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You're Alive. Insure It.
By MP Dunleavey Monday April 05, 2010
Plan D You shudder to think about dying. But imagine if you died suddenly—and left your family with no financial cushion?
"That's why life insurance should be at the top of your To Do list—but it isn't, because it makes you think about things you don't want to think about," says Jackie, 36, who has a 14-month-old daughter.
Jackie, a long-time DailyWorth reader, is determined to purchase life insurance policies for herself and her husband—and she is willing to share her experience with us.
Come to terms with it
Jackie, who works in sales for a food company, wanted to get started—but didn't know where to start.
We walked her through the two types of life insurance: term insurance (uncomplicated) and permanent insurance, also called whole life (complicated).
Term life insurance is similar to home insurance. You pay a monthly premium for coverage in case of catastrophe—fire, flood or in this case, death. If your house went up in flames, your policy would cover $X amount. If you died, your life insurance would pay your survivors $X amount (charmingly called the "death benefit").
- The policy only lasts for a certain number of years, i.e. the term.
- Like homeowner's insurance, you only get money if something bad happens. There's no cash value to the policy.
What Jackie found appealing about term is that it's straightforward—and inexpensive. According to Money: "A $1 million permanent policy for a healthy 40-year-old woman can run as much as $13,900 a year; she could get a $1 million 20-year term policy for $750 per year."
Next: Jackie discusses these options with her husband.
On a happier note: Wedding bells are ringing! This e-mail address is being protected from spambots. You need JavaScript enabled to view it your financial survival strategies—for being a bride, bridesmaid or guest.
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Written by Linna, April 05, 2010
This is a great topic to discuss on DW! I think it should be noted that life insurance is absolutely necessary when you have dependents; otherwise, it should not be an expenditure.
Written by Lara, April 05, 2010
One thing to know about term life insurance: you can be denied coverage if you have a health condition or a history of same. A medical exam and bloodwork are usually part of the application process. Sure, you're healthy now, but can you count on that being the case for the next ten years (a common term length)? Do you know for sure that the bloodwork you have done for the application won't indicate a hidden but serious illness like cancer? Many people don't even know they have a health problem until they are denied life insurance.
When shopping for life insurance, look for a policy that comes with a guarantee of coverage extension at the end of the term. That way, if you do have a health issue during your term, you're not suddenly denied life insurance when the policy expires.
When shopping for life insurance, look for a policy that comes with a guarantee of coverage extension at the end of the term. That way, if you do have a health issue during your term, you're not suddenly denied life insurance when the policy expires.
Written by Lori, April 05, 2010
Please warn people about annuities. Unfortuately, I signed up for one when my first child was born 8 years ago. It was for $100,000. Variable annuity with John Hancock. After many disc. with financial advisors and others I just pay the premium once a year and try not to think about it since I would lose more than its worth to get out of it. Its terrible. They charge a $30 monthly fee to maintain the account. My annual premium is only $929 and that gets invested but if you subtract the $360 annually as well as the various other monthly & annual charges the amount that is invested each year is only about $280. Anyway, I just think it would be good to warn people about annuities.
Written by AK, April 05, 2010
Lori - really interesting note about annuities. Variable annuities have really come under the spotlight as problem starters. Because annuities are confusing, a lot of people don't understand there is a HUGE difference between VARIABLE annuities and FIXED annuities. Fixed Income Annuities are actually a great source of guaranteed income (provided you purchase from a smart, financially secure company - mutuals (privately held insurers) are a good place to start). It guarantees a monthly payout starting on X date for the rest of your life. They've gained a lot of traction over the past few years - waving the "Boring is the New 'Cool'" flag while pensions seemingly disappear and 401(k)s deflated. Think about taking with a financial adviser or even an insurance agent about them as an alternative.
Written by Kate, April 05, 2010
Another HUGE point about life insurace - you need life insurance for those things and people that are dependent on you and would keep on needing the money you provide if you were not there. So, when you have kids - an absolute must. When you don't have kids, it is a calculation based on your debts and assets.
Written by MP Dunleavey, April 06, 2010
These are all great comments. Let's steer clear of annuities--they are a can of worms unto themselves. We'll address what annuities are and how they work in a separate topic. But AK is right--Lori, you should talk to an independent financial advisor (fee only), OK? It sounds like you're young, and there's no need to be stuck with a losing cause like that. Perhaps you can convert to a fixed annuity?
@Kate...if you don't have any dependents, you really don't need life insurance. If you have debts, they will be subtracted from your assets if you die. If you don't have assets, your debts die with you (your spouse or family won't be held responsible). BUT--if you want life insurance simply to provide your spouse with financial support--because you provided half the income, say--you can do that.
