Blog — Sisters for Financial Independence

“A woman who dies without adequate life insurance should have to come back and see the mess she created.”

Momma (and dads out there), I want to talk about life insurance for a sec. I know it’s not easy to talk about life insurance because we associate it with death and death is never an easy subject, but this is real life and part of a good financial plan is to protect your loved ones should something happen to you. I’m not an insurance salesperson but here’s my perspective on it.

Momma, Here's Why You Need Life Insurance. Life insurance is not for you, it’s for the people you leave behind.

Many people don’t believe in life insurance because they are going with the outdated idea that they won’t be able to enjoy the benefits of the money, since, well, they'll be gone. I was on that same boat. Life insurance never came into my mind until very recently. I had attended a workshop at the library on you guessed it, life insurance. The agent said these words that made me listen in. “Life insurance is not for you. It’s really for the people you leave behind.” Yeah, I know she was still trying to sell a product and her incentives were a little different, but this got me thinking. It still took me over a year to finally do the work to find a good insurance company, go through the questions and get blood work done and in the end, I think it was worth it.

Life insurance technically gets taken out on you, but the payout goes to your family. We all want to think we are invincible, but sadly we aren’t. Accidents happen. Illness sets in. Imagine by some act of fate that something happens to you. Who takes care of your children? Who can work to ensure your family is taken care of? Who will have the means, resources and time to provide for your family? If you are from a two-income household, an income loss can be severe. It may mean the family needs to move away from the nice neighborhood with the good school district because the housing costs are too high on one income. The loss of a parent will already be devastating to children. The least we can do is to reduce the financial burden that occurs today and in the future.

Life insurance seems complicated, but it is really simple. It’s there for your loved ones in case something happens to you. When we think about insurance, like car or even iPhone insurance, it’s normally associated with a thing, an object. We buy insurance to possibly replace a car or a phone. This seems easy and tangible to understand. Life insurance unfortunately won’t buy a new you, but it does buy your family security, peace of mind and a life that hasn’t been too devastated by the loss of you. I know it’s not easy to plan and talk about death, but it’ll happen to all of us one day and it’s best to be prepared than to jeopardize your family’s future.

Term Life Insurance

Many posts in the FIRE community talk about expenses and savings rate, but rarely does anyone talk about financial protection. It’s time we add the subject of life insurance to the list. The thing with life insurance is that you might not need a lot. As with all things, the amount you take out will vary depending on how much assets you already have saved up and who needs the financial help when you are gone. There are many life insurance products out there. The one I’ll concentrate on for this post is called “term life insurance.”

Term life insurance is life insurance that guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate. The premiums that you pay do not accumulate.

You can use this calculator to help you figure out how much you need, but here are things to consider:

How long do you need life insurance for? For example, do you want to have something in place up to when your children turn 18 and can support themselves or after 22 when they hopefully have graduated from college. This will determine your term. You will be paying a yearly premium for however many years you choose. The premiums do not accumulate. Don’t think of this as losing money, but buying peace of mind.
How many people will need to be supported by the payout? How many children? Will this include aging parents? Remember that your beneficiaries don’t have to use up the entire payout. It can be invested so they can draw upon it over time.
How much do you already have in savings that can be tapped into to help them with living and education expenses?
How much insurance does each parent have?
Can you supplement this insurance with one bought through the workplace?
**For families with special needs, insurance, wills, and trusts are critical so speak to a lawyer that specializes in these to ensure there’s enough protection.

Protect Yourself Momma (and Dad)

Term life insurance will cost around $500 or less depending on gender, terms, health and other factors. If we go by the $500 number, that’s around $42 a month (which is still high by some estimates). I hope that’s money that can easily be found and allocated for security and peace of mind. If you need help finding that $42 a month, check out The Find Free Money Challenge.

I would encourage you to add this to your list of Financial Action Items for 2022.

I write this after celebrating our daughter’s half birthday. Time flies! Now, it is even more important for me to ensure we have the proper financial plans in place to protect her and her future. As parents, we always want the best for our children, and getting life insurance provides that added peace of mind.

If you are a stay-at-home, remember that your contribution to the household matters. You may not be bringing in income, but you are eliminating expenses. If something were to happen to you, your partner will need to pay someone to babysit, cook, educate and care for your house so it’s important that life insurance be taken out on both the partner that is earning income and the partner that is running the household.

If you are still thinking of a holiday present for yourself or your children, perhaps this is it. While life insurance can’t be wrapped in a nice bow, it will certainly provide plenty of smiles down the line. Remember to use money to buy peace of mind.