Non-Healthcare Insurance
End of life#
Contemplating how this universe works after we’re no longer part of it, is an uncomfortable process for just about everyone. The result of it being uncomfortable means that a lot of people simply attack the problem by avoiding it. Which is a terrible choice. So, it’s time to pull on your big people britches and start adulting.
Life insurance#
I’m going to break this down into two different sections. One is a framework for thinking about life insurance, and then we’ll get into the details of the actual investments.
So, why do you need life insurance at all? Independent of your philosophical beliefs on death, it’s pretty universally agreed on that you won’t be able to use the money for it when you slip the mortal coil. Obviously, the answer is that it’s for your survivors. The questions then break down into:
- How much money do they need?
- Who needs to be covered?
- How long is this a problem for?
How long is this a problem for?#
There is no set answer on this, because it will depend on a lot of factors, but here are things to think about.
Will your family be financially independent?#
- If you’re 30 years old with two kids and a 30-year mortgage, your time horizon on financial security is probably pretty long. The mortgage will represent a large part of your expenses for a very long time. With the two kids you’re probably considering college costs, which is an ever increasing and intimidating number.
- If you’re 50 years old with grown children that are self-sufficient, a mortgage with less than 5 years to go, and significant savings, the picture is far different.
So, you need to sit down and map that out. In both these cases you might want life insurance, but you probably want it for 30 years in the first case, and maybe for the second case you’re comfortable with “self-insuring”
Who needs to be covered?#
The easy answer is to assume you just need to cover the primary bread winner. Hm. I think it’s safe to say it’s a pretty crappy race if the winner only gets bread. Regardless, you probably want to spend time thinking more deeply on this.
Assume for a moment we have a family with a single income, and the prototypical 2.5 children. The unfortunate happens, and the spouse of the income earner dies. What will the impact of that be on the earning power of the surviving spouse? Yes, there is clearly a period of time mourning and recovery that would be impacted, but what about beyond that? Who is now cooking the meals and helping with homework? Cleaning the house, shuttling kids to activities? All of those things that were previously shared now represent an additional load, and there is no way that it can’t affect job performance. With that as the backdrop, you might want to consider life insurance on a non-working spouse to either help mitigate the income loss or allow you to pay to cover for some of these things. Maybe cleaning services, lawn services, eating out more often, …
How much money do they need?#
This will vary greatly, but again, you should probably focus on the big items
- How much do you spend now?
- Do you have large expenses that need to be covered?
- Mortgage
- College
- Medical expenses
Life insurance options#
I’ll provide a very quick, very concise summary: You should only get Term Life. Anything else will result in less money for you, and more money for people who sell it.