**Please note that I am not a financial adviser and this information is not meant to substitute for a real-life chat with a certified financial planner.
Life insurance. It’s something we don’t like to think about and something we don’t often talk about…but we need to change that. With the recent loss of my brother-in-law at just 35 years of age, I feel like I would be doing a disservice to all of you NOT to talk about it. Maybe this will be the push you’ve needed.
Who Needs Life Insurance?
If you have dependents of any sort and do not have enough savings to cover living expenses for them through childhood, I would HIGHLY recommend term life insurance (just like Dave Ramsey, I am not a fan of whole life insurance). Depending on your children’s ages, a 20 or 30-year policy should be a sufficient time period to allow you to build up enough assets to “self-insure” when the term ends. Back when our first daughter was born, we took out a 30-year policy on my husband and also on myself. We didn’t know how long we would be having children and wanted to be sure there would be enough to take care of all of them through childhood.
In addition to the primary breadwinner, you should also consider term life insurance for a stay-at-home parent. Particularly when the girls were small, if something had happened to me, my husband would have had to find childcare or a nanny and probably house cleaning services and who knows what else. During the first few years after a spouse’s death, having the financial freedom to take some time off work or work fewer hours could also provide extra stability for the grieving family. Having enough life insurance to cover financial obligations is definitely a wise idea.
How Much Life Insurance Should I Get?
Back when we purchased insurance, the standard advice given was 10-12 times your annual income for the primary breadwinner. Many still use this figure today, but you might also consider this approach:
- Do you have any debt? Add up all your debt including student loans, mortgages, etc. Include an estimate of funeral expenses, too.
- Decide how many years your family will need support. Multiply that number by your annual expenses.
- Estimate educational expenses for each child (if you plan on helping out with those).
- Add all of these together.
- Subtract any liquid assets you have (savings, college funds, other life insurance, etc.).
- Use this number to help you decide how much term life insurance to purchase.
If you are a stay-at-home mom or dad, it’s a little more tricky to figure out how much life insurance to purchase. Dave Ramsey recommends from $250,000-$400,000, but I would also add any debt you have to that number.
Please Don’t Wait!
Estimates show that at least 40% of Americans don’t have life insurance and 1/3 of those that do just have a basic policy (and are underinsured). Up until just a few months ago, my brother-in-law was one of those. You can imagine how relieved I was when I found out they had gotten that policy. The whole situation has been overwhelming and feels like a nightmare, but it would be so much worse if finances had caused my sister and her girls to have to move, take on a new job, or make some other drastic change due to lack of finances.
This is not a conversation I normally have with people, but it’s one I feel passionate about now. Please, please, please be sure you and your spouse are covered. You truly never know when it will be too late.
If you don’t have a local insurance agent or are looking for an easy way to get an estimate or apply for life insurance online, be sure to check out HavenLife. They offer a simplified approach to the process and are owned and fully backed by MassMutual, a 160-year old company. You can get a quote here or check-out their blog with much more advice on choosing term life insurance here.