There’s an old adage that goes “plan for the worst, hope for the best”, which is not a half bad way to plan for things in your life. I’m a big believer in being prepared, but only to the point where it makes sense. At one point in my life right after college, I worked for an Army/Navy surplus type store that also sold preparedness products. I definitely met some interesting characters and although I do have a small “zombie kit” in my car, I haven’t gone to the extreme of buying property in the woods as my getaway bunker. It’s worth thinking through and assessing risk, but only worth taking reasonable steps for things that could reasonably occur. In light of this, I wanted to explore the ins and outs of life insurance and talk a little about what that could look like for your life.

There’s another adage I’ve heard is “no one likes insurance until you need it”. That’s definitely true with life insurance and is something you should consider, depending on the stage of life you’re in. An unexpected loss of life is exactly that, unexpected. No one expects or plans for a loved one, or yourself to pass away. However, it honestly could come at any time, at any age. We shouldn’t take a single day for granted, as it’s not guaranteed to us. A good friend of mine experienced such a tragic loss of both his wife and mother in the same car accident which really got me thinking about the fragility of life. You never know what’ll happen and it’s worth preparing a bit.

Life insurance is meant to not place an undue burden on either yourself or others close to you in the event of a loss. If you passed away, or a loved one close to you, not only would their be the emotional toll placed, but also a financial one. You’d have to cover some initial costs like burial expenses, but also have long term cost to consider too with the loss of income. Perhaps you are the bread winner in the family or your spouse is, either way you’ll be faced to deal with additional expenses, potentially in the long run. Life insurance can cushion such a blow dealt to you or your family by providing financial resources. It’s in no way meant to replace the loss, but meant to soften the blow and provide. The money from the policy could pay for immediate needs, like funeral costs, moving, taking time off to grieve, or for longer term needs, like paying off a house, paying for daycare for children, paying for household expenses or even paying for future college tuition. I wouldn’t wish such loss on anybody, but as there is a possibility of it, it’s worth exploring.

Let’s get into some of the details of life insurance and how you can acquire it. Afterwards, we can talk about some recommendations for if you need it and if so, how much.

The two basic forms of life insurance are: term and permanent (aka whole life). Both offer a payout upon death to the beneficiary of your choice, but the cost and operate very differently.

Term life

This type of policy is one that’s good for a pre-set timeframe, based on your age. Common terms may be 10, 20 or 30 years. The policies are as good for as long as you pay the monthly premiums, stop paying and you lose the guaranteed payout. Term life is much, much cheaper than whole life, and can actually be affordable to the point of being a no-brainer to protect your and/or your family. Your application will be reviewed, and you’ll be presented with premiums for a variety of coverage levels. Typically payouts under $250K don’t require a medical exam, and amounts over will require a doctor to fill out a brief questionnaire on your health. (Hint, if you’re a smoker, go ahead and stop). Payouts typically are in the amount of: $50K, $100K, $250K, $500K, $1M and on up from there. Once you select your overage level, you’ll simply pay the premium each month and the coverage level will be good for the term (i.e. 10 years). Easy. Peasy.

Whole life (aka permanent)

Whole life is a type of policy that’s more for life as opposed to just a term. Whole life is different as it carries a cash value with it, meaning some of the premiums you pay can be yours if you cancel the policy early. Whole life is a bit more complicated and has more of a guarantee. For example a buddy of mine got a $60K policy that he’ll pay a steeper premium for each month. If he chooses to cancel, he’ll be able to get some of those premiums back because his policy has a cash value. However, he had to keep paying those premiums for the policy to remain in force. Whole life is often sold as a combo between an investment and insurance policy, i.e. the best of both worlds. In actuality, whole life often proves to be good at neither, and you’ll end up paying more for a less than ideal coverage. Many financial experts don’t recommend whole life, and instead recommend you get affordable term life insurance and then invest the rest of the money yourself (i.e. index funds).

So, those are the two main types of life insurance. Of course, compare and research actual prices for yourself to see what best fit your needs. Always shop around! Just note for reference that the stock market on the whole has returned an average of like 8% per year since modern times and so weigh that return vs any return a whole life policy is offering. As I always say, put your money to work where it’ll work the hardest for you.

How much coverage you should get

There are probably article upon articles of research helping you figure out how much you’ll need, but for the sake of simplicity, I’ll provide some general recommendations.

• If you’re single, just a small policy of $25K or $50K will be enough. Leave enough behind for funeral, burial and any closing up costs that may occur.
• If you’re married, don’t a house but no kids, have a policy of $100K. There will likely be a little more cleanup costs, and your spouse may want to take time off to grieve.
• If you’re married, own a house but no kids, consider a policy of more like $250K, or enough to pay off the house. Your spouse may end up selling the house, but it’d be nice to leave them enough not to worry about making the mortgage payments, which are often a big chunk of the monthly budget, 
• If you’re married, own a house and have a kid(s), it’s time to get serious about life insurance. You’ll need at least $500K, or more like $1M+. Raising kids together is expensive, so imagine doing that all by yourself if your spouse passed away. Have a conversation about the actual amount and what that should entail, i.e. Paying off the house, paying for all daycare, private school, college, enough to have the spouse not work…all things to think through.  

You probably don’t want to pay for more coverage than you actually need, but having too little is certainly not something you’d want to leave behind for your family.

Where to get life insurance

The first place I’d recommend (up to $250K) is through work. One of the employee perks that many companies offer is life insurance. They’ll partner up with an insurance company to offer affordable coverage. As mentioned previously, often times you can get $250K coverage without going through the hassle of going to the doctor for an exam. You an often get very affordable coverage while you’re employed there. For example, I get $250K worth of term life insurance at my current employer for like $9 per paycheck. At that point, it’s a no-brainer for me to provide coverage in the event of loss. Take a look at your employer’s benefit package, and see if you an sign up for life insurance coverage.

The other place to look is through an insurance broker. In the olden days, you would have an actual person who would give you all your insurance needs. They’d be affiliated with a larger company (i.e. State Farm or Progressive) and sell you auto, home, and life insurance all at once. They’d also send you Christmas cards, come to your kids baseball games and take you out to lunch once a year. I’ve got no problem with such an agent, I actually think it’s cool to have one person you know and trust readily available. However, in today’s modern age of the Internet, there may be cheaper, easier and quicker options out there. You maybe already get car insurance online, and you can just as easily get life insurance online as well. Of course, make sure they appear reputable, and even better if you’ve heard their name before. The Internet is full of scams, so be sure you’re signing up for a legit product. See if your auto insurance company offers life insurance, as insurance companies love offering multi-policy discounts.

Life insurance helps prepare you or your family for the unexpected tragic loss, and ensures that your family or won’t be left with a financial burden. I’d go ahead and say that life insurance is probably something all of us should consider and look into, just at varying levels of coverage. No one likes paying for insurance until you need it, so don’t leave yourself or your family in a bad financial spot!