There is nothing more invigorating than sitting around a dinner table with guests and talking about life insurance.
Okay, just kidding.
It might not be invigorating, but it is something that I wish people would talk about more. Why is that?
Because far too many people still don’t have any life insurance at all, and if they do, they don’t nearly have enough.
Often times, I see people that have $50,000 to $100,000 of term life insurance either through their employer or that they purchased themselves and they think that is enough.
Newsflash: It ain’t!Fact: You Don’t Have Enough Life Insurance
If you have a family, with kids, if you have a mortgage, if you have consumer debt, student loan debt, I promise you that $100,000 is not nearly enough, and I will even be bold to say that $500,000 of term life insurance isn’t enough either.
I have shared my story about the progressions of me buying more life insurance from a great top life insurance company as my family grew.
After I got married, $250,000 at the time I thought was more than enough, and it probably was. After our first child, I added an additional $500,000 and after our second child, I really ramped it and purchased another 1.5 million dollar 30-year term life insurance policy, for a grand total of 2.25 million dollars.
For the longest time, I thought that that was enough, even after the arrival of our third child I still felt that my family would be protected in the event that something were to happen to me. I’m not really sure what triggered it, but I started to get the life insurance itch again, thinking man, do I really need to buy more?
Why I Bought More Life Insurance
With my wife and I starting the adoption process for our fourth child, I thought it at least wouldn’t hurt to look into it. We have other assets, retirement accounts, savings, equity in my business that my wife could always liquidate, so I know there is other assets there, but I thought it wouldn’t hurt to at least shop around and see if I could get more life insurance; I didn’t expect that I would also be able to save a pretty penny.
By comparing quotes with tools like you see here on the site, I was able to find out that I can actually get a 2.5 million 30-year policy and save over $400 a year for doing so.
The previous policies had been purchased over an eight year period and apparently life insurance rates have gone down enough and by consolidating, I was able to save a decent amount.
Here is my challenge to you; do you really think you have enough life insurance?
If you are the breadwinner in your family and something happened to you, is the amount of coverage you have going to take care of your family? Will it help pay off the debt? Will it help ease the financial burden that your spouse may have when she is forced to take care of the bills, take care of the children and help pay for their college?
$1 Million of Life Insurance Might Not be Enough
Think $1 million of life insurance is enough? There is so many other things that people don’t realize that occur after your passing.
For my family we have four children (my wife would include me as number five) and they are all school age. This means if something were to happen to me, my wife not only would have to replace my income, but would have to handle the household, and be ready for the future.
This means having enough for retirement, paying for college, and whatever other expenses she has over the next several decades (mad props for using ambiguous language to not leak here age here). It seems to me that a million just isn’t going to cover it for my family.
If you have got the itch, use the life insurance quote engine below to see how inexpensive it is to get more life insurance coverage today.
Expanding Life Insurance Coverage
So what is the best strategy? That is going to depend on if you currently have a policy, how much you are paying and what your family’s needs are? Here are a couple of options.
Get a Single Brand New Policy
If you do not have life insurance or have a small policy, then getting a brand new policy may make the most sense. Even if you figure out you need $3 million in life insurance coverage, you can get a good price on a 30 year term life insurance policy.
The biggest advantage here is that you only pay the one premium and it makes life nice and simple.
Staggering Term Policies for Stages of Life
If you want to get the best bank for your buck, you can look at getting multiple policies. I do recommend doing this in a more deliberate way that I did whenever I got the life insurance itch.
We’ll use my family as an example. Instead of just adding life insurance when I felt like it, I could have looked at where my family would be when the term policy would run out.
Right now all my kids will be out of the house in 20 years or less (or at least they BETTER be). So I could get a 20 year term that is structured just for the family needs while they are still living with us. For my family that would be a $2 million dollar policy.
I would then have a longer term policy with the purpose of taking care of my wife before and after the kids are out of the hose. For me that would be an additional $500,000 to $1 million dollars of life insurance on a 30 year term policy.
When you do the math, that would mean while the kids are in the house Mandy would have $2.5 million to $3 million of life insurance for the next 20 years, and then $500k to $1 million once it’s just the two of us again.
Now you may be thinking, “But Jeff, why go to all this trouble?” The reason is that 20 year term policies can be significantly less expensive. So you spend much less in premiums over that 20 year period.
Get Covered
Whether you need a million, $2.5 million, or $3 million of life insurance coverage, get you insurance in place today.
It isn’t worth the risk to your loved ones to leave them without you being covered.
So figure out how much you need, get some quotes and get that policy in place.
Scott says
I am married with 2 children (16 and 21) I am considering $3 mil term life insurance. Is there any advantage to having 3 separate $1mil policies (1 for each member of my family)?
Jeff Rose says
Hi Scott – The only advantage I can see is in flexibility. You may decide you don’t need that much coverage in the future, and cancel one or two of the policies. You might also find the renewal premium on one policy is better than the other two, and decide to keep that policy. But otherwise it won’t be cost effective. Life insurance rates fall on a cost-per-thousand basis, so a single $3 million policy will be less expensive than three $1 million policies. And single policy can easily be split three ways, if that’s what you’re going for.
BG says
So, the worst happened to us. Two weeks ago my husband, at age 42, passed away from a year long battle with cancer. We did have insurance, but not enough. He had a 250 policy, and I am a stay-at-home mom of 4 kids age 3-13. So what do you do from here? Our mortgage is paid, so that is not a concern. I just need to make this money last as long as possible.
