Do I Really Need Life Insurance?

Ah, the life insurance conundrum…  For those in their 20’s and 30’s it’s the best time to think about getting life insurance.

Unfortunately most in their 20’s and 30’s rarely broach the topic!

Before I was 40 years old I too had a lot of competing interests for my money. I am guessing that it’s the same for many of you reading this now.

When we are in our 20’s and 30’s, we’re invincible. Thoughts of not being around (aka “dying”) were not even a possibility in my mind.

Our priorities during those years are digging into our career, buying our first home, and finding the lifetime partner of our dreams and starting a family.

But life insurance? Nah– that’s something “old people” worry about….besides, I’m so HEALTHY!

…and isn’t life insurance REALLY expensive?

My wish is that more young people knew that being young and healthy is the BEST time to buy life insurance (it’s cheaper when you’re young and in good health) and that it is not as expensive as most people in their twenties and thirties think it is.

The average person can expect to pay between $250 to $450 a year— or about $20 to $40 a month, depending on one’s health, how much death benefit (the coverage amount) needed, and the type of life insurance being applied for.

My specialty is in helping you to compare life insurance policies and find the best fit for your needs.

The two main types of life insurance are term life insurance and permanent life insurance.

When beginning one’s career, or starting a family, there are many competing interests for the breadwinner’s finite monthly paycheck. That’s why I almost always will counsel my younger clients that the best choice in this stage of life is inexpensive term life insurance.

Term life insurance is PURE life insurance coverage, meaning that there is no additional cost to the monthly premium for building a savings account, such as permanent life insurance has.

Term life insurance is protection for a pre-determined length of time, which is usually a 10, 15, 20, or 30 year period.

Buying a term life insurance policy when you’re young will lock in a very cheap rate for the duration of your coverage.

As mentioned above, life insurance gets more expensive as we get older.

Life insurance premiums are age-based, and will cost more with each birthday, because each year we edge closer to our actuarially-determined day of reckoning.

This is why it’s better to lock in a low monthly on a term life policy in your twenties and thirties, because it saves a TON of money going forward!

Locking in a nice low rate is the reason I always recommend purchasing the LONGEST term of protection that you can afford.

While I don’t always agree with this statement, in some situations it’s appropriate: “Buy term life insurance and invest the difference” (between the monthly cost of your new term life policy being purchased, and what your permanent life policy would’ve cost you a month).

(By the way, in case you’re interested, the reason I don’t always agree with the above statement is that I know human nature, and most of us just aren’t disciplined enough to stick to such a trite recommendation as “buy term and invest the difference”… but that’s an article for another day!)

So, what about you? Are you wondering if you need life insurance?

There’s a very easy answer to that question: Is there anyone you love who depends on your income?

Bingo. Done. That was easy. But beyond that there are questions to help determine how much life insurance you will need to protect your family from financial devastation when you die:

If you own a home, is it paid for?

How would the loss of your income affect your family’s quality of life or standard of living? Would they have to “downsize” their lives, their living situation, their activities?

Do you have kids? How many? What are their ages?

Have their future college tuition’s and expenses been saved?

Does your spouse/partner work? If no, are you ok with her having to go back to work?

The economic value to the family of our non-working spouse is so much greater than we think. Her returning to the workface means that there are new child care costs, public school considerations for the kids, and (of course) any homeschooling activities–current or planned, go out the window’.

Term life insurance can ultimately act as a stand-in savings cushion and an invaluable protection plan if the breadwinner dies prematurely. From the time the first monthly premium is paid until the last, the beneficiary is entitled to the full amount of coverage if the policyholder dies (this is called the death benefit).

“Ideally, your family’s need for life insurance will end around the time the term expires: Your kids will be on their own, you’ll have paid off your house, and you’ll have plenty of money in savings to serve as a financial safety net,” wrote NerdWallet’s Barbara Marquand.

If you’re signed up for group life insurance through work, you only need to supplement that amount with an individual policy. Many companies offer life insurance coverage for employees, but it’s usually a multiple of annual salary and not enough to replace income for a family. The policy is often free and the money is guaranteed, so it’s typically worth taking.

Some employers offer supplemental life insurance to make up the difference, but it’s smart to compare rates with other insurers to find the best option.

Not everyone needs additional life insurance, though.

Whether or not you need life insurance boils down to this: Does anyone rely on your income for their financial well-being? That could be a child, a disabled adult, a spouse, aging parents, or anyone else who could be considered some level of dependent.

If someone you care about relies on your income for their well-being, then yes–you need life insurance!