As part of my desire to be as transparent as possible, today I wanted to discuss what I have ended up deciding in terms of my life insurance needs (as part of a series on my insurance products). As you will see, there is one part where I will not go into too many details simply because I have a whole post about it to be published later on.
My Current Coverage
I put a lot of energy into trying to keep my life as simple and easy as possible and most of my insurance needs were accomplished in such a way but unfortunately, I feel like the insurance part is a challenge and life insurance more than any other.
3 Different Policies!
I personally have 3 different life insurance policies that I am currently using. They all have different uses.
#1-Temporary Life Insurance – Work
I currently have a life insurance paid by my work that would give my wife 2 times my annual salary in the event that something did happen. It’s certainly not enough to take care of every financial obligation that she would be faced with but it is a nice benefit. I did not have any options regarding this policy.
#2-Whole Life Insurance – First To Die – My Online Company
I’d invite you to take a look at my post that explains exactly how and why my partner and I agreed to do this, it is live on TheFinancialBlogger.
#3-Term Life Insurance With My Wife
My wife and I decided to take a life insurance as soon as we purchased our first home. It was done at the same time as our will. We hesitated quite a bit between a term life insurance or a whole life one and evetually decided on taking a 25 year term life. Many would say that we will likely be losing every dollar put into that insurance considering how young we were. I certainly hope that turns out to be the case.
Why Did We Buy Life Insurance?
The main reason was for me to know that in the event something happened to me, my wife would be able to stay in our current house, if that is what she desires, with the insurance giving her enough money to take some time off, etc. We did not have kids at the time but we did expect to have some in the near future so making sure that the remaining partner would be ok if a tragic event was the primary goal.
Whole Life vs. Term Insurance
In the end, our main goal was to protect ourselves because an untimely death right now would make it very difficult for the remaining partner (especially my wife) to go on. We do have an emergency fund but that isn’t enough to last for several years. Term insurance gave us the ability to eliminate that risk while not setting ourselves up for a payment that will be made for the next 70 years. I personally felt like I am buying insurance not to leave money behind 50 years down the road (I will inclur less fees and thus generate better returns by managing my own things than by using a life insurance).
Given that it’s clear why I’m buying life insurance (to give a cushion in case something happened in the near term), I felt like term life insurance was the way to go for me.
There are clearly many unknowns. I do not know how much coverage I will need 5, 10, 20 years down the road or even further. There is also a lack of clarity for me in regards to the fiscal impact of a life insurance and how that would come into the equation. Another important component is how much it will cost me if I want to buy a similar insurance, such as a whole life insurance, 20 or even 30 years from now.
Clearly, I will have a lot of reseearch to do but I think this gives me a decent starting point. I would love to hear about you. What life insurance do you have, how and why did you choose? Etc