Spending $20,000 on Life Insurance Is Worth it for Peace of Mind

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  • For my wife and I, it’s a no-brainer to buy term life insurance when we have our children.
  • We want to make sure they will be financially protected if we both die before they grow up.
  • We spend about $82 a month on two policies worth $500,000 each.

Being a parent is a very heavy thing.

There is a tremendous sense of responsibility that overcomes new parents when they realize that they are not responsible for their own lives. For a moment, there was a helpless baby who depended entirely on you.

That’s why it was a no-brainer for my wife and me buy life insurance to make sure that if anything happens to us, our kids will be financially secure until they grow up.

Think the unthinkable

One of the biggest obstacles to buying life insurance is having to think about the last thing you want to think about. What if I die before our children grow up? What if my wife dies? What if we both die? What will happen? And how can we plan financially for all those possibilities? None of this scenario is the stuff of daydreams or pleasant conversations.

But after mulling it over, my wife and I finally concluded that if one of us dies first, then the surviving spouse will experience the difficulty of grieving while raising children and earning a living at the same time. Money from a life insurance policy It certainly won’t fix all the problems, but it will give the survivor breathing room to take some time off work, and gradually return to the workforce when the time is right.

My wife and I both have careers and we are equally capable of providing for our families, so we decided that we both needed life insurance policies of the same size, in case one of us died. In clinical insurance terms, it’s called “predeceasing” your spouse. And in the almost unthinkable case that we should both die and at least one of our children survives, our children will receive double the benefit that the surviving spouse would have received.

That being said, we want insurance to provide for our children when they become adults, but we do not feel the need to provide for them if one of us dies after they reach adulthood. Our goal is to raise children to be independent, not to fund them for the rest of their lives. And if we die soon after adulthood, they will not receive the insurance benefits, but they will have to inherit the rest of our assets, which we expect will be significant.

Choose a type of life insurance

Once you decide to buy life insurance, you will quickly learn that there are many types of policies available. However, they all break down into “term” and “permanent” options.

term life insurance sold for a certain period of time, such as 20 or 30 years. If there is no claim, then the policy will expire. Term life insurance policies have a single premium and fixed payments.

Permanent life insurance lasts until death, as long as you pay your premiums. This is typically more expensive than term life insurance.

In the end, my wife and I chose to buy a term life insurance policy from American General Life Insurance. We bought one for ourselves for 20 years, with a profit of $500,000 each. We bought this policy in 2013, so it will expire in 2033.

If one of us dies before June 2033, the survivor will receive $500,000, and if we both die, the survivor will receive a total of $1 million. If we die after June 2033, then the policy will have no value.

But as I said, we plan to have substantial assets by then, including retirement savings, home equity, cash, and personal property. And while last year’s inflation has definitely reduced the real value of our policy, it has also increased the value of our assets, such as our house.

The insurance premium on my wife is $21.96 per month, and the premium for myself is $60.66. The difference is due to my age (I’m almost 10 years older than her), as well as my health. I have a history of heart disease in my family, and I take cholesterol-lowering medications. I am also a commercial rated aircraft pilot and flight instructor, which up my premium. Although I am not currently employed as a pilot and I only fly recreationally, it is a risk factor that I must disclose.

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What we could have done differently

Now, almost 10 years into a 20-year term life insurance policy, my wife and I have few regrets.

I think I would have bought a longer policy, a little earlier in my life. The younger and healthier you are, the less expensive the term life insurance policy will be.

Although we can buy more expensive policies with higher benefits, I know that, with each passing year, our household assets increase, and the future financial needs of our children decrease, generally canceling out the effects of inflation on our policy benefits.

It always helps to remember that we buy these policies only to ensure that our children will be provided for into adulthood in our absence, not so that they will receive a windfall and be set for life. We sleep better knowing that if something happens, our children will be provided for and will be able to attend college with the proceeds of our life insurance policy. And they will not be a financial burden to our family members who may be called upon to raise them in their absence.

Until I wrote this article, I rarely gave our life insurance policies a second thought. That’s how you want it. We want to buy life insurance for the proverbial “peace of mind.” And in those inevitable moments when I feel like my life might be in danger, I’m glad I don’t think my kids will suffer financially in my absence.

As for the cost, our greatest desire is for 2033 to come and go, and my wife and I must be thankful that we never received any benefit from making all their payments.

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