What is the first thing that comes to mind when you think about financial planning? If you are like most people, it probably has to do with budgeting, or investing. Yes, both of these are fundamental parts of our financial planning. You can’t win at the financial game if you don’t follow the basic art of spending less than you earn (budgeting). Likewise, you won’t become wealthy, much less keep up with inflation if you don’t invest your money. Tracking your expenses, managing your spending, practicing proper asset allocation – these are all essential. And so is life insurance.
It’s great to pay attention to the little things when it comes to money. But you also need to make sure you take care of the big things. The most valuable asset you have isn’t your bank account, your 401k, or your Roth IRA. It is the ability to create income. The single biggest financial risk many people take is the failure to protect this asset.
There are two ways you can protect your ability to create income: long-term disability insurance will help you if you become incapacitated and are unable to work. There are limits, to these policies, but they are worth looking into. The next way to protect yourself and your family is by purchasing sufficient life insurance.
Who Needs Life Insurance
Everyone. OK, maybe not everyone – but almost everyone. We laid out a more detailed article regarding who needs life insurance. But a good rule of thumb is that if your income is used to support someone else, then you should have enough life insurance to off set the loss of your income and any additional expenses that may arise from your passing.
What about DINKs? There are many people who say you don’t need life insurance if you are a dual income no kids family. The rationale is that the surviving spouse should be able to provide for his or herself because he or she would still be able to work. Unfortunately, that logic is flawed in many cases. Many couples live on both salaries and a surviving spouse may find it hard to continue making mortgage or loan payments on only one income, especially if they were the one who earned less. Many debts can also pass on to the surviving spouse, depending on state laws. You also need to consider the possibility or large medical bills or other expenses related to a death and burial.
What about stay at home moms? Stay at home moms contribute to the household finances, even if they aren’t bringing home a paycheck. They take care of children, housework, cooking, cleaning, etc. Every year the national media puts together the “salary” of a stay at home mom based on their household contributions. It is always in the six figures. Think about it another way. Imagine you are the primary bread winner and your spouse stayed at home and raised your children. What would happen if he or she died? Would the children go to day care? Would you eat out more frequently? Could you afford to pay for any associated medical or burial costs?
Do retirees need life insurance? Yes, and no. If your house is paid off, you have no consumer debt, you have enough investments and other assets for one or both of you to make it through the rest of your life, then you may be fine without a life insurance policy. If you still have a mortgage or any consumer debt, then you might want to consider a life insurance policy that is large enough to satisfy these debts. Here is more on this topic.
Should you insure your children? This is another highly contested topic. Many people don’t think you should insure a child’s life. After all, most children don’t contribute to the family income, and the thought of profiting from a child’s death is morbid. I can understand why people may feel that way, but there are times when it may make sense to insure a child. I took out a life insurance policy on my children. Why? Because it only costs me $2 a month per child for $20k in life insurance. If my child dies, the money from the policy would be enough to pay for funeral expenses, and hopefully a portion of any medical expenses which may occur. The other benefit is that my children will be able to take the policy with them when they turn 18, regardless of whether or not something happens that would otherwise label them as uninsurable. It’s not a huge policy, but it’s enough to make me feel better. And that is what insurance is all about, right?
There is No Time Like the Present
In most cases, it is cheaper to buy life insurance when you are younger (and healthier). If you have some life insurance, great. Review your plan and make sure you have enough. If you don’t have enough life insurance, take a few moments and get a life insurance quote or see if you can get a policy through your employer. Here are some places where you can get a free, no-obligation quote on a life insurance policy:
|Life Insurance Company||Notes||Click for a free quote|
|Mint.com Life Insurance Wizard||This tool helps you learn how much life insurance you need by examining your age, income, dependents and more. Then they give recommendations based on your inputs.||Click to Start Your Quote|
|Efinancial.com||Get life insurance quotes from multiple providers||Click to Start Your Quote|
|USAA Life Insurance||USAA life insurance is only available to USAA members. Click to lean more about eligibility.||Click to Start Your Quote|
|US Insurance Online||Get life insurance quotes from multiple providers||Click to Start Your Quote|
Life insurance is one of the most essential parts of your financial plan. Please, for the love of your family, make sure you have enough. This article is part of the life insurance movement, a gathering of financial writers sharing the message about the importance of life insurance.