It seems everyone is getting some these days.
A friend of ours started selling life insurance and is now trying to convince us to purchase it.
His “recommended” insurance coverage for us would have run us $600 a month, to which I said:
He made the mistake of insisting that we need a $1 million policy on me, and a $1.2 million policy on Eric, even though:
- we don’t have a mortgage
- we don’t have kids
- we don’t have debt
- we’re both relatively young and healthy
- we both make decent incomes on our own
His recommendation was a combination of:
- term insurance: where you pay a small amount monthly for coverage but don’t get any money unless you die
- permanent life insurance (also known as whole or universal): where you pay a large sum of money monthly but it is invested and you get a chunk of it back after 20 years or so
- disability insurance: to cover the portion that wouldn’t be covered through work if you are disabled and can’t work for a period of time
Even term insurance for smaller amounts would run us about $80 a month. I don’t feel that’s a necessary expense right now.
Now, I’m not saying life insurance isn’t a good investment for some people. But right now, I definitely don’t think we need it, and we may never need it, actually.
The only argument for getting it now as opposed to in the future is that it would be cheaper for us to purchase while we’re younger rather than try and get in when we’re older.
In addition to the reasons I listed above, this is why Eric and I won’t be getting life insurance anytime soon:
- We’re covered through work. Should anything happen to me, Eric would get 4x my annual salary plus $50k and $25k per child (some day). If something should happen to Eric , I’d be well-covered.
- We both receive pensions through work. Should something happen to either of us, we would still receive the other’s pension.
Also, we both make decent incomes (we’re now at 50-50%!). If something happened to either of us right now (with no mortgage and no kids), the other one would be financially okay.
As for disability insurance, Eric and I are both covered through work for 60% of our pay. Because we also save 25% of our take-home income, if something were to happen, we would simply stop contributing to our savings until we could return to work again and cut down on some of our extra unnecessary expenses in the meantime, like doggie daycare for our furry child, and our fitness classes.
And if things really got dire, we may even let our house cleaner go. But, whoa, let’s not get too crazy.
Our friend tried to convince us that we would still need disability insurance so that we wouldn’t have to dip into our savings. But helloo!? Isn’t that what savings are for? Emergencies!
And I’ve just proven that we wouldn’t need to dip into our savings, we just wouldn’t be able to continue saving while one of us was on disability.
Our current mandatory expenses run about 40% of our take home pay, and that includes our $500 grocery budget, cleaning lady and gas budget. So, we’d be fine. We may have to stop purchasing organic eggs and chicken, but again, we’d be fine.
Perhaps our decision will change when we have a mortgage, or when we have children. But for now, it seems silly to spend so much money on the very small chance that something could happen to us.
I read somewhere that only about 6% of people actually receive the benefits of life insurance (I can’t seem to find that info now). It seems like a lot of money to spend on something you have only a 6% chance of actually needing.
That said you might be reading this posting because you are looking for life insurance. As you can tell we are pretty skeptical of the need for life insurance. However if you want a recommendation, consider going with USAA. Their rates are good and their customer service is great. So, USAA is a low hassle good value buy.
Do you have life insurance?