Jeff Rose says
Hi BG – You’re in a tough place, especially since your husband’s death is so recent. I think it would help you to sit down with an accountant to consider your options. Everything has to be crunched – any potential income sources (Social Security for your kids) – your monthly expenses, and any options that you may have or want to investigate. That has to be done in a face to face meeting with someone who you will have an ongoing relationship with.
Action Economics says
I’ve got $500,000 now and am looking at getting a $250K policy, but I might get a larger one. Any ideas as to what multiple of income they will stop giving you life insurance for?
Jeff Rose says
Haven’t come across that problem! For most people, its the opposite, they don’t have enough. You can apply for as much as you want, and see where they might cut it off.
Brittney @ Life On A Discount says
Interesting post. We are in our late 20’s and both have $500,000 30 year term life insurance policies. I actually make twice as much as my husband, but we have agreed that the policies are what we need at this point in our lives. We are planning on having a child in the next few years and I will add an additional $250,000 policy then. Our plan is more for the money to pay off our mortgage ($200,000), funeral expenses and our car ($10,000), otherwise we have no other debt. It is not necessarily to replace income. We have built up a very healthy emergency fund and have a decent amount in retirement savings. So, it’s a plan we are comfortable with for the time being.
Rene' says
My mother is wanting to purchase life Insuarance and had cancer but has been cancer free for only about 6 months.. She would like to leave my brother and I and her grandson money when she passes away. She does not smoke.What life insurance company’s are available to her in this situation?
Bhargav says
Hello, I am interested in Life insurance, I am 29, single and recently laid off. I have high student loans, and consumer debt. I am also head of the household as my parents are disabled. What would be my best option to get a life insurance and how much should I take?
Heather says
Hi! What quote engine did you use in your example for this article? Thanks!
Jeff Rose says
@ Heather It’s actually the same quoter that I have on my site currently just an older version.
Angie says
I would like to have enough to mortgages and have money left for the surviving spouse and children. You gave me much to think about.
Jeffrey says
Used to preach, buy term, invest the difference…
But a permanent death benefit, cash values, tax free loans, tax free lump sum payment to beneficiary, privacy of beneficiary info, very difficult for others to get at your cash value, ability to fund very high amounts with tax benefits, cheaper while you are younger/healthy, paid up additions, Potential less premium with IUL and index gains potential, or Whole Life and pay more for insurance, but higher dividends…
Why not pay more, use as an investment and legacy planning tool?
Mix in term if need be for cost savings and bring up benefit, if need be.
Sandra parr says
What is health class? I have had thyroid cancer and breast cancer but have been cancer free for five years. Non smoker. Active lifestyle. What is my health class?
Jeff Rose says
@ Sandra We wouldn’t know until we actually submitted a life insurance application. At that point, every insurance company may look at your profile differently. For example, I had one client that was a Preferred Class with one carrier, but another one rated him Standard Table 2.
It truly is insurance company specific.
Erika0123 says
When I was a baby my parents had gotten a 1 million dollar life insurance plan you me and paid it off already, my mother just told me the other day that when I had turned 18 that I could cash it if I wanted to. What does that mean?
Jeff Rose says
@ Erika Did they buy you some sort of cash value life insurance policy? Like a whole life policy? If so, it could have accumulated some sort of cash value. Note: it won’t be $1 million dollars. 🙂
sandra says
my spouse is sick with liver and kidney problems .can I get a life insurance policy that covers this? If so which one ?
Jeff Rose says
@ Sandra It depends on the severity of the illnesses. We’ve been able to get clients approved for high risk conditions but it will usually cost more. Contact our office for more information.
Joel says
Call me devil’s advocate, but I’ve heard a quote (not sure of the source) that goes like…
“How much life insurance do I need?”
“Enough to get your wife by until she remarries.” (which WILL happen!)
Nick says
I have quite a bit of life insurance on me – I’ll be repricing it in the next year or so – got it 3 years ago. Not quite $2.5 mil but it’s up there. I may go up to $2.5 though – it’s definitely comforting knowing that my wife can buy a house with cash and still have plenty of cash to pay for college for our kids and live. 🙂
Love how cheap term is.
[email protected]&More says
At my point in life my employer life insurance would cover me completely. However, if I ever take on my debt with a bigger house or have kids I know I need to buy much more insurance. I’m glad you got more and it should help you sleep better at night.
Jeff Rose says
@ Lance. Here’s one thing to consider regarding buying life insurance through your employer that you may want to consider. Even have a video, too. 🙂
Sean says
Thanks for a great post. You helped me to make the decision to get serious about life insurance. My wife’s father died leaving 5 kids still in the house and I want to make sure we are now prepared if such a thing ever happens. Thanks!
Jeff Rose says
@ Sean. You’re very welcome! $2.5 million might be too much for what you need right now, but making sure you have some life insurance coverage is a must. Let me know if you have any questions!
SM says
Question on Life insurance – what happens after 30 years (and I do not die in that 30 years) ? Do they pay me that million (or whatever amount I chose) and/or the amount I paid as premium annually?
Jeff Rose says
@SM if you buy a standard term life insurance policy, then the premiums you pay over that 30 years is gone. Think of it like auto or home insurance. You really don’t want to cash in on it but if you do, your family is taken care of.
There are other options though.
1. Whole life insurance. Whole life insurance builds cash value over time. The only disadvantage is that to get sufficient amount of coverage will be very costly. Check out this post I did what looks at the difference between the cost of whole life insurance vs. term life. For me to get $250,000 of whole life coverage would be $3,440 per year vs. $252 for term.
2. Return of Premium of insurance. ROP or Return of Premium insurance allows you to get what you paid back out at the end of the term (or a pro-rated amount before term’s end). You’ll pay more to have it, but it’s also a viable option.
Hope that helps!