If our kids ever get our life insurance money, I hope they'll spend it in 2 ways: on debt and index funds
My husband and I bought life insurance long before we had kids — we knew it was an important investment to keep each other safe. Now that we have two daughters, I sleep better knowing they'd be taken care of financially if we died unexpectedly. If they ever got our life insurance, I hope they'd do two things: pay off any debt and invest the rest in index funds. Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »
When my husband and I got married, we knew we wanted to get life insurance right away. We had bought our home the year before and even though we didn't have kids yet, we wanted the other spouse to be able to stay living in that home if one of us died unexpectedly. At the time we got married, I was beginning to work as a financial adviser and was learning the ins and outs as well as the importance of life insurance firsthand. I wasn't a stranger to the concept, though. My dad had developed terminal liver cancer when I was in my early 20s and had taken his life insurance money out early to travel the world with my brothers as a last hurrah before he passed. Because of these experiences, my husband and I knew we didn't want to take any chances with our health and got the insurance as soon as we could. Both my husband and I were in good health, and we decided on 20-year, $1 million term life insurance policies for each of us. Fast forward a few years after purchasing life insurance and we now have two daughters, a 3 year old and a 1 year old. As a former high school personal finance teacher and now a financial coach, I've thought a lot about the lessons I want to teach my own children about money. My husband and I are very open about our finances, have regular money "dates," and want our children to understand the importance of managing money responsibly while also balancing enjoying life.
What I hope my kids would do if they ever got our life insurance money If my husband and I were to die and our children were old enough to be in charge of their own life insurance inheritance, I feel strongly about what they would do with the money: It's my hope that they would pay down debt and invest the rest in index funds. Paying off debt The reason I feel so strongly about paying off debt is my husband and I have struggled with debt in the past and when we paid off our consumer debt, it was like a veil of anxiety and fear was lifted. We have also gotten more into the financial freedom movement within the past two years, and are big on paying down debt and investing as aggressively as possible so we can retire early if we wish. If my children have student loan, car loan, or credit card debt, I would want them to pay those debts off first. These types of debt, especially credit cards, tend to have the highest interest rates. I know firsthand the freedom that comes with having no debt, and would want my children to experience that same type of freedom. Investing in index funds After paying down any debt they have, I would want my children to invest the rest of their inheritance into index funds. I personally love index funds because they have low fees and typically outperform other investments. It's hard to find funds that outperform the market, and by trying to do so you end up paying a lot more in fees. I'm hoping to teach my children these basic investing lessons as soon as they are able to grasp the concepts. They then could use this money down the line to make a larger purchase, such as buying a home or starting a business, or they could keep it invested until they felt they needed it. Another option this would give my children is the ability to live off of some of the earnings. If they were to invest the majority of their inheritance they would very likely be able to live off of the invested amount (at least for a little while) by taking a small withdrawal each year. In the event that my daughters were in jobs they disliked, wanted to stay home with their own children, travel, or take a break from a career that was burning them out, this would give them the option to take that time away from earning income. The beautiful thing about life insurance is that it provides options for your loved ones. It doesn't even have to be a large policy to make a big difference in their lives. For us, the most important thing is that our children would still be well taken care of if they were under the age of 18 and with guardians. And if they are over the age of 18, then a life insurance inheritance would allow them the ability to increase their financial freedom and security so they can then pass these principles along to their own children. Related Content Module: More Life Insurance CoverageJoin the conversation about this story »
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Summary List PlacementLike many young parents, actress and model Brooke Shields realized she needed life insurance...Summary List PlacementLike many young parents, actress and model Brooke Shields realized she needed life insurance at a moment when a lot of changes were happening in her life. "The moment that I got pregnant was when I had [that moment],"she told Business Insider. "I was getting married, having children, and becoming responsible for someone else," and life insurance became critical. Life insurance can help anyone who depends on your income to support themselves if you die unexpectedly, and help cover everything from living expenses to mortgage debt. Suddenly, she realized that she'd be responsible for another person in ways she hadn't been before. Before her first baby was born, "the only other person I really had to take care of was my mother," said Shields, who is partnering with the nonprofit Life Happens to encourage Americans to get life insurance. With a baby on the way, getting life insurance was critical to make sure that her future family would be provided for, no matter what. Life insurance is important for all new parents, and it's easy to get covered For parents with children depending on their income, or a spouse