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So recently I found out that quite a few of my friends don’t even have life insurance. To say I was surprised was an understatement. They’re in their late-thirties or early-forties with families and jumbo mortgages. Their peak earning years are ahead of them. It’s a no brainer to have life insurance of some sort in this day and age, given that a lot of the initial legwork can be done online during your lunch break?
So this dear friend, is for you. Yes you the one who I can’t point to this article that I just wrote because I’m well, anonymous. Here’s hoping some folks reading this will get off their you-know-what and get some life insurance.
Term Vs. Whole
Don’t worry, I won’t dive into the whole debate about term life insurance vs whole life insurance. I suspect there’s more than enough information out there for fine folks like yourself to decide.
I just want to say that my feet are firmly on the side of term life. You may agree and we can agree to disagree over some single malt or a nice IPA.
So much so that when my dear ol’ dad became a life insurance agent after he semi-retired, I didn’t even buy a policy from him. In hindsight I should have done so, good son that I am. Unfortunately, those were leaner years and I had just started to make my own investments *cough* smartass *cough*. I also didn’t have any extra left over to purchase whole life.
So yes, I believe that term life makes the most sense for most people. Take the balance and invest it, and you’ll come out ahead in the long run. Term life is also incredibly cheap, making it even more likely that you’ll get it and continue to pay the premiums for the 10/20/30 years that you get the policy for.
The Very First Time
The first time I got life insurance was a month or two after 9/11. We were still reeling from the horrors of the tragedy and I realized that I’d just gotten married earlier that year. My wife was new to the country, unable to work and dependent on me. Talk about being in a pickle should something happen to me. If I remember correctly, I did some basic research and ended up on one of those comparison/lead generation sites. 2 weeks later I had a 10-year policy for $300,000. That was a huge amount then, and I couldn’t ever imagine her needing more than that. I had gone with 10 yrs since I assumed that circumstances would be different in 10 yrs and we would re-evaluate at that time.
How Much Should You Get
As with all insurance, the question is always how much you should insurance should one get? The answer is different for everyone, especially when it comes to confronting one’s own mortality. The answer also depends on which stage of life you’re in, who your beneficiaries will be, and what expenses you’d like them to cover – at a minimum.
For example, when I was in my late 20s:
- It was just the two of us, no kids or kid-related expenses
- We were renting, so no mortgage
- Should anything happen to me, the wife could always move back to India and start again (if she chose to do so). This is relevant as the cost of living would be much lower for her at that time
Now when I’m in my 40s:
- We’ve got kids, and college + other expenses are looming
- A jumbo mortgage
- More crap than we need
- We’re kinda set in our current lifestyle and there’s no way we’re moving back (unless it’s because of FI)
So yeah, what worked at my late 20s is not going to cut it in my mid 40s.
I finally went for a 20-year $1,000,000 policy for myself, and a 20-year $500,000 policy for the wife. I wanted to have enough so that the mortgage could be paid off and the wife didn’t need to worry about college expenses. Between the 529s and the balance of the life insurance, the kids’ college expenses would mostly be covered.
Selecting An Insurance Company
Selecting an insurance company is really not that difficult. An easy rule of thumb is that you start with the top-rated ones and work your way down. There’s a bunch of companies that rate life insurance providers like A.M.Best, S&P, Fitch etc. and most providers will mention their rating on their website.
There’s also a lot of third party sites like Insure.com, SelectQuote.com, AccuQuote.com and others. I went with one called Term4Sale.com. I think I read about it on Bogleheads.org and it worked great for what I needed.
The process itself was pretty straightforward, and couldn’t be easier.
I went to Term4Sale.com filled out the the form:
And was presented with a bunch of options:
I picked one based on ratings, and was then given a screen with 3 agents’ contact numbers and a form to fill out.
I know – you were probably thinking that you would just buy a specific insurance policy online and call it done. Trust me, this is better – especially if you know what you’re doing.
Picking a Provider
So after submitting that form, I got emails from all three agents.
- Agent #1 wasn’t memorable. I don’t remember why I didn’t pick him but do remember that he didn’t email me a quote upfront. Also that he was the first one to be eliminated from consideration. The way I see it is simple: You get paid a commission because I get a policy through you. This means you work for me, and not the other way around.
- Agent #2 was good, but sent me quotes and just that, nothing extra.
- Agent #3 was smart and smooth. He sent me exactly what I asked for, but also asked about criteria not covered in that short form. He then sent me some other suggestions on which other insurance companies might make more sense based on my needs. In short, he went the extra mile and I ended up going with a higher insurance policy than what I’d anticipated. He wanted me to go higher (bigger sale = more $), but this is where it helps to know what you’re doing and how much you really need.
Long story short, a few back-and-forth calls later, I had the medical done and a quote in my hand that was one tier lower than what I wanted. The reason was simple: my cholesterol wasn’t great and it was something I knew going in so wasn’t too surprised, just bummed.
Remember how I said going with an agent worked out better? Here’s why:
- He then contacted another insurance company, and convinced them to not only use the medical test of the first one but also put me in the highest tier provided I would get on a brief telephonic interview with them to assuage any concerns. 2 days later, interview done, policy finalized and I didn’t even need to do the medical again.
- A year later, we were moving and misplaced the annual premium bill *and* the reminder. He got a notification, called me and then convinced the insurance company again about the delay and prevented the policy from getting cancelled. Yes, his commision would be impacted but he worked for it.
- Only 55% of households have life insurance. You need to get one today, including one for your spouse.
- Get enough to cover debts, loss of income, funeral expenses and whatever else makes sense for you
- Get Term. Invest the rest.
- Buy it from wherever you like, but go with a reputed, better-rated insurance provider
- If you have one already, check to see if its enough or if your circumstances have changed since you last got it.