Tag Archives: term life insurance

Why I Went With Term Life Insurance

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I went with term life insurance because it’s all that I could afford.  Considering I had goals of paying my mortgage off early, contributing to my 401k, funding my kids 529 plans and investing in my Roth IRA and regular brokerage accounts, I just didn’t have any money left for a whole life insurance policy.

In fact, even with extra money now available, I still only have a term life insurance plan.  You see, I still cannot afford to have a whole life insurance plan or other versions of insurance plans other than term, because of the cheaper cost and benefits that a Term Life Insurance plan provides.  For me, a term life insurance plan offers the most bang for my buck, shop around for term life insurance quotes instead of jump on the first insurance company you think of!  Of course, I’m investing a large degree of my extra income into investments so that makes it worth it.

I just check 20 year term life insurance rates for a 35 year old that wants to receive $500,000 and the rates are around $65 a month.  While more expensive today than when I got my insurance, it’s still relatively cheap.

Other forms of life insurance (whole, universal and variable) include an investment part of the life insurance, but the fees associated with those plans don’t make it worth it unless you are one of the top earners.  Since I’m less than the top 10% of income earners, term life insurance is the best deal for me.

To be honest, I actually like that fact that my term life insurance is just plain insurance and not an investment vehicle.  I would much rather control my destiny via mutual funds, ETFs or individual stocks than trust my money with some company that sells insurance.

What do you think of the various types of life insurance?

MR

Increasing Insurance Coverage

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I decided to bite the bullet and up my life insurance coverage amount for the family.  I increased the amount by $300,000 more than my current coverage ($200,000).

So now, I’m covered for $500,000 if I die.  While that doesn’t sounds like a lot… in our case it is.  With the Social Security death benefits, my wife should do just fine, and my kids will still be able to go to college (or at least they’ll have enough for the first 3 years, if I were to die now or next year).

A smarter approach on my part would have been to have this level of coverage all along.  Now that this is in process, I feel a little better now.  The only problem with the new coverage amount that I now  have, is that the coverage is through my employer.  I’m not sure what would happen if I were to get laid off (or worse fired).  That’s why I am considering purchasing additional coverage separate from work.  I will earmark these funds separately too, perhaps putting the money in a bond or a safe dividend paying stock (or even a mutual fund or etf…).

What type of extra insurance am I considering?   Since I’m late to the party, I’m looking at 20 year term life insurance (If I was starting new, then 30 year).  Since this is extra security above the amount what I currently have with my employer, I’m going to look for bargain amounts (but at least $150,000).

What should I have done when I started my family?  If I were to start again, I’d buy a 30 year life insurance term right out of the gate.  I’d also make sure the coverage amount is at least $500,000.  If I was just starting a family in 2010, I’d probably go for the $750,000 to $1,250,000 range depending on how much the monthly cost would be.  Actually, I would most likely go for the $1,000,000 amount.  The thing is if you go too low and a mishap occurs and you need it years later, inflation might take a decent size bite out of the amount your family receives.

I can’t stress how important this coverage is.  I’m kind of surprised I was weak on this (to me, at the time, 200,000 seemed like a lot of money), but it’s not!  I also underestimated my chances of death.  But even if you are in excellent shape, that doesn’t prevent accidents from happening to you! 

If you have or are starting a family, please go the extra mile on this one, don’t be naive like I was!