When should I get Life Insurance? I get this question a lot in various forms. “When is Life Insurance an important thing to have?” “I’ll get Life Insurance when I have kids, that’s when I’ll need it right?” “Shouldn’t I get life insurance when I buy a house?”
Common variations of the same theme, we instinctively know that we need and desire security for our loved ones, and life insurance provides that. But we rarely understand when we need to get insurance in place.
The 6 “triggers” for life insurance purchase
Most of us really do know when life insurance becomes important, we just don’t recognize it. Here are 6 common triggers that should tell you, “It’s time”.
When you marry, you agree “to have and to hold, from this day forward, until death do us part”. But many people want to care for their partner beyond death. There is something unsettling about dying and leaving your partner with a lump of bills, a mortgage, and perhaps less than half the income they enjoyed while you were around.
For these reasons and many less obvious ones, people often seek life insurance coverage just before or after marriage. In truth, this is typically a good time, especially if it’s your first rodeo and you are young.
Why? Because the younger you are, the cheaper coverage will be. Even if you have medical conditions that cause it to be more expensive, it will likely be less expensive for you when you are young that it is for, say someone 10 years older with similar health.
If you are active and healthy and qualify for insurers’ best premiums (often called being “Preferred Plus rated”), purchasing life insurance young pays big dividends, because for you, the premiums are often 50% lower than those paid by the average person your age (someone rated “Standard Non-Smoker”).
While we don’t want to think of this as a possibility, life throws us some curves and one might be the ending of a marriage. In many cases, attorneys will ask for life insurance to be purchased on the life of the primary bread winner (and sometimes on the lesser bread winner as well), to ensure that there are funds available to sustain their client and possible children, should the other party die prematurely.
Many times these are term policies, required to remain in place for the duration of time that alimony or child support is required.
With children, we take on added financial burdens. According to CNN Money, the cost of raising the average child is now estimated at over $245,000. Factors contributing to this cost include: housing, food and clothing, and various costs of getting them through school.
College is yet another cost that today could cost roughly $50,000 – $200,000 for an undergraduate degree.
Enter life insurance. Without it, your offspring could be left with very little. In fact, families without life insurance can count on very little in the form of assistance. With life insurance, all of your dreams for those children can still be financially realized through carrying the proper amount of coverage.
4) A New Home
When we purchase a new home, we typically tie up 25-40% of our income in mortgage payments for 30 years. If you or your partner were to pass unexpectedly, the ability of the surviving partner to carry on with the same household would be unlikely without life insurance coverage.
5) The passing of someone close
We often reflect on our own mortality when someone close dies, particularly when that person in younger or about the same age. Realizing that we are all going to die, and often observing the unfortunate circumstances of someone else passing, we are jarred to action by the precarious position that their family is left in (when life insurance was insufficient or non-existent).
This causes many of us to do what we know we should have done many years ago perhaps.
6) “Key-man” insurance
Named politically incorrectly, key-man insurance is a life policy on partners in a business, male or female. Suppose George and Abigail open a pie shop.
George is all things pies. He knows the process, best temperatures, best recipes (all secret of course) and how to get them prepared for sale daily.
Abigail, is all things business. She understands marketing, how to sell day-old pies while not diluting the value of their fresh pies, accounting, payroll, state and local compliance, and all the rest.
What would happen to the business if either of these individuals died unexpectedly? Well, we hope that the business would not fail, but we know that neither understands what they don’t have responsibility for and would need help. Perhaps help to get through a lull in sales and income, and perhaps to replace the income they would lose if the business completely goes under. That’s one use of key-man insurance, to keep things moving.
Another is to “buy out” the heirs of the deceased partner. Let’s say each makes $100,000/year from this business. They may want to take out life insurance policies on one another for say $500,000 so that they have the capital to make it through the bad times, and to buy out the heirs of the partner that has passed (remember, their assets pass to their heirs, so now you’d have new partners if you did not buy them out). Key-man insurance can be purchased to provide for many scenarios, including those I’ve mentioned here.
What should I do if I’ve been ignoring these triggers?
You should find out whether or not you need term life insurance coverage. Today, term life insurance is extremely inexpensive. Remember, the younger you are, the cheaper it is, so someone in their late 20’s that recently married or even just had children, could gain appropriate coverage to protect their family for a few dollars a month.
And remember, the better your health, activity level, and family medical history, the cheaper your premiums will be. The typical 30 year old, “Preferred Plus” customer would likely get $500,000 of coverage for under $30/mo.
Where can I find out the cost?
I’m glad you asked. At mylifecovered.com, we can provide you a free, no-obligation quote from 5 of the lowest cost carriers in the market.
After quoting, you can apply online, call our agent support line, or shop around. One thing though, when you call our agents, know that you will be talking with experienced life insurance agents right here in the U.S. No overseas call center, no language barrier, no kidding.
Life insurance is a product that we all need while we have “insurable interests”. As we age, many of us can “self insure”. We have assets saved for our spouse, or we no longer have a spouse, and we may not need the life insurance because everything we have is paid for. So life insurance needs should diminish over time.