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- When my husband and I were first married 13 years ago, we bought term life insurance policies — one each.
- We each pay about $25 a month each for two 30-year policies worth $300,000 per policy. Ten years later, we added two more 30-year policies worth $400,000 each that cost us $50 per policy.
- We chose term over whole life insurance because it met our needs and saved us money, allowing us to put about $1,200 a year into our retirement accounts.
Thirteen years ago, one of the first things my husband and I did after getting married was purchase life insurance policies for both of us. Outside of setting up a will, purchasing life insurance policies was the most important thing we did to provide for our family in the case of an unexpected accident or illness.
Well over a decade later, we’re confident we made the right decision back then and have continued to increase our coverage to protect our family.
Here’s what went into making our decisions when we purchased life insurance.
Choosing a life insurance company
Learning about all the life insurance companies offering coverage was overwhelming, so we went with the insurance company that we used for our car and homeowners’ insurance. There’s often a discount for having multiple policies with one company, and it made sense to bundle our insurance policies.
In terms of the cost of our premium, or monthly payments, we were young and healthy and most quotes were pretty similar, which made the decision easier. When we were ready to purchase a policy, we sat down with our insurance agent and he patiently answered all of our questions.
Deciding on whole life vs. term
We went back and forth debating which type of insurance to get, and in the end we decided on term insurance.
Whole life insurance does not have an expiration date, but the cost of the policy was several times more than a term policy. When we first bought our policy, we were in our twenties with no health conditions, and we qualified for a very low rate, so we decided to purchase a 30-year policy.
We ended up purchasing two $300,000 policies that cost us less than $25 each a month. A whole life policy was going to cost us over $100 each a month for about the same coverage.
Ten years later, we reviewed our finances, and we decided to purchase another inexpensive 30-year policy. We bought two policies for $400,000 each for less than $50 a month. This brings the total of our life insurance to $700,000 each. Both of the policies are still less expensive than the first whole life insurance policy that we looked at.
We are likely to continue stacking our insurance policies as long as it is financially beneficial for us. While some see life insurance as an investment opportunity, we see it as a risk management tool.
Any money that we would have spent on a whole life insurance policy has been directed towards our retirement funds. We figure that we are saving at least $1,200 a year in our retirement accounts that, over the course of the next 30 to 40 years,will give us a better rate of return.
Figuring out how much coverage we need
When deciding how much to spend on our life insurance, we opted to buy policies worth 10 times our yearly salaries. When we bought our second set of policies, we stayed around that same number. Because our salaries had increased, our coverage needed to increase as well.
Life insurance is important to have at any age, but we wanted to make sure that if anything happened to either of us early on, we could pay to cover any funeral costs, pay off our mortgage, put our kids through college, and have a cushion with any remaining funds.
For us, life insurance is one tool that we use, along with being debt free and investing in our retirement funds, to create financial stability. Our hope is that we never have to cash in a life insurance policy, but for less than the cost of a fancy dinner and a movie every month, we have peace of mind.