Have you ever received a selfless act of kindness? Perhaps the car ahead paid your bridge toll. Maybe a stranger helped pick up your groceries when the bag ripped open. Or perhaps you received a life insurance payout when a loved one passed away.
I hate bad luck. And dying prematurely is the worst bad luck there is! Do you have dependents, best friends and extended family that you love dearly? Getting a life insurance policy is a selfless act of kindness you can bestow upon them.
Life Insurance Is A Bad Luck Insurance Policy
I don't know about you, but I go through strings of bad luck every several years. This makes me question whether I'm sometimes cursed.
For example, my car Rhino wouldn't start one morning. I had to call roadside assistance to have them jump him so I could then drop him off at the service department. He was in the shop for a couple days and the day after I picked him up, he wouldn't start again!
I had to cancel my road trip to Lake Tahoe that morning to take him back to the shop and waste another couple hours of time. While I was driving around in a rental car, I was pulled over and given a $160 ticket because I was looking (not touching) at my phone on the center console for directions while stopped in traffic.
If Rhino had never died, I never would have gotten a ticket because my phone would be in the phone mount as usual. Curses!
The reason why I hate bad luck is because it's outside of our control. We can do everything right, but still not succeed due to unfortunate circumstances. As they say, it's better to be lucky than good! I see life insurance as a bad luck insurance policy.
A Selfless Act Of Kindness
When you pay for something that benefits another, that's by definition a selfless act of kindness. Perhaps the joy of helping people is exactly why I have spent so much time writing over the past ten+ years.
I want to help as many people as possible achieve financial independence sooner rather than later. This is why I continually write about personal finance topics.
Knowledge is vital to achieving wealth. With awareness comes determination, courage, risk taking, and the ability to set and achieve goals. For example, get to know your finances forwards and backwards by taking advantage of free wealth management tools.
In addition, get educated on important investment concepts like the proper asset allocation of stocks and bonds and different ways to earn passive income.
Life Insurance Gives Peace Of Mind
Now back to our discussion on why life insurance is a selfless act of kindness. Life insurance makes me feel better about life in general because I've imagined these various scenarios before:
1) I'm in a horrific car accident where my legs are crushed and my heart is punctured by an improperly installed Takata airbag. During the moments before blackout, I'll think about all the things I did and didn't do.
Most of all, I'll think about my loved ones and how I'll never see them again. The only thing that will keep me from dying from sadness is knowing that a term life insurance policy will pay out to my beneficiaries in order to minimize any further disruption.
2) I'm flying overseas and my plane loses both engines. I'm not afraid of flying, but I always text and e-mail as many loved ones as possible before I take off because I never know whether it'll be the last time I communicate with them. A life insurance policy will let me die in peace before impact.
3) Right after I turn 50, I feel a pain in my lower abdomen. I go to the doctor to check out what's wrong and it turns out I have pancreatic cancer with only one year left to live. Thank goodness I took out life insurance while I was still healthy.
During the time I have left, I'll do everything I can to live life to the fullest. The life insurance benefits will go to my wife and kids to help them continue living a comfortable lifestyle. My death would give purpose to someone else instead of just dying for nothing due to bad luck.
Worry Less With Life Insurance
I can't be the only one who has thought about these accidents happening to them. Before I got life insurance, I wondered more often when my ultimate bad luck would come.
Now, I don't think about unfortunate events as much because the people around me are taken care of thanks to life insurance and my estate planning.
I want life insurance to minimize disruption in my survivor's lives. I don't want them to be forced to sell our house because they can't afford the mortgage payment. Grieving takes time. The more stable the environment for grieving, the better.
There Is A Price For Everything
People have asked me why get life insurance if I have a large enough net worth that makes me “self insured” already. Given I view life insurance as a selfless act of kindness, I like to get more insurance than simply replacing 100% of the financial benefits I provide. This way other people can actually BENEFIT from my death. The benefits are viewed as making up for the sudden pain.
Since $3 million is the new $1 million, I took out a $3 million, 20-year term life insurance policy for my family at a cost of about $200 a month several years ago.
Because my beneficiaries will inherit all my investments and properties that generate six figures in passive income a year + my online business, the $3 million will be icing on the cake for them to live the most financially free life possible long after I'm gone.
This makes me happy, because again, I've always felt it my DUTY to provide for the people around me. What would tear me up is not being able to provide for anyone because I'm dead.
Related: The Right Amount Of Life Insurance To Protect Your Family
Calculate How Much Life Insurance You Need
A good way to understand how much life insurance you need is by estimating how much debt you have or calculating how many months of your income is needed for how long a period of time.
Six to ten times your income is the common recommendation. If you have children, consider your debt plus the costs to complete their tuition.
