My family's life insurance will cost us nearly $20,000 over 20 years, and it's worth every penny for peace of mind

My family’s life insurance will cost us nearly $20,000 over 20 years, and it’s worth every penny for peace of mind

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

Becoming a parent is very heavy.

There is an overwhelming sense of responsibility that can overcome new parents when they realize they are only responsible for their own lives. All of a sudden, there’s a helpless baby who’s completely dependent on you for everything.

That’s why it was a matter of course for my wife and I to purchase life insurance to ensure that if anything ever happened to us, our children would be financially secure well into adulthood.

think of the unthinkable

One of the biggest obstacles to buying life insurance is the need to think about the last thing you want to imagine. What if I died before our children grew up? What if my wife died? What if we both die? What would happen? And how can we financially plan for all these possibilities? None of these scenarios are daydreams or pleasant conversations.

But after thinking about it, my wife and I finally concluded that if one of us died first, the surviving spouse would have a hard time grieving while raising the kids and earning a living at the same time. Money from a life insurance policy certainly wouldn’t solve all of these problems, but it would give the survivor leeway to take 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 supporting our families, so we decided that we both needed an equally sized life insurance policy, just in case. one of us would die. In clinical insurance terms, this is called “preceding the death” of your spouse. And in the almost unimaginable event that we both die and at least one of our children survives, our children would receive twice the benefit that a surviving spouse would.

That said, we wanted insurance to support our children into adulthood, but we didn’t think it was necessary to support them if one of us died after reaching adulthood. adult. Our goal is to raise our children to be independent, not to fund them for the rest of their lives. And if we die soon after they reach adulthood, they won’t receive an insurance benefit, but they should inherit our remaining assets, which we hope will be substantial.

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 “temporary” and “permanent” options.

Term life insurance is sold for a specific period of time, such as 20 or 30 years. If there is no claim, the policy expires. Term life insurance policies have a single premium and a fixed payment.

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

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

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

But as I mentioned, we expect to have substantial assets by then, including retirement savings, home equity, cash, and personal property. And while last year’s inflation certainly reduced the real value of our policies, it also increased the value of our assets, like our home.

My wife’s insurance premium is $21.96 per month and the premium for me 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 medication. I’m also a commercial level airline pilot and flight instructor, which increases my premium. Although I am not currently employed as a pilot and only fly recreationally, this was a risk factor I had to disclose.

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What we could have done differently

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

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

And while we may have purchased more expensive policies with greater benefits, I know that with each passing year, our household assets increase and our children’s future financial needs decrease, largely negating the effects of the crisis. inflation on our policy benefits.

It’s always worth bearing in mind that we purchased these policies only to ensure that our children would be cared for into adulthood in our absence, not so that they could receive a windfall and be fixed for life. We sleep better knowing that if something happens, our children will be taken care of and able to attend college with the proceeds from our life insurance policies. And they won’t be a financial burden on our family members who may be called upon to raise them in our absence.

Until I wrote this article, I rarely thought about our life insurance policies. That’s how you want it. We wanted to buy life insurance for the proverbial “peace of mind”. And in those inevitable moments when I felt my life might have been in danger, I’m glad I didn’t think my children would have suffered financially in my absence.

When it comes to cost, our greatest wish is for 2033 to come and go, and for my wife and I to be thankful that we never got any benefit from all those payments.

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