Life Insurance

As soon as somebody depends on you financially, you likely need life insurance.

Most of us know this, but for some pretty good reasons, we don’t want to think about it. To start, someone has to die for life insurance to be of use. Also, buying a policy means putting a price on the life of someone we love. That’s all complicated, messy, emotional stuff.

So we’re stuck lying in bed thinking about this dilemma: We know we need the insurance, but it’s the last thing we want to think about. So let me get to the point here and just give an effortless way to check life insurance off your mental checklist.

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Who needs it?

If you were to pass away, is there someone who depends on you financially that would be unable to support themselves? What would this mean for your spouse and your children? Would it mean that your spouse would have to go back to work to provide for your family? Would it mean that your spouse would have to put your children into daycare? Would it mean your spouse would have to sell the house because they could no longer afford the mortgage?

If not, you probably don’t have a strong need for life insurance.

How much do I need?

Deciding how much life insurance to buy is where most people get stuck. Here is a simple formula for you to follow: just take your income and multiple it by 20 then subtract any investments/savings you have.

For Example:

• Income: $50,000
• Investments: $100,000
• You would need $900,000 of coverage ($50,000 x 20 – $100,000)

Then add any lump sums that you would like to pay for (i.e., pay off the mortgage, pay off any other debt, pay for college, etc.) Then add these numbers together, and this is the amount of life insurance coverage you’ll buy.

How long do I need coverage?

You need coverage for as long as someone is dependent on your income. For example, when your child is born, they will likely be dependent on you for the next 25 years. So this means you should buy coverage for at least the next 25 years.  If you plan on having more than one child, then I would consider a 30-year term policy.

If you are a NYS teacher with a pension then you need at least $1,000,000 of coverage until you retire.

What type do I need?

There are many different types of life insurance. I don’t think there’s any reason to buy anything other than term life insurance. I’m not a fan of whole life insurance, universal life, or variable universal life.

The reason is that I believe insurance is for protection planning, and you should invest for retirement through retirement accounts (i.e., Roth IRAs, 401ks, 403bs, etc.). I don’t recommend that you try to do both by having a complicated insurance policy. In my opinion, it’s costly to blend the two, and there can be high fees associated with these policies.

If you determine that you need life insurance, you can take out a 20 or 30-year term life insurance policy and typically get much more coverage than you can for the monthly premiums on a whole life insurance policy with a far lower death benefit.

I believe it’s better to get hundreds of thousands of dollars in additional coverage with term life insurance than to have an insurance policy that is slowly building up cash value. Also, did you know that often your insurance agent’s commission on whole life insurance is equal to 100% of the first year of your premiums? That’s why your buddy from college wants to sell you whole life insurance! Here’s a great article on why to avoid whole life insurance.

What is the process to apply?

We have partnered with insurance leader, Policygenius. The best part of this partnership is that you get Policygenius’s best-in-class experience and our guidance along the way.

Here are the steps:

1. Get a personalize quote
2. Policygenius calls to gather your medical history and, based on that, recommend the best insurance company for your needs. Then Policygenius completes the application. This step takes about 30 minutes.
3. Schedule a time for a blood and urine sample at a place of your choosing. This also takes about 30 minutes.

The whole process usually takes about an hour of your time and about 4-6 weeks before the life insurance is approved.

How much does it cost?