Another way to calculate how much term life insurance you need is by asking your beneficiaries. Asking will force your beneficiaries to talk through their finances with you so that everybody is on the same page. It's much better to have the talk while alive, than dead.
If you're a healthy 35-year-old, you can get a $500,000 term policy from PolicyGenius for just ~$24 a month. That's the cost of a couple rubber chicken sandwiches. Not a bad deal for insuring against bad luck!
Try PolicyGenius today and compare life insurance policies for free from top insurers in minutes.
If there's nobody in your life you want to help after you are gone, there's no need to get life insurance. Just make sure your will or revocable trust is clear.
I believe in leaving a positive legacy. Life insurance is just one way to help others as a selfless act of kindness. Even if you are financially independent, getting life insurance is a good idea if you have debt and dependents.
Get A Life Insurance Policy The Easy Way
My wife recently got a new life insurance policy with better terms for less money. If you're a first time buyer of life insurance or want to see if you too can get more life insurance for less money, try PolicyGenius.
PolicyGenius is the most efficient way to get competitive life insurance quotes online. They are the #1 life insurance marketplace where qualified lenders compete for your business.
It's much easier to apply on PolicyGenius than go to each carrier one-by-one to get a quote. I've known the founders for years and they have truly built a fantastic resource for individuals and small business owners.
Life insurance is a selfless act of kindness and love. Please get life insurance to protect your family.
The life insurance company is taking your $ and investing it at a conservative rate – using an asset-liability matching strategy. The liability in this case is your death.
I personally buy enough to ensure my family’s security in the event of my demise, however I am always a fan of putting your own money to work not in the hands of someone else- so my “excess policy” is the growth in invested assets and passive income. For example, $2m in term life and a strategy to have $500k-$1m in invested assets producing passive income.
But that strategy needs to be evaluated on a case by case basis. For example, can you outperform the life insurance companies returns? will you die before passive income strategy is established – are you expecting to outlive the actuarial tables?
Good thought provoking article.
I follow a similar philosophy in that I want more than enough life insurance so my family is well taken care of if something happens to me.
Ms. Financial Slacker and I each have a small whole life policy that we took out years ago, but the bulk of our coverage is inexpensive term life.
We also purchased small whole policies for our children. One of the benefits is that they have additional purchase options which means even if they have a health condition later in life, they’ll still be able to buy insurance. And actually the cash value has been generating a 4.5% after-tax return which isn’t too bad.
The wife and I went with the term route for 30 years with an amount slightly higher than the mortgage. We also have small policies through work. Instead of getting two policies we got one with a rider basically stating that whoever croaks first the other will get paid. The numbers don’t lie and you would be much better off, all things being equal to invest the premium difference from a term vs a whole life policy in a low cost index fund over the same duration. You come out on top due to the BS fees that insurers charge on whole life policy. The one vehicle though that may make some sense is borrowing against the policy. It’s a lot of due diligence though but you will find if your dividends cover the interest (and maybe the principle) you can borrow (interest free, sort of) from the policy creating cash flow and tax breaks versus cashing the policy out. It gets complex but this hits the general ideas of it.
I asked this in a previous post on insurance but didn’t get much response, so I’ll bring it up again. What about joint term life insurance? I was doing some research on it but there doesn’t seem to be much info out there. It would seem to make sense for dual income family where both parents have similar income…
Not entirely sure I agree with the methodology of how much coverage you have. Most women remarry within 5-7 years of a their spouse dying prematurely. Very noble to ensure your family is taken care of and financially free but do you want so much coverage that the new husband also become financially free? Buy enough coverage to pay down all loans and debt plus five to seven years of spending. Anything more is overkill.
I love my wife a little more than that. What if she doesn’t remarry? I want her to be taken care of for life. If she remarries – great. I trust my wife to save those funds for our children then. And I trust my wife to not marry someone like that. Regardless, I’ll be dead, so who cares. I just want to know that should something happen to me, my wife will be very comfortable and can raise the kids without having to worry about work.
Hey Sam,
I wasn’t actually sure how to reach you so I figured posting a comment made the most sense so it gets caught by you in the modding phase. You’ve mentioned in past posts meeting up with other FIRE-ers. I’m 28 and FIRE’d a few weeks ago. I’ve been a reader of your blog for over a year and of all the early retirement bloggers out there, your approach has been the most aligned with my values and life (also worked in finance, live in a HCOL city with my husband so I think it takes a few million to throw off the appropriate amount of passive income to support a family, etc).
