It’s hard for me to admit that there was a time, not all that long ago, that I didn’t make life insurance a priority. My employer provided one-year salary as a standard benefit, but in the grand scheme of things- that was nothing. It wasn’t enough for to pay off the mortgage, it wasn’t enough to pay for my kids to go to college, and perhaps even more importantly– it wasn’t enough to buy my wife (who stays at home with our young daughter) some time to figure out a plan to provide for our children in the event that I was unable to do so.
Even before we started this website and started climbing out of debt, I finally came to grips with the fact that death can come any where, any time, to anyone. I was in my early thirties and didn’t have a ton of risk factors, but that didn’t mean that the risk wasn’t there. As such, I took on an extra $37/month payment for a life insurance policy on myself, to make sure that my family would be covered. Adding an extra monthly expense to the top of the pile when you are trying to get out of debt certainly doesn’t make your life any easier, but frankly– it is just careless not to go this route. If you don’t have kids, then certainly the same urgency is not there. But if you have people depending on you, getting a life insurance policy should be your number one priority. This is true even if you are carrying debt, and even if you haven’t even taken the first step towards getting rid of that debt (creating an emergency fund).
Because it is such an important topic in personal finance, we have talked about life insurance before here at See Debt Run. Michelle talked about the fear that comes along with being a one income family, when your husband isn’t at home and isn’t answering his cell phone. I talked about how the feeling of invincibility that we have in our youth eventually gets replaced by the realization that our time on this planet is limited, and leaving our loved ones high and dry just cannot be an option.
At the end of this year, my employer announced that they were dramatically shuffling their employee benefits, and a slew of new options were now available. These changes were mostly for the better, and the best of all was the announcement that they were offering life insurance at a hugely discounted rate. I noticed that I could get the same amount of coverage that I was currently getting through a third party, for about 25% of the cost. The downside of this, of course, was that the policy was only valid if I stayed employed with the company. Since I had no plans to switch jobs, I immediately jumped at the opportunity. The plan was initially to drop my existing policy once this one took effect, thus saving a nice chunk of change each month.
When you sign up for life insurance, the first step in the process is to have a nurse come out to your home to give you a health checkup. They take your blood pressure, do a saliva test (to make sure you aren’t lying about being a non-smoker), and draw a little blood to test for drugs and a few diseases. Some might find this invasive, but the insurance companies do charge higher rates for those that have higher risk factors (as might be expected). A few weeks later, I got notice that my application was approved and my policy was active.
Effectively at that point, I had double the life insurance that I initially calculated that I “needed”. In reality, this new number was probably more appropriate for my current lot in life. If something happened to me, my wife would almost certainly need to go back to college to finish her degree. While that was occurring, she would need child care and likely wouldn’t have much money to cover her day-to-day bills. I decided to go ahead and keep my existing insurance plan on top of the work plan– effectively doubling down on my life insurance.
If you don’t already have coverage, I would strongly recommend looking into purchasing life insurance to protect your family. There are people who are very close to me who lost their parents in an automobile accident when they were very young, and while it was a horrible and life changing experience for them to go through, it could have been even worse if their parents hadn’t taken the time to setup a proper life insurance policy prior to their passing. Losing a loved one is always a very painful experience, and forcing those left behind to handle an incredible financial burden immediately after is just something that should never happen.
My employer provides 2x salary as a base, and allows us to buy up to 10x, which I take advantage of. They also allow me to buy coverage for my wife, up to $200k or $250k, I can’t remember offhand. For now, this is adequate.
i’ve purchased a bit more than that, but as mentioned– i now have 4 dependents.
No sense in being both sad I’m gone and out (hopefully) years of my earning potential. Got to think of retirement, even when you’re dead. That’s a bit sad, but true.
yes.. it is important to build up savings such as these when i am in my prime earnings years (right now).
My employer provides burial expenses only. So we have private life insurance.
yes.. in that case, you would have to go private with some of the insurance. do they even mandate what type of funeral you need to have?
It changes everything once you have a family. I have burial expenses and a little lump sum on my credit card but that is it, so far no one depends on my income so it is enough.
without kids– i don’t think that carrying more than burial expenses makes any sense at all.. but you’re right, kids change everything.
I wish my employer offered life insurance as an option. As my son’s due date is fast approaching, July 15th, I have definitely felt more of a need for life insurance. Thank you for reminding me to put it on my list of things to do withing the next few weeks.
no doubt, jennifer. the time is rapidly approaching to put it high up on your list.
I have life insurance through my employer which pays out 2x my salary I believe. I don’t really need life insurance though. No dependents!
i hope that employers don’t pull life insurance off their set of standard benefits any time soon– but then again, it is a relatively cheap way to help with employee retention.
Employer insurance is great. Especially if it’s simplified or guaranteed issue. But chances are, your cost per thousand is too much. Because the insurance company is willing to offer it with limited underwriting, you’re paying for that privilege with your premiums. As you said, the biggest takeaway here should be portability. You will need your insurance (or some of it) when you leave, retire, or are terminated. Why not cover yourself by insuring privately?
i will have to consider at the end of the year, whether or not to drop my private coverage entirely and switch to a pure company provided plan. that would leave absolutely no portability, however– and of course, the older i get when i start a policy, the more it costs p/month.
Check out this recent post I wrote about getting your life insurance amount straight to see if you agree. You seem to be covering more of the emotional side of things, whereas I try attack the problem from more of a logical perspective.
Great idea to increase your life insurance. If you can not afford to pay much money for coverage a 10 year term life insurance policy is your best bet for your money. Good luck in 2018!
How can I retain my employer-sponsored life insurance benefits after leaving the job?