Saturday, August 2, 2014

Life Insurance for our Life Changes

As a single person I never really felt the need to get life insurance.  However, when Sis and I bought our rentals together, Beau helped me see the prudence of having life insurance.  It is rather irresponsible of me to leave my family with the burden of these mortgages if anything does happen to me.

Since insurance premiums increase as you get older, Beau helped me do a small $250K permanent life insurance policy before I turned 30.  There are two types of life insurance, permanent and term.  Simply put permanent is lifelong life insurance, and term is life insurance for a limited time (i.e. 25, 30, 35 years when you need the protection).  Term is cheaper than permanent.  We decided on permanent at the time since it was relatively cheap before 30.

Now that we are expecting a baby, and I have even more rentals, it was time to reassess my insurance to see if it see meets our needs.  (If you wonder why we did not do this for Beau as well, it's because Beau has been well insured since his early 20s with a mix of policies  He actually has one policy that gives him $500k when he turns 65.)  After looking at our needs, it's clear that my small $250K policy will not cover our mortgage, and four rental mortgages.  We had thought about doing another permanent life insurance policy, something for baby when I pass away.  However, looking at the monthly payments (which is significantly more because of insurance rate increases and my increased age), it was just more than we wanted to spend.  Instead for the second policy we did a 25 year, $500K term policy.  This means I am covered until baby is 24.  If anything happens to me after that age, baby still have to the $250K to cover the small expenses, and hopefully baby should be self sufficient by then with their own savings etc.