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In 2014, I decided it was time for life insurance.
While this is one of the least sexy parts of personal finance, it is a very important one. It was before I had kids and I didn't even own a house at the time, but I planned ahead and picked up a $1 million policy at 28 years old.
Read more to find out the reasons why and what I would do differently today.
Talking about things like death and dying are never fun, but it is a reality we all have to cope with at some point. If you were to die today, would the people you care about be okay?
I picked my life insurance policy to protect my wife from the loss of my income as well as any future kids.
While my wife alone could easily use her job skills to pay for her life, it might have been at a lower standard than we were living at the time. I also wouldn't have ever wanted to put her in a situation where she was supporting a family on her own. While this is all too common today, it would be much easier with an extra seven figures in the bank.
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The timing of getting life insurance was important to me. Outside of the non-portable policies I got from work, I knew that a new life insurance policy would only get more expensive over time. I picked term life insurance as it gives you by far the best bang for your buck compared to the monthly cost.
With term and other life insurance, your monthly cost is locked in when you sign up for the policy, but that monthly cost goes up over time as you age. It makes sense, as older people are more likely to die than younger people. But if you lock in your rate while you are young, you lock in a lower cost than someone who waits five or ten years past your current age.
Since signing up for my 30-year term life insurance policy, some risk factors emerged that would make insurance even more expensive for me today.
In addition to being five years older, my Dad was diagnosed with cancer and I decided to earn my private pilot license.
Both health risks and activities like flying planes can make life insurance premiums more expensive. But again, they were locked in when I was 28 before my dad was sick and before I had ever considered hopping into the cockpit. No one plans on a cancer diagnosis, but if one happens to your parent or sibling, it could mean a higher risk for you and higher monthly insurance costs.
If you plan to get life insurance at some point, signing up for it now is probably the cheapest price you'll ever get.