I’m in SF for a week and was wondering if you still meet up with readers for coffee. I’d be really interested to hear your perspective on the transition from go-go-go to retirement and how to think about reasonable goals/where meaning comes from. Right now my biggest challenge is how to get the monkey off my back that says ‘only activities that make money are worthwhile’ to make room for all the other things I had quit to pursue in the first place. I got the sense that you had wrestled with some of this yourself and would value your input. Let me know if you have time to meet up! Thanks. And if you’re busy, totally understand and wish you the best with all the writing for the blog.
The only debt I currently have is student loan debt and it’s non-transferable after a death. I do have a son; however, his uncle is a wealthy attorney and left him a sizable deposit into a 529 Tuition Plan. Sizable enough that should he choose to go to an in-state public school, it’s already paid for. It’s for that reason, I have minimal life insurance and both are provided through my work. My employer automatically provides one year of salary (which I tripled coverage on for a minimal monthly fee), and then my membership with a Sheriff’s Association adds an additional year of insurance.
I know I’m lucky at this point in my life to not really need to buy my own. I’ve thought about buying a separate policy because my work insurance isn’t transferable, but it’s just not imperative at this point.
I would like to make a comment against term insurance. If you purchase 20 year level term at age 38 years old. At age 55 you develop cancer which makes you essentially very hard to insure. You might be able to convert your term policy to insurance that will not expire. The new life insurance will probably not give the coverage that you had with you term policy.
Years ago my husband had a heart attack. Today he is fit and healthy but the night I drove home alone from the hospital with him facing possible surgery the next day I DID think, “Thank God we bought him that $1 mil life insurance!” I feel embarrassed to say it but it gave me a small sense of comfort at an otherwise very difficult time. Stuff can happen. And it does. Get insured. The younger you are the cheaper it tends to be. Do it for your loved ones. One final note. My dad died suddenly when I was 13 years old, ten months after the sudden death of my mother. At 13 I was a full orphan. Without my father’s life insurance my siblings and I would have been toast. DON’T think it can’t happen to you and yours.
Wait, they don’t offer their product in San Jose, CA? Disappointing.
Not available in San Francisco either!
Hi Matt and Willow! We don’t offer coverage in California yet, but we plan to soon. If you’re interested in Haven Life, please submit your email on our website, and we’ll let you know when we expand coverage into new states. https://havenlife.com/#dialog/enroll
Thank you for checking us out!
Another great reason to have Life Ins is because Uncle Sam can’t get his greedy paws on it.
I didn’t see any mention of the tax consequences of life insurance. Most people realize that life insurance benefits are income-tax free to the beneficiaries, which is a huge benefit and another reason to get life insurance. However, life insurance payouts are included in the value of the policy owner’s estate and subject to estate taxes if the estate value is over the excludable amount (currently $5.45mm per person).
If your net assets are already over the exclusion amount or if your net assets are currently under the $5.45mm exclusion amount but could cross that threshold if life insurance is included, you should consider putting your life insurance policy into a Life Insurance Trust. The Life Insurance Trust will own the policy on your life and any payout will be excluded from the value of your estate.
You may also want to consider this option if you believe that the estate exclusion amount will be decreased in future years by congress (like I do).
Also, please consider the Accidental Death & Dismemberment add-ons to life insurance. They can increase your payout significantly so be sure to take into account estate tax consequences.
$1M Term Life Policy, got it at I good time I guess, I’m at ~$500 a year. I was making less then but still $1M would leave my wife with a paid off house and about $600K left over. That would put her right now at about 850K to live off the interest on assuming she didn’t want to move. It would be a little tight but still very doable.
Also, another thing to consider in the whole life vs term life debate is that since I’m self employed I can pay for ONLY term life out of my business account. Not that I would consider whole life anyway.
Having life insurance is a necessity, until you’re self insured. In my opinion, the rule of thumb would be, every person has to have 10x-12x coverage of your annual income. My 20 years term cost me $400 per year.
Wait $3 million is the new $1 million. I finally get to $1 and then it changes to $2 and now it is $3…. son of a b….. back to work.
PS – buy life insurance unless you are an a..hole who hates their family or you don’t think you won’t die.
LOL, awesome :) Gotta love inflation! Might as well ride it, rather than let it slap us silly in the face.
This sums up my thoughts on term life insurance perfectly. I believe everyone should have at least a small term policy, even if they possess a high net worth, simply because it is cheap. The average person with good health can get a quarter million dollar policy for the monthly cost of a pizza.
I carry beyond the typically recommendation of 10-12 times one’s annual income because I want my wife to be free of any financial concerns if I should pass away. We have a running joke that in the event I pass away, she cannot mention the money to any potential future husbands until the marriage is official.
If you are reluctant to purchase life insurance because you dread the conversation with your spouse or find it morbid, I recommend lightening up and cracking a few jokes during the process. One thing is certain: we will all die someday. With a term life insurance policy, your death can at least serve to accomplish financial freedom for your loved ones.
