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There’s An App For That: Low-Cost Life Insurance

January 25th, 2010

Many people dismiss life insurance because they think it’s too expensive, or already have a policy and feel stuck paying an exorbitant premium. But life insurance can be had for a modest price, and provide security for your loved ones if the unthinkable happened.

Who Should Get Life Insurance?

Single, Ready to Mingle
If you’re young & single without many financial responsibilities, odds are you need little or no life insurance at all. If you had student loans, car notes, or any other debts where a co-borrower is involved, they would be on the hook for your debts. When you’re young, that co-borrower is usually a parent; so be nice to your parents and take out a policy that will cover your debt expense, and list your parents as a beneficiary. And if you want to sail right through purgatory on your way to sainthood, take out a bit more to cover funeral and burial costs.

Married… With Children
If you’re married, and/or have children, take out a policy roughly 10-12 times your salary. That way the beneficiary (your spouse and kids) can live on the income generated from investing the policy pay-out.

Easy example: if you make $50,000/year, you’d want roughly a $500,000 premium, when invested, would provide about $50,000/year to replace the lost income.

Real-World Application: Term Life Insurance

There are plenty of debates between buying whole life or term life insurance, and that’s a topic for another day. What you should know now, is term insurance can be bought for 5-10% the cost of whole life. And in this series, we’re all about saving money in your budget. It is not an investment vehicle, it is an actual insurance against your death for a fixed amount of time.

Term Insurance
The theory behind term is that you buy a policy for a 20-30 year period. If you outlive that timeframe, your kids will be out of the house and your family finances will be under control; therefore you have no further need for life insurance.

Where To Get Term Insurance

I bought mine through Zander Insurance, an independent agency that can price shop for the best rates. For $75/month, both me AND my wife have 20-year policies that pay out $1,000,000 upon death. We’d better sleep with one eye open!

Does anyone have term, or other life insurance products? Are you satisfied cost-wise?

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