@Kate...if you don't have any dependents, you really don't need life insurance. If you have debts, they will be subtracted from your assets if you die. If you don't have assets, your debts die with you (your spouse or family won't be held responsible). BUT--if you want life insurance simply to provide your spouse with financial support--because you provided half the income, say--you can do that.
Written by MP Dunleavey, April 06, 2010
The other thing I'd suggest employed DW readers do this week is to check with your benefits department to see whether you're paying for life insurance through work. in most cases it's a small amount ($10K or $50K), and if you're getting a real policy, you can cancel that one.
Written by carrie, April 06, 2010
great topic! I'm trying to navigate this one myself currently. It's definetly confusing ground. The other thing I didn't even think of but was pointed out to me by an elder was that if you do go with permanent you need to figure in tax consequences on the money you invest because most likely you'll sell this for retirement money. Ugg! I'm hoping this site will help me to understand more about the life insurance thing.
Written by Kenia, April 06, 2010
@MP - You said that your spouse or family won't be held responsible for debts...but doesn't that depend on whether or not any of them cosigned with you? The reason I bring it up, is because I have student loans that my aunt cosigned on. If I were to pass away, I believe she would now have the responsibility to pay. I automatically have term life insurance through work, and the payout amount would be enough to cover my student loans, as well as some extra ~$7K for funeral costs. (I'm assuming that life insurance money can also be used to pay for funeral costs - please correct me if I'm wrong.) Anyway, I have a close family member listed as the beneficiary, and I figured he could recieve the money and then use it for those two things.
Written by Jeff Landers, April 06, 2010
Just as there are many types of life insurance (term, whole, universal, etc.), there are also many different reasons to have it. Life insurance should be viewed as a solution to a specific situation or problem, not necessarily as a product. Most commonly, life insurance is used to make sure that your family will have sufficient funds to take care of their needs in the event of your death. But it can also be used for estate planning purposes, for buy-sell agreements in business, to make sure that a mortgage or other debt can be paid off if you die and in cases of divorce, to secure divorce settlement payments (alimony, child support, etc.) in the event that the paying spouse dies.
There is no one size fits all when it comes to life insurance, so make sure that your life insurance agent and/or financial advisor has a good understanding of what you want to accomplish before they even start telling you about types of product. I would be more than happy to answer any questions on this topic and if you want to email me privately, my email address is This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
If you just want to do some comparison shopping or get some ideas about term life insurance premiums, please feel free to use the quote engine at my website - http://www.DivorceSettlementInsurance.com (you don't even have to enter your name).
Although this is a specialized website for using term life insurance as a way of securing alimony, child support and other payments in the event that the paying ex-spouse dies, the engine that runs the quotes (from all the major life insurance companies) would be applicable for any term life insurance, not just in divorce cases.
There is no one size fits all when it comes to life insurance, so make sure that your life insurance agent and/or financial advisor has a good understanding of what you want to accomplish before they even start telling you about types of product. I would be more than happy to answer any questions on this topic and if you want to email me privately, my email address is This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
If you just want to do some comparison shopping or get some ideas about term life insurance premiums, please feel free to use the quote engine at my website - http://www.DivorceSettlementInsurance.com (you don't even have to enter your name).
Although this is a specialized website for using term life insurance as a way of securing alimony, child support and other payments in the event that the paying ex-spouse dies, the engine that runs the quotes (from all the major life insurance companies) would be applicable for any term life insurance, not just in divorce cases.
Written by Abby, April 06, 2010
Great topic - I recently went through upping my life insurance so that the dh could replace most of my income by putting it into a fixed-interest rate account (CD or other). The insurance would cover child care and other costs he would encounter in my absence. The hopes would be that the balance would pay for all of college, and hopefully some extras in their 20s. As a 30 year-old woman, I was able to easily obtain a 20-year term for under $400/year.
It's important to note, that even though I WOH, SAHMs should have term life policies too - Dad would have to cover the costs that the SAHM completed (by hiring after school care/ nanny, a chauffeur, a cleaning lady, a personal chef, etc....)
It's important to note, that even though I WOH, SAHMs should have term life policies too - Dad would have to cover the costs that the SAHM completed (by hiring after school care/ nanny, a chauffeur, a cleaning lady, a personal chef, etc....)
Written by Melstewart, April 07, 2010
You never know when your ife is going to end, due to accident or terminal medicalcondition. Everyone should have life insurance. I had signed up for 75,000 about a year before I was stabbed by my husband & died twice once in the helicopter & once in the or. Don't ever take for granted that you will live to see another day. I have term life because the whole life that you can borrow on, can leave you with a hefty loan payment that will eat up your insurance policy.Everyone have a great day!