who needs help paying the bills, life insurance can help ensure those loved ones are covered in the event of an unexpected death. Term life insurance policies are generally the most affordable type of life insurance. These policies cover people for a set number of years, generally between 15 and 30 years. Term policies are ideal for young parents, covering your family for enough time for kids to grow up, or pay off large debts like a mortgage or student loans. According to data gathered by Business Insider, the average term life insurance policy costs $44 per month. It's cheaper the younger you are when you get the policy — the average person in their 30s pays about $16 per month for term life insurance coverage, while people in their 40s pay about $22 per month. For Shields, buying a life insurance policy was a small price to pay to protect her new family. "People just want to live for today, but really, [life insurance] is just so affordable," she said. Related Content Module: More Life Insurance CoverageJoin the conversation about this story »
For parents, buying life insurance is a no-brainer — if you died unexpectedly, your life...For parents, buying life insurance is a no-brainer — if you died unexpectedly, your life insurance payout would take care of your kids' needs. For a married person with no kids, like me, you might not think life insurance is necessary. But my husband and I both have term life insurance policies. The main reason we have life insurance is because both of our incomes factor into our financial planning — if one of us died, the other would struggle financially. Life insurance protects us. A good, general rule of thumb to follow if you want to figure out whether or not you need life insurance is this: have kids, get life insurance. Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price » That's because the purpose of life insurance is to protect your beneficiaries against financial hardships they may face if something happened to you. If you're single and childless, there's probably no one who financially depends on you and the income you earn. While there's no doubt your loved ones would emotionally suffer if you died, they would not face a financial hardship due to your death. Children or anyone who is financially dependent on you, however, especially as minors, cannot financially provide for themselves. Which is why "do you have kids or not" is a good rule of thumb for gauging your need for coverage. But it's not the only point to consider. Why I have term life insurance coverage even though I don't have kids That was certainly true in my case. I'm 30 years old and married, and both my spouse and I work and earn incomes — and our financial planning is based on that total household income. If something happened to one of us, the other would be in a tough financial position because of the loss of that income. That's why both of us have term life insurance policies with the other spouse as the beneficiary; mine is worth $500,000 and I pay a monthly premium of $26. To complicate matters further, the work we do is to run a business together — a fee-only financial planning firm based out of Boston. My husband, Eric, is the CEO and lead financial adviser, and I direct marketing and operations. I'm an employee of the business and earn a paycheck, and also do some freelance writing on the side. So if something happened to me, Eric would be in a very tough financial position because he would not only lose an income-earning spouse, but also a key employee in the business that would need to be replaced in order for it to keep it functioning. Obviously, running a business with your spouse isn't the norm — but there are plenty of other reasons childless couples or partners may want to consider having one or both members of the couple get life insurance coverage. Other factors that might indicate you need life insurance If one partner earns significantly more income than the other, for example, that partner may need to carry a life insurance policy if their death meant the surviving partner could not financially sustain their current lifestyle. Even if you each earn about the same, you may want to consider a term life policy for each of you that names the other as a beneficiary if you jointly hold a lot of debt, like a mortgage. Although Eric and I did not own a home when I got my coverage, we do now. Should something happen to me, the death benefit that would be paid out to him could be used to pay off our home in full so that he would not have the burden of that debt. If one of you could not pay off your existing loans without the help of the other's income, that indicates it's worth looking at coverage so that you could use the death benefit to repay outstanding debts. Finally, life insurance could be worth exploring if you don't have kids now, but you do plan to in the future. The benefit of getting term life policies now is that the younger you are when you get a policy, the lower the premiums are likely to be. My term life insurance is a 20-year policy that I got when I was 29 years old — and yes, we saved significantly on premium costs just by purchasing the coverage before I turned 30! That doesn't mean you should rush out to get a policy just in hopes of saving a little money, but it is worth considering if there's a very good chance you'll have dependents in the near future (even if you don't have them now). That goes doubly for women, as trying to apply for life or disability insurance while pregnant can get complicated; it's a little easier to take care of this protection-planning chore ahead of time. Remember: term life, not whole or permanent! If you do decide to look into life insurance, term life is probably your best bet. Most people do not need whole, universal, or permanent life insurance (although these products can be useful in some specific circumstances). When shopping around for quotes, talk to an independent broker who can help pull together the best rates from a variety of companies. Keep in mind that brokers and insurance salespeople do earn commissions on the products you buy, so an independent evaluation of your true needs by a professional who doesn't sell anything might be a smart move to make first. Related Content Module: More Life Insurance CoverageJoin the conversation about this story » NOW WATCH: Pathologists debunk 13 coronavirus myths
