Yes. Repeat after me: I need life insurance.
Let’s get down to brass tacks, shall we?
The younger/healthier you are, the greater the reason to buy life insurance right now. The cost of life insurance is based on a formula having to do with the odds of you dying. Obviously. Otherwise, how would the insurance companies make any money? And the odds of you dying when you’re young and healthy are minimal, so the cost is very, very low. Wait and you could be looking at much higher premiums, either due to a health condition or simply age.
You should buy as much insurance as you can afford, because it’s expensive to go up later. Now, obviously, a single person with no real obligations is unlikely to need a million-dollar policy when all that money would be used for in the event of an untimely demise is a funeral, true. On the other hand, if you’re in a field where your earnings are likely to go ‘way up, and right now you’re young, do go for a larger policy if you can afford it, because you’ll probably want it later and it’s cheaper to get it right now.
You need life insurance even if you’re a stay-at-home parent. “Oh, but I’m not making any money,” you say. “And my spouse makes plenty! It doesn’t matter if I have life insurance!” If this is your response, you’re being short-sighted. In the event of your death if/when the kids are still young, your spouse will need to pay for your funeral and probably additional care for the kids and (let’s be honest here) probably some therapy. That’s aside from the issue of said spouse probably needing to take some time away from work—which may or may not be paid. Do not equate not having a salary with not needing life insurance.
You need life insurance even if you don’t have kids, even if your spouse makes good money. Again, in addition to funeral costs, your grieving spouse could probably do with the freedom to take some time off of work, if necessary, without having to worry about paying the bills.
Term life insurance is a better value than whole life insurance. I love insurance agents. Truly. But their job is—surprise!—to sell you insurance. And just about every insurance agent would rather sell you a whole life insurance product than a term one, because whole is more expensive. If you don’t know what I’m talking about here, in a nutshell the difference is this: Term life insurance is a set payoff amount (if you buy $100k worth, you can never get back more than $100k), whereas whole life insurance has the potential for a greater payoff because some of your money is being invested, resulting in a greater value over time. There are better ways to grow your money than a whole life policy, and given that most people are scraping to find the funds for any policy, stick to term. (There’s a better explanation of this here.)
If your employer offers insurance, take it. Maybe this has changed in recent years (I’m now a freelancer, and my husband is a state employee, so it’s been a while since I’ve poked around in the private sector to see what benefits are looking like), but back when I was a corporate drone just about everyone offered some sort of employee death benefit. If the benefits were so-so it was one year’s salary, and at better places it was automatically two or three times your salary—without any extra charge to the employee. And then there was usually the option to add on to that coverage for a fee. Do look into the additional coverage your employer offers; just as with health insurance, bigger groups get better rates, and your employer may be offering coverage at a rate that’s superior to what you can get as an individual going to a life insurance provider on your own. It’s worth checking out. (However, you also want to keep in mind that hardly anyone is a “lifer” at a job anymore, and you may prefer additional coverage purchased independently because it’s portable.)
Shop around for advice. Talk to a few different agents; poke around online; talk to your parents and/or your friends. There are all sorts of guidelines about what sort of coverage you “should” have. But you have to do what works for you. My insurance agent is one of those “ten times your salary at a bare minimum” sorts of people; again, she’s selling, so it behooves her to aim high-end. Do you really need that much? If you can afford it, sure. But in reality, think about what you’d want covered. I’m not saying I know the answer for everyone, but I can tell you that if something happened to me, I would want to know that my kids would absolutely be taken care of—what that means to you might be different than what it means to me. To me, that means that adequate care for them would not be a financial issue, and also that there would be money available to them to pay for college. You don’t have to be a rocket scientist to figure out that that’s a sizable chunk of change. Some people might say I’m throwing away the money I spend on my policy’s premiums, but to me the peace of mind is absolutely worth it.
Hey, lord willing, I will end up “throwing away” every cent and the policy will never be cashed.
Shop around for price. You want a reputable company, and rates are going to be similar amongst different providers. But you wouldn’t buy a car without shopping around, so why would you do so with your insurance? You shouldn’t. Also, read this before you shop.
Now please tell me you already have life insurance, or that you’re looking into getting some right away.