I listen to many financial podcasts. A topic that comes up often is term life insurance and why I need it. Honestly, I never even thought to get any sort of life insurance. I think it stemmed from me not fully understanding the purpose of it, or that it was just something I needed once I'm older. It was also a hard topic to think about.
Life insurance is money paid out after you die. So, you have to face your own mortality to understand it. Hopefully, you'll have a long life, but inevitably it will happen some day. Consider who would get affected the most financially when you die. For me, it's my wife and it's very difficult to think about. I want her to be okay if I passed. I don't want her to worry about anything. Life insurance is a way I can take care of her, even when I'm not around anymore. Taking finances off the table would give her once less thing to worry about. She would be able to focus on healing and getting past the pain and grief.
After thinking about it in this way, I was pretty convinced that I needed life insurance. First, the recommendation given by many is to get term life insurance. Never get whole life. It's financially a really bad deal and you'll get more for your money if you do term life insurance. I recommend doing a term for about 10 years at 10 times your income. For me, that's only about $35 dollars a month, but that's more than worth it knowing my wife would be taken care of amidst a tragedy.
Doing term life insurance every 10 years allows you to readjust the 10 times your income rule. Most likely, your income will go up 10 years from now, so you don't want the same term life policy. You would want to increase your coverage based on your new salary. Or maybe, you paid off some debt and you took a lower paying job. Again, now you would want to adjust your coverage lower.
I would also say the 10 times your income is a soft rule, but your coverage should be close to it. I think of it in this way. If I passed, I want my house to be paid off and my wife to be able to live in it for as long as she is comfortable with. I want her to be able to do whatever she wants, without having to worry about the finances. If you have a full family, you might want enough to cover your kids college, weddings, first cars, etc. If you have grand-kids, you might want enough life insurance that you could pass some money down to them.
Life insurance is a tough topic, but important. It's most important for families, as there is a reliance on your income or you rely on someone else's income. You want to ask the hard question, "How will I be financially if you die tomorrow?" That question will help you determine your life insurance needs.
If you're single with no dependents, you probably don't need life insurance, but if you want to get ahead on things, start setting aside $30 a month. It gives you a nice buffer in your bank accounts, would cover funeral costs in the worst case scenario, and get you used to paying "life insurance". Then, when you're actually paying for it, it becomes an easy transition. You could go ahead and get term life insurance, but remember to determine who it would take care of, if you passed. For example, make sure that it would go to your parents or guardians, which can be done with the help of a lawyer.
Thanks for reading this post! I hope it helped you get a better understanding of term life insurance and why you should get it. If you have any questions at all, please ask! I'll be more than happy to answer. As always, I hope you get a better budget every day and continue in a successful personal finance journey.
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My name is Corey and I have a passion for budgets and personal financing. I can talk about it for days (weirdly enough). Hope you enjoy the blog!
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