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The Importance of Life Insurance

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If you don’t have life insurance and you have a family that you support, today is your day. Part of preparation is for our benefit and part of it is for the benefit of our loved ones. In this case you and I won’t have any tangible benefit from purchasing life insurance, but the peace of knowing that our loved ones will have a nice financial buffer is pretty nice.

Just like the FLOP we mentioned the other day, the hope is that you will never need to use this. But if that day were ever to come, there would be some people in your life who were really glad that you and I spent an hour or two taking care of it.

After this article went live, we got this comment from a reader on the Facebook Page:

“I totally agree! In 1995, my husband of 9 years died and we did not have term insurance…I was left with 2 small boys and very little money. When I remarried in 1998, that was the first thing we purchased as husband and wife…thank God I have not needed it, but it’s nice to know it’s there just in case…”

There is a lot of debate about all the details of what kind and how much, and everyone’s situation is unique. So just take what I suggest as an opinion and do more homework to figure out what kind you need.

What kind do I need?

For most people and most situations I think Term Life insurance is the best bet. It is the cheapest kind of insurance and the easiest to understand. It is as simple as agreeing to pay $100/year for 10 years to have $100,000 of coverage. Whole life (and most other forms) are a bit

more complex and can offer some benefits for certain situations, but again term is normally your best best.

So how much do I need?

This is like asking what is a good salary? Everyone’s definition will be different. The rule-of-thumb that I have commonly heard is 8-12x your annual salary (after tax). But I suggest you think through your particular situation and think through what your family would need.

In our particular case, I bought a term policy that would pay off the house and cover my funeral expenses. This is far less than the 8-12x figure, but because we don’t have kids yet and my wife earns an income she would easily be able maintain her standard of living if the house were paid off.

Your situation will be different. But just spend a few minutes discussing and thinking how your family would get along if you left the earth a little early.

Remember, don’t get hung up on the details. The key is just to first make sure that your family is covered, then you can split hairs on the details. My hunch is that most of our loved ones won’t give a lot of thought to how big the life insurance check is, they will just be grateful that it is there.

How much does it cost?

I was surprised how cheap term-life insurance can be. Granted, I am very young (30) and in good health, but relative to a lot of other expenses we all have it is really cheap. I think I am paying $123/year for my policy – which comes out to about $10/month.


  1. Talk to your spouse and figure out how much insurance you think you need.
  2. Get a life insurance quote online  or find a trustworthy insurance agent and have them help you.

Category: Insurance

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