I’m horribly under insured. My policy is only $250,000. Mrs. RB40 only has life insurance through her job. We need to increase it a bit. Social Security should cover most of the expense if one of us croak, but it would be more comfortable with more life insurance. Anyway, hope to stay strong for another 40 years..
I honestly have never thought about getting life insurance although I do get a small amount of this for free from my day job which is great. Now that I am a newlywed and see babies in the future, its time I really sit and weigh this out.
Hello – often, employer provided life insurance isn’t enough to cover your policy needs. The usual recommendation is at least 6 to 10 times your salary; employer policies are usually 1 to 3 years salary. And, don’t forget that the coverage lapses once you leave your job. Please do check out our site and get a quote: https://havenlife.com/#quickquote
How about disability insurance? Any thoughts on this? Many insurance salespeople will tell you to get Disability Insurance before Life Insurance. Of course, it’s also more expensive and the contracts can be very specific and stringent.
I’ll check out your sponsor’s site today. I’ve got some life insurance, but probably not enough. The last thing I want is for my wife and 4 kids to start bootstrapping it should bad luck turn my way.
Thanks in advance for checking us out, Ty. We have customer service available via chat or phone if you have any questions along the way.
Really interesting post. I ran the calculator and they don’t offer insurance in my area yet. This could be something we look in to soon, even though we have “enough” and have planned for our futures. My family has always been very “anti-” life insurance and have worked hard to self-insure. At these costs, this requires more consideration in terms of a legacy.
Hi Vicki, we are expanding coverage to more states this year. If you’re interested, please submit your email on our website, and we’ll notify you when we’re available in your state: https://havenlife.com/#dialog/enroll
Wow, this is a very interesting way to think about life insurance. I really liked all the scenarios that you gave. It really changes your perspective. Thanks for sharing!
If I had a wife or beneficiaries other than my college, I would already have life insurance. As it is, my savings will cover my funeral expenses. Residuals will go to my college. If my girlfriend and I marry, I will get $1m in coverage, because I want her and her family to be fine if I am gone. I want her brother to be supported even though he is unable to have a job. She knows I want to buy him a home for security. She would ensure that the money was used appropriately.
I have a life insurance policy but not for a crazy amount. Just up to the maximum before the insurance company starts asking for evidence of insurability. This post though makes me want to revisit my selections.
I wouldn’t worry too much if your spouse is very independent but maybe for a spouse that has moved from another country or has been unemployed for a long time taking care of children it would be much more critical.
This is something that has been on my mind. If you have an estate that is sufficiently funded so that your child(ren) will be able to live a nice life and attend college, why pay for life insurance? Why not just set up a trust, designate a beneficiary, and have the trust own an account into which you pay $200 per month (or whatever)? I understand it is necessary in the case of people with a high income, debt, lower networth, and dependents. But otherwise, why? I guess, as you said, it’s an act of love. But isn’t setting up a trust and designating a beneficiary also an act of love, but you’re just taking the insurance “in house” and keeping your $200/month?
I’m with you, BH. The only advantage I can think of for life insurance is if you’re building your family and still at the fairly early stages of building your nest egg. In that case, if you died, your family might really struggle without you. But if you’re pretty stable financially and you’re investing in your own assets, or if you just think it’s really unlikely that you’ll die and your family can do much better with you investing the money instead of paying it to an insurance company, I’d just keep it all “in house.”
You can buy a life insurance policy for the same $200/month. Use the insurance policy to fund the trust if you die prematurely.
But why? I think the average life expectancy is like 78 years old. If you’re someone who already has a networth that is large enough to provide for your dependents, including pay for college, it just doesn’t make sense. I feel like life insurance as an industry prays on people’s emotions. In the case of someone with high income, high debt, and multiple dependents, life insurance makes sense, but otherwise, I’d rather not give someone else $200 a month when I could invest it myself for my “estate” and it will have some value if I live to 78 years or beyond.
Let’s review the math.
Example 1: If you are 60 years old and purchase $500K of level term life insurance in good health, the premium will be approximately $200. If you live until 78 years old you would have paid $43,200 in premiums (18 years of premiums). The amount of premiums paid is less than 1/10 of the face amount of the policy. If you are younger you could buy even more insurance for $200.
Example 2: If you have save $200 a month and you want to save $500K it will take 18 years at 21.2% interest.
Example 3: If you save $200 a month at 8% interest compounded 12 times a year for 18 years you would have $96,857.34
Almost all families can benefit from an extra $500K. The only way you can lose money by buying 20 year term life insurance is you don’t die within the 20 years. If you are very young or good health and longevity is in your favor then I would not buy term life insurance.