Today is the day of the Life Insurance Movement organized by Jeff Rose at Good Financial Cents. I figured this would be a great opportunity to discuss my situation and why I have the level of life insurance that I have. You must evaluate your own situation and determine what type of life insurance and how much life insurance you need.
Life Insurance – How I Evaluate My Needs
To determine how much insurance I feel I need a take a few factors into consideration. They include my age, my assets, my liabilities, who depends on me and, most importantly, how much money they would need to stay on track for a comfortable life should something horrible happen to me and I die. It isn’t something anyone wants to think about but accidents happen every day.
So What is My Current Situation?
Currently I am in my mid twenties and have a long-time girlfriend. We plan to get married eventually but we do currently live together. As far as assets and liabilities go, if I died today the mortgage and a small portion of my car loan would remain. My assets would be able to cover my liabilities completely if they needed to.
So who depends on me? My girlfriend does depend on me to split some of the household bills with her so she can pay more toward her student loans but if she needed to she could easily get a roommate to replace the same cost savings. She has a decent paying job and can provide for herself. The fact that we live together does afford us to live a nicer lifestyle than we would be able to if we lived apart but she’d be able to survive and live a decent lifestyle without me.
In my current situation, life insurance is not necessary for me. I would place no undue financial hardship on anyone if i died (other than the fact they would no longer be able to be in my awesome presence). Don’t get me wrong, it’d suck and I hope it never happens because it’d make a lot of people sad but financially everyone would be able to do just fine and move on with their lives.
That Won’t Always Be The Case
Don’t get me wrong, I strongly believe in term life insurance when you have a need for it. The second I find out we’re going to have a kid I’m getting term life insurance. At that point I would have more dependents, my wife and my kid(s) that rely on my income and chances are my girlfriend’s current income wouldn’t cover all the necessities to live a comfortable life and provide for our kids the way we would like. I’d make sure the insurance would be in effect until my kid(s) were completely grown and out of college so that our bases would be covered.
After the kid(s) graduate from college I’d be at least in my mid 50s and I should have enough assets invested for my wife to live a normal life if something were to happen to me. After all, we’d be retiring in a few short years and I am definitely going to be financially prepared to retire!
The Key About Life Insurance and Why It Is Important to My Family
To me the key about life insurance is that it is there for a purpose. Why it is important to my family is that it is there to make sure that my family can continue living a decent life without relying on me financially. I don’t want to make someone rich as a result of my insurance payout. I’d expect the money to be used to finish raising the kids, send them to college and fill in any gap left behind when my income disappears with me.
So do you have life insurance? If so, what is your reasoning? If not, why not? You really need to think through this because it is a very important decision.