Life Insurance: What, Who, Where, When, Why and How Much

The best decision Kris and I made in our end-of-life preparation happened when we had our first child while still in college. We invested in life insurance. Twenty-four years later, the insurance payout I received after Kris died was a life saver. It allowed me to focus on healing and loving my children rather than worrying about our financial wellbeing. It also covered my inefficiencies in things Kris did like shopping, preparing meals, gardening, and celebrating holidays.

If you are a younger family with kids at home, we highly recommend that securing appropriate life insurance be a top priority in your planning for the future. Below are some tips to help you.

WHAT IS LIFE INSURANCE?

For an insurance provider, life insurance is a risk/reward offering. Insurance providers receive regular premium payments at the risk of having to pay out a much larger sum of money if the insured dies during the term of the policy.

Generally there are two main types of life insurance – Permanent and Term (in most cases we prefer term policies for their affordability and simplicity). For details about the pros and cons of each type, see https://www.affairsinorder.com/blog/term-vs-permanent-life-insurance

WHO SHOULD BE INSURED?

Both parents. If a breadwinner dies, you’ll obviously need to replace their income. A stay-at-home parent should also be insured. Child care and running a household can take a significant emotional and financial toll on the surviving parent, who may need to reduce work hours to grieve and care for the children.

WHERE DO YOU ACQUIRE LIFE INSURANCE?

Life insurance agencies have agents to help answer your questions and identify the right policy for you. There are also brokers who will look for quotes from multiple companies to help compare policies. You can also buy directly from an insurance company online. See https://www.affairsinorder.com/blog/where-to-buy-life-insurance for more details.

Also, your employer may offer life insurance as a benefit. Take it, but please don’t rely on it as the sole source of your family’s security blanket. In addition to losing coverage if you ever switch employers, the death benefit is usually no more than $25,000 to $50,000, which will pay for immediate expenses like funerals and hospital bills, but not much more. Acquire a second, larger policy that will sustain your family for a longer period of time while they transition to a life without you.

WHEN SHOULD YOU BUY LIFE INSURANCE?

Yesterday???? We heard a story from one widow who said their life insurance paperwork sat on their kitchen counter for weeks. Before they got around to signing it and sending it in, her husband died unexpectedly. Don’t wait until it’s too late.

In addition, the younger and healthier you are, the better you can acquire more insurance for less. The moment you’re diagnosed with cancer or some other potentially life-threatening disease, the cost of life insurance for you will suddenly skyrocket.

WHY SHOULD I GET LIFE INSURANCE?

Life insurance is protection against the unthinkable. Should an accident or illness end the insured’s life prematurely, beneficiaries receive a lump sum payment to help pay off debts and buy your family time to grieve and adjust to a new life without having to make any drastic changes to lifestyle or schedules. A good policy can also ease the surviving partner’s burden of paying for the kids’ college education and saving for retirement.

HOW MUCH LIFE INSURANCE DO YOU NEED?

“We had too much life insurance,” said no widow or widower ever! While age, family size, existing savings, and debt load are some factors that influence how much insurance to acquire, the general rule of thumb from most experts is at least 10x or more the annual income of the person being insured.

DO SOMETHING!

There are many life insurance options to consider and it’s worth doing some homework. Be careful, however, not to allow “paralysis by analysis” to take root. It’s easy to get overwhelmed and not do anything. Find some coverage that you’re comfortable with and pull the trigger. Your family’s future well-being is at stake.

If you already have life insurance, review your policy and make appropriate changes, especially if you have more children, a higher income, or a new home.

Cheers!

Corey

P.S. Don’t forget to check out our free downloads (https://www.affairsinorder.com/free-downloads) to help in your personal end-of-life planning.