I’m Reconsidering When To Buy Life Insurance

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Life insurance is, at a minimum, an important factor to consider in any financial plan. I’ve said in the past that I don’t currently have my own personal life insurance policy. However, we do have small group life insurance policies through our jobs that had covered our needs at the time.

While it may be difficult to have the life insurance talk with your partner, it is a necessity and you should do it now rather than put it off.

What Made Me Reconsider My Life Insurance Choice?

Life changes. Your financial plan should, too. A few big things have changed since the last time we evaluated our financial plan which means we need to reevaluate our life insurance needs.

We Bought A New House

The biggest change in our financial picture recently is the fact that we bought a new house. We love our new house and are super excited about where we live, the extra space and the long-term suitability of this house for our future.

Unfortunately, we weren’t able to pay all cash for our new, bigger home so that means we had to make a death pledge. That means that both our debt and our cash outflow have increased significantly. Both of these factors increased the amount of life insurance we needed to feel comfortable should something happen to either one of us.

We Became Landlords

When we bought our new home, we didn’t sell our old townhouse. Instead, we turned it into a rental property. While the property cash flows well, if something happened where we didn’t have a tenant for an extended period of time things could get tight financially. This is especially true if one of us passed away and the second income was lost.

Another situation that could cause problems if one of us passed away would be large repairs to the property. We could easily work most repairs into our current monthly budget while we have two incomes, but if one income disappeared it would be much harder to cover the repair.

Due to these reasons, I need to make sure my life insurance would be able to cover any of these needs. If I have enough insurance to pay off the rental mortgage and cover any needs, I feel that would be a good situation to be in.

My Wife’s Student Loans Are Almost Gone

The other two items on our list were negative because they increased our need for life insurance. This one, however, is a positive that lowers our needs for life insurance. Once my wife’s student loans are gone, her expenses will drop off significantly.

That’s great news should something happen to me. In fact, it decreases the amount of life insurance I would need to ensure she is able to live comfortably should something happen to me.

Will We Get More Life Insurance Right Now?

After analyzing our current situation, we decided that we don’t need more life insurance than we currently have through our employers right now. We know that our lives will continue to change and we’ll continue to reevaluate our situation as those changes happen.

Unless we run into some major money in the few years, we know we’ll have to buy a lot more life insurance when we decide to have kids. When that happens, I’ll be sure to update you all!

If you want to become more knowledgeable about life insurance, make sure to check out this resource from Genworth.

When was the last time you evaluated your life insurance needs? What did you discover?

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. We bought our 30-year term life policies in our late 20′s, just prior to having kids. It’s amazing how inexpensive these policies were, even for a $500k – $1M death benefit.

    We figured while we were young, healthy and thin and could still get the best rates that we should lock in for 30 years. We won’t need life insurance when the term runs out at ~59 years old since we’ll have more than enough assets, so it made sense for us to lock in early.
    Brad @ RichmondSavers.com recently posted..Stress-Free Cooking Installment 2: Gourmet Sloppy JoesMy Profile

  2. I think the re-evaluation aspect is what is key. Many don’t re-evaluate and things change but they don’t make the changes necessary to cover those needs. We bought our main insurance about 8ish years ago and actually need look into getting more – which is on my plans for the near future.
    John S @ Frugal Rules recently posted..Betterment Review: A New Investing Option to ConsiderMy Profile

  3. I am still not insured, but thinking about it to get a low rate while I am young-ish and healthy instead of waiting to start a family.
    Pauline recently posted..The purchase that makes you go “meh”My Profile

  4. Like Brad, I bought affordable 20-year term policies that kept my family protected while they were dependent upon my income (which would vanish of course if I should die). As we had expected, as those policies start to term out, there is no longer any need for them since the kids are grown and gone, the mortgage is paid off, etc. I get constant solicitations to buy more life insurance as those policies expire, but I can’t see any reason for it. Folks really need to think about their needs when buying insurance, just as you advise.

  5. You definitely need term life insurance when someone else is counting on your income. And in the case of a child, the cost will go up if a spouse dies, due to additional child care. My wife and I both bought $500k term life policies shortly after our son was born. He is 12 now. We figured and still think that will be enough to pay for loss of income and additional expenses if one or both of us die. House is paid off, lots of college savings done, and plan to retire in 9 years. Policies still have 13 years to run.
    Bryce @ Save and Conquer recently posted..CharityMy Profile

  6. currently hubby and I each receive life insurance through our employers. The policies aren’t super great though. I think in the next few years we will re-evaluate our life insurance needs. Especially once we have kids!

  7. We have pretty high amount term policies because we want to have enough to pay off all debts and make sure our daughter is taken care of if something happens to us. As we pay down our mortgages, that need might lessen. It’s certainly important to re-evaluate your situation every so often.
    Kim@Eyesonthedollar recently posted..One Year After Paying Off Credit Card DebtMy Profile

  8. While I agree with your insurance need considerations, I love having a policy outside of work ASAP. When you eventually leave your job, who knows if you’ll be in good health? Will you be able to purchase insurance outside of work then? It’s so cheap when you’re young that I just don’t like waiting.
    AverageJoe recently posted..5 Ways To Supersize Your Frugal Holiday Fun – Stacking Benjamins 34My Profile

  9. It is important to have your insurance agent or financial planner perform an insurance needs analysis when there is a major life event to be sure you have the appropriate level of coverage. The cost of college can change drastically over time especially if the needs analysis was last performed when a child was born.
    Paul @ The Frugal Toad recently posted..More Ways to Stretch Your Retirement IncomeMy Profile

  10. We currently have $250,000 policies on each of us, but if we have a kid, we’ll be raising those. Without a kid, $250,000 gives each of us enough money to have a funeral and live like we do now for a few years while figuring out the next move…
    Crystal recently posted..Cupcake Makeover $50 Holiday GiveawayMy Profile

  11. I currently don’t have life insurance, and my husband only has a very small policy. I’m self employed, so I don’t have the option of getting it through my employer. It’s definitely something that we need to do, especially since we just had our first child, but it’s one of those things that has been put on the back burner as we focus on more immediate concerns.

  12. I definitely want to lock in lower rates now before we are older and have children. Have to start looking into that…
    Michelle recently posted..Our Travel Plans For 2014My Profile

  13. I think this is the right way to approach it. Many people just follow generic advice when it comes to insurance, and they end up getting more than they need. It’s important to remember what the purpose of life insurance really is, and I think that can help us to have discipline when evaluating our needs.

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