Life insurance sounds morbid. I am 29, full of life and haven’t felt sick in years. On the other side of this coin, I am a finance buff who preaches preservation of wealth and risk management; how antithetical of me to walk around with no life insurance right?
Up until December 2019, I only had life insurance through my employer, which was contingent on my employment. While the benefit was free of cost, it simply wasn’t enough. This is a post about my search for life insurance, filtering through what seemed like a hundred insurers and policy options. I’ll walk through my thought process on term vs whole life policies (excluding universal policies for simplicity), as well as my decision factors on the amount of life insurance I purchased.
First thing to discuss: We all gon die (I hope you read it exactly how I wrote it). I pray you repent before that day comes, because there is no insurance policy that can sneak you into heaven. Alright stay with me, I promise this isn’t a switch and bait post; I am really going to discuss life insurance. While we know we will all die at some point, we do not know the time/day. As Coronavirus transfuses through our communities at alarming rates, the reality of death has become a familiar discussion. Life insurance ensures that your family and loved ones will not have to bear the entire burden of your debts and burial costs.
Who should get life insurance?
Short answer is everyone. Children unfortunately can pass away and leave parents with funeral costs that exceed current savings. The younger you are the cheaper rates become. You can’t rewind the clock back to a younger age, but you can take action asap. Some people have no liabilities and believe their death would not be a burden; if your family and friends have to make a GoFundMe page when you pass, then you thought wrong. Obviously, there are needs that require immediate attention and you may not be able to pay for life insurance right now. If you have to skimp on the amount of insurance to lower your premiums, you can always get more coverage later. You do not want to look for insurance once you are in your latter half of life as premiums will be very high.
Why did you start thinking of Life Insurance?
I started thinking of life insurance due to approaching 30. I have no wife or kids, but I was in the process of settling down. I also was looking for a house, which would require a mortgage. If anything happened to me, I wanted the house to stay in my family and not deeply trouble my family members with taking over the mortgage. Debts were not a big factor as my federal student loans will not roll over to next of kin (not the case with private loans).
Term or Whole Life Insurance?
Fam, I’m not about that whole life insurance life (give me my ambiguity points). Well the truth is, I really did not want to pay that much for a policy because I’m an Igbo man that hates spending money. Term policies were attractive to me because they were cheaper and straightforward. A whole policy had premiums more than 4x the term policy I was looking at and there were fees associated that would vary year over year. The whole policy did come with a guaranteed cash value (aka something you can pull cash out of down the line), but after looking at the accumulation projections; I rather take the money I save from getting the term policy and invest it myself. I am trying to keep this post rudimentary as people usually get put off by life insurance due to its complex nature and verbiage. The savings portion of the whole policy can be invested in various assets, but the returns are usually capped and floored.
How much insurance did you get?
I already had approximately $250,000 of life insurance with my employer that I took into consideration. I have seen some finance gurus says you shouldn’t count this type of insurance because a job can let you go; while this is 100% true, life is full of risks and I am willing to take the risk that I will not lose my employment given the industry and company I am employed in. With that in mind, I thought of the house I was going to buy and its price range. My student loans were all federal and would not run the risk of getting passed to loved ones if I died. I came up with $300,000, which would pay for my house in full and the $250,000 from my job’s policy would be sufficient to handle funeral expenses, future family needs, and some light debt that I may have amassed.
How many years is the term policy?
A term policy is very flexible. You can choose a 10/20/30 year term from all insurers and a 10/20/30/35/40 year term from a select few insurers. In choosing a term, I thought of how long I would possibly need to support my family. If God blesses me with a baddie wife right now and we have a couple kids in 5 years, then I will be about 35. My kids will be under my household for let’s say 25 years and my mortgage will be a 30 year term. So far, I counted 5 years to settle down and procreate and another 25 to have my kids in my household for a total of 30 years (matching my mortgage). Now these are just rough presumptive projections; what if my timelines are off? Therefore, I added another 10 years to my projections and chose to select a 40 year term policy.
Who did you get your policy from and how did you pick them?
I utilized the internet for shopping around. You can find many platforms that will do comparisons for you after you put in some variables. I used HealthIQ.com for my search and I only found one insurer (Banner) offering a 40 year policy. As I mentioned earlier, anything longer than 40 years is hard to find. I really had no other choice in terms of insurers so the decision was simple. I liked the fact that I could pay for my policy upfront and save 3% as opposed to having monthly premiums. I wound up paying about $30 to $35 if you divide my payment into monthly rates. My quotes were derived from answers given in questionnaires and were not locked in.
Did you have to take a physical?
Of course! It was pretty quick and I didn’t need to take any time off as they were able to meet me at my desired location. I had someone come to my place of employment and they took a urine sample, drew some blood and made me fill out and sign a few forms.
In conclusion, don’t be scared of life insurance. You never know you will need it until someone in your family passes and you witness first-hand the financial strain that a family undergoes if not prepared. I also like the fact that I can economically improve my family if something were to unfortunately happen to me. All this death talk, so I’ll end with a positive note: Live life to the fullest regardless of your situation; there is always someone less fortunate who would love to live your life!