Shopping for life insurance can be intimidating. There's so much information out there that it's...Shopping for life insurance can be intimidating. There's so much information out there that it's hard to know where to start. If you want to learn more about life insurance, figure out if it's for you, and get some tips on where to start (comparison site Policygenius is usually a good move), you've come to the right place. We've gathered some of Business Insider's most helpful articles to answer your burning questions, from who needs life insurance, to how much, to where to get it. Life insurance seems like a big deal. But setting it up is surprisingly easy, and paying for it can be surprisingly affordable. If you think you might need life insurance, but you're intimidated by the seriousness of it all or don't know where to start, we've gathered some of Business Insider's most helpful articles in one place. If you want to learn more about life insurance, figure out if it's for you, and get some tips on where to start, you've come to the right place. Who needs life insurance? If you have dependents — that's people who rely on your income, like children, a non-working spouse, or aging parents you support — you need life insurance. If you don't have dependents but do have debt or own a business, you might also want to consider it. Read more » How much life insurance do I need? Traditionally, the rule of thumb is to get life insurance worth 10 times your annual income — so if you make $75,000 a year, you'd get $750,000 worth of coverage. However, some experts consider that to be a low estimate, especially if you'd want your life insurance payout to cover your child's college tuition, or if you have a mortgage on your home you'd want to pay off. Some people choose to get millions in coverage. Read more » How much does life insurance cost? There are two types of life insurance: term life and whole life. Term life, which covers policyholders for a set term (like 30 years), is our recommendation for most people primarily because it's much more affordable than whole life. Depending on your profile and your coverage needs, it's possible to get term life insurance coverage for as little as $25 a month or less. When you sign up for a term policy, your payment is fixed, meaning unless you change your coverage needs, you'll be paying that $25 a month for the entire 30 years. Read more » Does life insurance cost more now that there's a global pandemic? In short, no. Business Insider's Liz Knueven reports that online life insurance agencies — despite a surge in applications — say getting term life insurance is just as easy, and just as cheap, as it was before the pandemic. "If you're a healthy young person and you're applying for life insurance, your rates shouldn't be changed due to this coronavirus," Allison Kade, a marketing director at online life insurance agency Fabric, told Knueven. "The underwriting process is the same if you were to apply today as if you were to apply two months ago." Where should I get life insurance? Every insurer evaluates potential applicants slightly differently, so you'll want to get multiple quotes to see who can offer the most coverage at the best monthly price. You can start by getting quotes from: Policygenius, a life-insurance comparison site. Read more about Policygenius » Bestow, an online insurer which offers term life policies for as little as two years at a time. Read more about Bestow » Haven Life, an online company which offers coverage without a medical exam Read more about Haven Life » Fabric, an online insurer geared toward parents with kids living at home. Read more about Fabric » I already have life insurance through work. Is that enough? As financial adviser Jeff Rose says, "the only people who have enough life insurance through work are the ones who don't need it." Employer-sponsored life insurance policies tend to offer limited coverage, and their chief drawback is that generally you won't be covered any longer if you leave your job. That's not to say you shouldn't sign up for the policy offered by your job — only that you'll want to strongly consider adding an independent policy as well. Read more » I'm going to have a baby — when should I get life insurance? For life insurance, the sooner, the better. Life insurance coverage typically gets more expensive as you age and become riskier — in the eyes of an insurance company — to cover. If you can, you'll want to get life insurance before you have a child, if only because you're currently younger and presumably healthier than you'll ever be (plus, it's nice to cross a chore off the list before you have a newborn). Read more » What if I don't have children? Should I have life insurance? Most people think about life insurance in terms of leaving money to their children should they die, but really it's for leaving money to dependents. That's anyone relying on your income to live, including aging parents you support or non-working spouses. Some people choose to get life insurance even if they don't have dependents, for a variety of reasons: They have debt they don't want their family members or cosigners to have to assume They want to leave money to pay the full cost of a funeral and burial so their loved ones don't have to pay for it They own a business and want to use the policy as collateral to borrow money or to keep things running if they die They want to help their same-sex spouse is taken care of, even if the courts overturn their marriage in the future Read more » Still shopping for life insurance? Get quotes from these Business Insider partners: Get quotes from Policygenius » Get quotes from Fabric » Get quotes from Haven Life » Get quotes from Bestow » Join the conversation about this story » NOW WATCH: 9 items to avoid buying at Costco