Is Life Insurance Really Necessary, or Just Something We Overthink?

Insurance Life Insurance
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I’ve been looking into life insurance lately, and honestly, it feels like one of those things most of us keep putting off. It’s not really fun to think about, but at the same time, it kind of makes sense when you think about protecting your family and future responsibilities.

From what I understand, life insurance is basically a safety net. If something unexpected happens, it helps cover expenses and gives financial support to the people who depend on you. That alone makes it worth considering, especially if you have a family, loans, or long-term commitments.

There are different types too, some are simple term plans that cover you for a set period, and others are more long-term with savings benefits included. I guess the right choice really depends on your budget and what you’re trying to protect. I’m still learning about it, but it does seem like one of those better to have it and not need it situations.What do you guys think, worth getting early, or only necessary later in life?

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It depends on your family situation. If you are single with no kids, then you don’t need it. If you are married with no kids then its about income replacement. If you are married with kids then its about providing a nest egg for child care and expenses. In 99% of the cases, term is going to be the way to go.

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As Butler said, It depends. My son started investing when he was 18, he got married at 29. He had enough investment income that if he died, his family didn’t need life insurance. He married a lady with 2 children and adopted another one, so he definitely needed to provide for them. If you have a family, start with 10 year term, and try to start investing, ROTH and non-retirement. By the time the 10 years is up, you might not need another policy. My husband and I are retired, and we have no debt, so we don’t need life insurance for our end of life expenses.

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As others already said, the primary purpose of life insurance is providing for those who depend on your support. A secondary purpose (should there be no dependents) could be to provide an inheritance; nice, but certainly not a necessity.

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Well, the first question is how old are you? The second is what are your commitments?

You are already starting out well by asking questions. What you will find is that typical life insurance needs will change over time.

Back when I was not-so-old - I’ll be 67 in late June - I did not have life insurance. I was married, but we had no debt, I was in school. Graduating and getting a job (I’m in engineering), it was typical that a company would provide life insurance as part of your benefits anywhere from 2-5 times your salary.

I happen to have a large family with a work in the home wife. We both worked hard, but I was the single breadwinner. For about 20 some years, I carried at least a million in life insurance. The intent was to be able to pay off the mortgage and have sufficient funds afterward to invest and generate income. At the time I was shopping, there were 3 basic product types on the market: whole life, universal life and term.

Whole and universal insurances’ (any agents want to chime in and correct me I won’t be offended) differentiator is that it built cash value. Term does not. When I needed the coverage, I simply could not afford a whole life or universal policy. I’ve had term forever. I know Clark has many articles about this, but lyn nailed it pretty sucinctly.

Now the sort of downside of term. It’s based on the concept that by the time you get older, you won’t need as much insurance. Your debts and other commitments should be going down. Back in my 40s I bought a 20 year level term policy. It expired but by that time I had a few health issues (standard actuarial analysis) so to get a new policy - if they would even give me one - was expensive. Thankfully most term policies have a guaranteed renewal (for annually increasing costs). So, a few years ago, I contacted my insurance company and asked if I could reduce the amount of the policy without losing it. They worked with me.

With all that said, I’ve been religiously watching expenses, sweat labor on house repairs, and our cars are relatively new. My goal is to be completely debt free within 5 years. As I get closer to that goal, I’ll keep reducing the life insurance to zero.

One other note: life insurance is not a decent investment tool.