Finding And Buying Affordable Term Life Insurance Should Be A Priority

When I was following Dave Ramsey’s 7 Baby Steps a year or two back (I suppose we still are), I was convinced that I needed to buy a term life insurance policy.  They give some very vivid stories in their Financial Peace University class from some folks who were in Dave’s class who bought life insurance, only to find out months or years later that they had terminal cancer or some other illness.  I knew it was a good idea that I buy life insurance to protect my family as well in case of a life changing event, but I had just never followed through.

When we had our son last summer I knew I had put it off long enough, and that it was time for me to take action and buy a policy.  I didn’t want my wife to have to muddle through without me in case I were to die, I wanted her and my son to be taken care of, with enough money to live on comfortably if I were to pass.

When Should A Person Buy Life Insurance?

There are several frames of reference when it comes to buying life insurance.

There are those that say that y0u should buy it when you’re young, because that way you can ensure that you get the best rates because you’re young and healthy.   They say you should buy it even before you have children or a spouse because you never know when you’ll have a health event or health issue crop up that could keep you from getting affordable Term Life Insurance.

Then there are those that say you should buy life insurance only when you need to because you’ve got dependents, and folks who are relying on you to provide for them.   Buying before then is just a waste of money.

I used to come down in the second camp, but I’ve been swayed to the first camp (buying early) for a couple of reasons.  First, you can buy an extremely good policy when you’re young at an extremely reasonable cost.  For example, i got a $500,000 term life insurance policy for about $30/month. I probably could have gotten an even cheaper policy if it weren’t for my weight being a bit high at the time (I’m currently working on that).  Also – my wife had a health event in 2008 that made me realize that you really do never know when you’re going to need insurance because negative health events can pop up at any time.

How Much Should Your Policy Be For?

Before you buy your policy one thing you need to decide on is how much your policy will be for.  Most experts I’ve read will recommend something in the range of 8-10 times your annual salary.   So, for example, if you’re making $50,000/year, you would want to get a policy in the range of  $400,000-500,000.

Some more conservative experts will recommend even more than that saying that you should have somewhere in the range of 17-20 times your annual salary.   For a $50,000 salary that would come to around $850,000-1,000,000 for the policy.

No matter what you do, do your research before you buy, reading up on the different types of policies, and where to buy through educational resources like AARP.org.

Save On Your Insurance By Paying For Your Policy Quarterly Or Yearly

One thing to consider when buying your policy is whether you can save money by paying for your policy in quarterly or yearly installments.  A lot of companies will give you a pretty decent discount if you pay up front for the entire year.

The only reason why I might not do this is because  – as some experts point out – if you pre-pay for your year’s policy and then die part way through the year, you won’t be getting back your dues for those final months.  You’ve pre-paid. Granted it may only be a couple hundred bucks, but still.

In any event – always make sure that you set up automatic payments for your life insurance, and that you never let it lapse.  You don’t want to have someone die, and then figure out that the policy lapsed because payments hadn’t been made for a couple of months.

Conclusion

We bought term life insurance last year as insurance against my untimely demise.   I don’t my wife to have to worry about having to pay the bills in case I were to die.   I bought my policy while I was still relatively young and in good health – so my policy is pretty cheap, and if you do the same yours will probably be as well.  I’d recommend you buy your policy ASAP as well, because we never know when we might get sick, have a negative health event or, God forbid, die.

Do you have a life insurance policy? Why or why not?

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I’m a thirty-something Christian Midwestern father of one son, and have been happily married for 9 years to my beautiful wife. I love playing tennis, shooting hoops, or taking part in the occasional flag football game. Of course, I love writing and financial topics as well, and that's how this site came into being! Check me out on Google +!


Comments

  1. says

    My wife and I have 10 year term policies. Although our children are grown, and we have no debt except for a small mortgage, it was important to replace the income. Neither one of us is ready to retire!

  2. says

    Did you know that life insurance (particulary second to die type policies) can be used with estate planning?

    Although I am no lawyer, I have read that if you have significant enough asset levels to get hit with the estate tax, you might want to consider getting a life insurance policy that will be used by your heirs to pay taxes, instead of them being forced to sell off the family farm, or cash out your IRA (on which they might be charged double tax – income tax and estate tax).

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