Relax. This is going to be a cheerier than usual post about life insurance. I can’t avoid using the “death” word, but I’m not going to tell you stories about families without life insurance. Unfortunately, it’s not because I don’t have a few personal experiences to share. Quite frankly, it wouldn’t do you any good to hear them.
Let’s say that I succeed in scaring you into buying life insurance, then what? The life insurance agent is going to sit in your second favorite chair of the living room (you will be in the most comfortable; of course) and begin complicating things by using marketing terms like “peace of mind,” “dividends” and “it’s the best of both worlds.”
Worse still, I might scare some college freshman who should be paying off credit card debt and building an emergency fund into buying a policy too early. Life insurance often comes packaged with the impetus of doom and although it’s important to act and act quickly, it’s a marketing ploy that is completely unnecessary. There are plenty of convincing reasons for buying life insurance; I need not frighten you.
Your Kids Can’t Get a Job
There is this boring book of rules called the law and it prevents your children from earning a paycheck. So you can either bank on the rule of law reverting about 100 years or you’ll need to come up with a way to financially support your kids; lest they roam the urban streets like Oliver Twist.
When you are a young parent, life insurance is important. Even if your spouse brings in an impressive paycheck, you still need to consider day care, college funding and retirement for your spouse. Your kids can’t get a job when you die to make up for your missing paycheck. Get life insurance.
No One Paid For the Debt Like You Did
Obviously, once you die, you can no longer make payments on your debt. That doesn’t mean that it goes away. A surviving spouse cannot be held liable for debt that was in your name only. Regardless, paying for debts after you’ve shuffled off the mortal coil is a conundrum for surviving spouses.
For example, it doesn’t matter if the mortgage is in your name, you spouses or joint; the odds are that your spouse will not want to pick up and move in three months when the mortgage is in foreclosure. Think about it. Most of your net worth is probably in your home. When you die, your spouse will need to make serious adjustments, you don’t want to throw selling the house on top of the heap.
How much of your debt is joint debt? It gets confusing after you get married. You start putting names on loan applications and forget who’s responsible for what. Whatever debt you signed jointly, sticks around with your spouse even after you’ve headed for the next life.
Life insurance will shield your spouse from a mountain of debt in the wake of your unfortunate death.
No One Brought Home the Dough Like You Did
My spouse and I are almost evenly matched in the bread making industry. However, not all families function this way. Some spouses stay at home and other spouses bring home far more income than another. When you are the main income, your spouse is going to need something to fill in the hole that you’ve left behind. Even if your spouse could work when you die, odds are, they won’t be able to compete with the big bucks you brought home. Life insurance will smooth the transition of double income to single income.
Marketing. Not Reasons.
I hope that you are not surprised at the short list above. When it comes to answering the question why, there isn’t much that needs to be said. The “why” is the easy part. The hard part is converting what you want to protect into the right insurance policy. Not all insurance salesmen sitting in your second favorite chair in your living room is going to be helpful in this department.
There is a basic policy that covers income loss and expenses and its known as term life. However, there is an endless list of policies that you can buy that offer any number of additional benefits. These policies are crafted to have attractive selling points and clever marketing. I refuse to make insurance decisions for you and tell you what policies are good and bad. However, I am going to share with you two “reasons for buying life insurance” that really should not be reasons; they are just selling points.
Peace of Mind
It feels nice to know that, whatever happens, you are protected. It’s sold as peace of mind. Some salesmen like to offer peace of mind as a selling point. It should be a nice unintended consequence of buying though. That’s because peace of mind comes from the alleviation of fear. I shouldn’t need to convince you that our fears are often unfounded.
For example, I own a house that is 110 years old. The foundation is made of field stone and mud. I’m constantly afraid that my foundation is going to tumble even though, based on the history of the house, the foundation will probably out-live me. Should I buy foundation insurance for peace of mind?
There are all kinds of phobias that we have as parents. Sure peace of mind is worth spending money, but it’s best to get insurance for a financial reason and not just to allay fears that might be unfounded.
When you sit down with an insurance agent, retirement is going to come up. I know it seems like retirement is a far cry from life insurance. However, many policies offer savings options and the salesman is going to give you a very large and very tempting payout some 30 years from now.
Retirement should not be a reason for buying life insurance. There are plenty of tax advantaged savings accounts like a 401k, 403b or IRA accounts that will get you higher returns for your money. You are better off maxing contributions than taking on a life insurance policy with retirement savings.
If you have a family, getting life insurance is a must. It’s bad enough that you’ve passed on, don’t force your children to work, crush your spouse with a mountain of debt and leave your family without replacing your income. This should be enough to convince you to get a policy. Don’t force me to frighten you. I’ll do it!
This post is part of the Life Insurance Movement being sponsored by Good Financial Cents.