Tag Archives: life insurance

How to Talk About Life Insurance as a Couple

This is a guest post from my friend Eric Rosenberg, a personal finance blogger and podcaster at Personal Profitability in partnership with Mason Finance. He writes about personal finance, credit cards, entrepreneurship, and technology.

“Till death do us part.” This line has been read at countless weddings, and rightfully so we focus on the life part of our relationship, not the death. But that does not mean it is never going to happen. And as part of life as a couple, it is important to discuss the financial realities of death.

When planning for the long-term, life insurance is an important pieces of the financial security puzzle. Coupled with other savings, including retirement, it can create a safety net that covers your family for many years to come. Let’s take a look at why life insurance matters and how to discuss it as a couple.

Intro to life insurance

If you are new to life insurance, let’s do a quick primer to get you up to speed. There are a few key facts to know about life insurance before you start doing any research.

First, there are several types of life insurance. The most popular is called term life insurance because it is good for a period of time known as a term. Term life insurance is popular because it offer the biggest benefit for the lowest monthly cost.

The younger and healthier you are when you get life insurance, the less you’ll pay. Longer terms increase the price, as does a risky lifestyle that includes activities the insurance companies call “risky,” like rock climbing, skydiving, and flying small aircraft.

If the insured passes away before the end of the term, the policy beneficiaries get a payout. If the insured outlives the term, the policy expires for practical purposes.

Okay, there you go. We have the basics covered!

Figuring out your life insurance need

If you think life insurance makes sense in your situation (and it probably does), the next step is to figure out how much you need. Because life insurance policies are often priced in a cost per thousand dollars, getting too much life insurance may cost too much. But on the other hand, you don’t want to be underinsured and leave your family at risk.

To calculate what you need for life insurance, try the following formula:

[monthly expenses] x 120 + [big future expenses] = minimum life insurance need

Breaking it down, you are covering 10 years of expenses plus any major future expenses, like college costs or a mortgage payoff, which ensures your family has a long runway without worrying about going hungry.

Another way to find your policy value is using the popular 4% rule. This rule says you can safely withdraw 4% per year from an investment in perpetuity without ever running out of funds. For this calculation, use the following formula:

[(monthly expenses)*12]/.04 = minimum life insurance need

Using this method, a family with $3,000 per month in expenses, or $36,000 per year, would need $900,000 in life insurance.

Discussing life insurance with the significant other

No one ever walked into a room smiling and said, “honey, let’s talk about financial planning for me dying someday.” It is not always a fun conversation, but it is so important to talk about life insurance and other long-term financial planning needs.

In my experience, the best way to approach this is just being blunt, honest, and focusing on the facts. While you are probably not going anywhere anytime soon, it is good to be prepared just in case. That’s what insurance is for, after all, the “just in case” scenarios.

If you can go into the conversation prepared, it makes it smoother and easier. With that information in hand, you can discuss your needs and a plan to find and apply for the right life insurance policy.

What to do if you over insured

If you already have life insurance, this section if for you. Even when you have life insurance, it is a good idea to do an annual check-in to see how you are standing compared to your needs.

Because you are a smart saver and putting money away each month, you should see your savings balances grow and grow over time. Eventually, that savings level may grow beyond the point of needing life insurance.

For example, in the scenario above, a family with $3,000 in monthly expenses needs a $900,000 life insurance policy to ensure all costs are covered. But if you can save $900,000 or more, you don’t need that life insurance anymore at all!

If that sounds like you, check out this policy estimator to find out what your policy may be worth if you decide you no longer need it. Don’t let a policy simply lapse or you could be leaving money on the table.

Protecting your family is important

Your family’s long-term financial security is too important to gamble on. Instead of risking it all on a hope that nothing bad will ever happen, life insurance can help you hedge against that terrible “what if.”

Go head and have the conversation, even if it makes you a little uncomfortable. By planning for the future, you know you can rest easy in the present with your family protected by the right level of insurance.

The Couple’s Guide to Life Insurance

counting my money

If you’re married or engaged, learning to share your personal finances is part of the experience of sharing your lives.

Being in a serious relationship usually means you not only depend on each other for emotional support, but financial support as well. If you’re sharing a mortgage or a rent payment, if you have a joint checking account, or if the two of you are planning for the future together and aligning your saving goals and spending priorities, then you also need to think about buying life insurance as part of your financial goals.

No one likes to think about death and dying, and most of us don’t feel as though we’ll die at a young age, but you really never know when it can happen. Any happy couple can be separated by an untimely accident or illness. What if one of you was to pass away? With your loved one’s passing comes not only the grief of their death, but the danger of your current lifestyle vanishing. Without that other person’s income to help pay the bills, you might find yourself slipping into financial peril.

This is why life insurance is so important, for couples of all ages. Buying life insurance gives you the ability to plan for the most catastrophic loss of all – the untimely death of your life partner. If you own a life insurance policy, your surviving loved ones will receive a significant amount of money that can help them pay the bills and move forward with life in financial comfort.

Many people are reluctant to research life insurance, or don’t know where to go for help. Life insurance can often sound like a rather bland, boring, and downright confusing topic if you’re not an expert in the field. So here are a few quick basic questions and answers that any couple should know about life insurance:

What kind of life insurance is best, term life insurance or whole life insurance?

In general, we recommend that people buy term life insurance. Term life insurance is offered for a specific “term” of years – for example, 10 years, 20 years or 30 years. That means if you buy a 30 year term life insurance policy at age 30, you will be covered until you are 60 years old – if you die at any time during the term, your family will receive the benefits of the policy. Whole life insurance can be useful for some specific situations, but most people will get a higher amount of coverage at a cheaper price if they buy term life insurance.

How much does life insurance cost?

It depends on the term, the amount of coverage, and the health of the person being covered. For example, if you’re 25 years old, in good health, a non-smoker, and you want $250,000 of coverage for a 20-year-term, you might only have to pay $30 a month (or less). If you want more coverage, for example, a $500,000 payout, or a longer 30-year term, the cost of the insurance will increase accordingly.

How much life insurance coverage do I need?

This is a hard question to answer because every person’s financial situation is different. In general, a rule of thumb is that you should have term life insurance coverage that is at least 5 times your annual salary. For example, if you earn $50,000 a year, you should buy a $250,000 term life insurance policy. However, if you need to provide for a large family, you might want to buy more. If you have young children, you might want to buy more life insurance with a long enough term to cover your family until your kids are fully grown. It all depends on your present-day income and long-range goals.

Should I get life insurance for my stay-at-home spouse?

If you are in a one-income household where only one spouse works outside the home, you should still buy life insurance for both spouses. The reason is, even if your non-income earning spouse were to die, there would still be expenses involved with replacing the unpaid labor that he/she provides for the household. If you have a stay-at-home mom raising the kids, or a stay-at-home dad doing chores around the house, you would need to hire someone else to provide child care or do the other work that is being done by the stay-at-home spouse.

Buying life insurance is not always “fun” but it’s a necessary part of strengthening your financial relationship with your partner. Fortunately, it’s easier than ever before to find affordable term life insurance that can fit the needs of any couple, at any stage of life.

About MyInsuranceExpert.com
MyInsuranceExpert.com is one of the top 10 life insurance brokerages in America. We help people find the right life insurance policy at the right price – often saving up to 75% on the cost of life insurance premiums.

We work with several major life insurance companies, but we are independent in making recommendations – we always work on the customer’s behalf to make sure that our customers get the best deal. Talk to the expert advisers at MyInsuranceExpert.com for a free quote on term life insurance.