There is one statistic I’ve heard that appears to be unchanged and valid since Adam and Eve ate that apple: 10 out of 10 people die (except Enoch and Elijah, but those are exceptions that should not affect the statistical probability of this fact). This means you and I have the same event in the future that is coming to no matter if we want it to or not. Death! We all have plans, dreams and want to enjoy our lives for as long as we live, so it’s not the most popular topic for a blog and definitely not the trending Google search word, BUT one we have to talk about. Specifically, how to prepare for it financially.
First time I heard about life insurance was around 2011 when I was going through Dave Ramsey’s Financial Peace University program. I was young, happily married, expecting our first child shortly. At first, the idea of preparing for your own death seemed different and weird, but the logical part of the brain kicked in soon, and it started to make sense. I have been the family provider and primary source of income for my family, which means my wife and kids depend on my income to live, but what if… That thought that nobody voluntarily wants to dwell on: “what will happen if I will die tomorrow?” Imagining the grief and devastation it would bring to the people in my life was one thing, but then adding potential stress of financial security sounded just horrible. My mind was set- I have to purchase life insurance at least on myself.
What is it, and why?
Before diving into details, let’s establish that life insurance is an agreement between you and an insurance company that, in a case of a death, they pay a predetermined sum of money to beneficiaries you name, such as your spouse or other loved ones. In return, you fund the policy based on the terms you agreed to with the insurance company.”Why would I need life insurance?” you ask? Because this provides the peace of mind that your family or loved one will be well-taken care of even if you won’t be around to do so.
Which one to choose?
The pool of options is pretty big, but after doing due diligence, I found the best option for me – term life insurance. It is relatively cheap easy to understand and straightforward.
- First, they check your medical conditions
- Then, you choose the amount and term duration
- Based on the results, you get a monthly payment quote
As an example, my very first premium as a healthy non-smoker was less than $20 per month. Twenty dollars is probably 3-4 cups of coffee? I don’t drink coffee so guessing here, but the point is – my peace of mind is worth even more than that.
How much?
A good rule of thumb is, 10-12 times your yearly income. At first, I ignored that principle and just got the amount slightly over the value of our house (naively thinking not having a house payment solves most of the problems for the widow). But, I later realized that rule exists for a good reason, and there are many more financial burdens to be taken care of on a monthly basis. The best way to determine the amount of life insurance you need is to speak with an insurance agent.
When is the time?
Ask yourself this question to determine if you need life insurance right this moment: does anybody depend on you? Kids, wife, close siblings, elderly parents, just a few examples of who might rely on your income to be able to have a shelter and eat.
Who to get it for
It is also essential to be on the same page with your spouse about life insurance. While it is a no brainer that you intend to provide for them, my wife did not like the idea of me “preparing for my own death,” which is understandable! I had heard, read, and studied that subject for a while by then, but she was introduced to the idea out of nowhere, so it took some conversations to get on the same page. The next
Revisit
After you finally take this vital step and purchase a life insurance policy, be proud of yourself and celebrate a little, BUT don’t forget to put an annual reminder to review your policy from the perspective of your current financial situation. When you are newlyweds living in a one-bedroom apartment and making decent money, one amount can be good enough. However, a few years down the road when you have a house, several kids and much higher monthly minimum spend rate- that initial policy is probably too small and should be increased to accommodate your up-to-date financial situation.
Thanks to COUNTRY Financial for sponsoring this blog and if you have a question or need help around life insurance, contact an authorized COUNTRY Financial representative today. And to find out more about COUNTRY Financial’s life insurance options, click here.
Policies issued by COUNTRY Life Insurance Company® or COUNTRY Investors Life Assurance Company®, Bloomington, IL.
Term Policy: ICC17(RCT)