Tuesday, January 09, 2007

Do you need life insurance?

I'm going to write a few posts about insurance, life, car, home, and umbrella policies. But to start I'll discuss whether I think we need life insurance as DINKS in their 20s with some assets.

I'm constantly fighting internally over my internal desire for life insurance and the fact I don't need it. DH says no way, not until we're pregnant are we getting life insurance. His logic is that he gets 2x his salary from work, and as the breadwinner that amount will more than adequately take care of me. With our assets and his insurance I could live in our house if I choose for at least 5 years. If I die, he can manage the mortgage note solo and our current assets will more than take care of burying me. So his position is that we don't need insurance. My position, it's a really cheap rate and I feel nervous.

Right now we're both below 30, and rate are exceptionally cheap. However, I do acknowledge not having dependents makes it somewhat difficult to justify paying for life insurance. Also I am constantly wavering between 20 and 30 year term life insurance. Experts say long enough for your youngest to be done with high school. But we don't even have kids and we're not sure when they'll come or how many we'll have. So how do I know we'll have enough? But do we really need 30 years? I think we'll be self-insured probably by 20 years from now, so is it necessary to buy the longer term?

Another major issue that prevents me from buying life insurance is that I make very little money, and DH is starting his career (1 year) and the growth potential for both of us is huge. So if we were to buy 10-20x my income it'd be 300-600k. But I'll outstrip that when I graduate, and if we bought 10x DH's income it'd be minimally 1 million. But this really are our lowest earning years so if we buy now will be underinsured in say 5 years? What do we do if our income doubles or triples when we finish school? Suddenly will 500k policy be enough if we make $250k/year?

I guess this is part of the reason I am not currently pushing for life insurance. I feel as though we don't have enough information about our future. We're not sure when we're having kids, we're not sure how much we'll be making, we're not sure how long we'll need it for. I wonder if this is a problem other 20-somethings face when you feel as though your starting out and getting prepared, yet not all the information is in front of you...

6 comments:

Anonymous said...

From someone on the wrong side of the life insurance question: Get it. I'm 30-something, and my wife was killed in a car accident last year. At the time our son was just shy of 2. If I had $1M from a life insurance settlement, I'd have quit work, no doubt. Maybe even with $500K, although I'd certainly have to go back to work at some point then.

As it is I struggle mentally with motivating to work. For my own sanity and for the sake of my son, I wish I could get away from the daily drudgery of work right now.

I passed on life insurance for my wife because my wife was a student and I was the only breadwinner. I got insurance on my life through the job for a couple hundred thousand, and was considering more. (Honestly I had been considering purchasing more since my son was born, but parenthood has a way of distracting you and I had never gotten around to it.)

I was taking a very financially-oriented view of our needs. What I didn't anticipate was our psychological needs. The money certainly wouldn't get my wife back, or make me happy, but it would allow me more time and space to heal.

Anonymous said...

I would definitely get it. It's not expensive. And what would happen were your husband to die and THEN you find out you are a few weeks pregnant? And like the other guy said, it's enough money to let you off work long enough to heal some.

not confucius said...

i'm in a different situation than you are (single), but whether to buy now or buy later was a decision i mulled over recently. i actually wrote about it on my personal finance blog. again, slightly different situation but i think the numbers i ran in terms of cost now vs. cost later might be helpful. =)

W2E said...

Cool post – here’s an excerpt from an article I wrote a while ago that kind of completes the info you provided:

When it comes to the most popular types of life insurances, these are represented by the whole life insurance and by the universal life insurance. As opposed to the previous type of insurance, these ones have are not limited to a certain period of time. The first one is the one that resembles the term insurance, with the specification that, in this case, the period of time refers to all your life. Some might say that this type of insurance comes with the highest rates (even though this fact depends from company to company).

The latter form of insurance, the universal life insurance is basically the most complex package you can get. In addition, this can be the most personalized package you can get. Basically, the universal life insurance is in your hands, meaning that you are the one who decides the sum above the premium. Your investment will be part of a cash-value account, which can have various usages. Another popular variant of this type of insurance is represented by the universal policy insurance which allows you to opt for investment vehicles.

The final type of insurance is represented by the variable life insurance. What does this mean? This is the type of insurance that provides for you a larger range of investment products, which can also include stocks. Basically, in this case, the beneficiary of the insurance can receive either the value of the insurance policy or the value of the cash account.

When dealing with these different types of life insurances, there is one thing that you need to remember, and that is that their names and titles might differ from company to company or they might depend on your location. Not all of us are specialists in insurances. Besides, they can even make us confused. But as long as you are informed regarding the available life insurance possibilities, you have nothing to worry about. Act ahead and choose the perfect insurance type for you!

Hope it was a good read. For more info on life insurance policies please visit our blog.

Mike. S.

Living Almost Large said...

Anonymous, sorry about your wife. BUT I know we will have life insurance in place on both of us the moment we concieve. Why didn't you get any when you had a child?

That's the reason to get life insurance to provide for a dependent. It's the reason I can't get my DH to sign up because we don't have children and he feels if either of us die right now we're both well provided for.

And he's right. We have 20% equity in the home, money for retirement, and as the sole breadwinner he can easily live without my income and through work I've got 2x his income which is $200k. So I would be well provided for at 27 years old. I'd have close to 500k if he died (knock on wood).

king said...

There are quite a few people weary of an insurance career because they think they have to be an aggressive sales person. Of course, sales is a necessary ingredient, however insurance is a service everyone needs. Besides, most positions do not require straight sales.