There are many things I like to think my husband will remember me for. My willingness to edit his grad school papers, only occasionally teasing him about his grammar. My attempt to always have dinner made before he gets home, even if it means accidentally baking a magnetic bag clip that one time I was in a big hurry. My eagerness to go fishing with him, reminding him only every hour minute second how boring fishing actually is.
And money. While I don’t have it all figured out, of the two of us, I definitely have a better handle on our finances. Or at least I thought I did until this year’s open enrollment at my work. Imagine my surprise when I actually took the time examine my current life insurance coverage and discovered that what I would be leaving behind was actually a money mess.
Ignorance isn’t life insurance
As much as I like to think of myself as the best wife ever, my current life insurance situation might leave my husband feeling otherwise about his dearly departed in the event that I kick the bucket first. My school district offers optional additional coverage, but if you remember my biggest money mistake, you know that fear and ignorance are a dangerous combination. I never even bothered to explore the additional coverage options until this year because I didn’t know better and I didn’t want to know better.
Nobody wants to think about dying. I don’t have time to think about dying. On any given school day, I spend time facilitating discussions, troubleshooting technology, delivering lessons, giving feedback, connecting with families, reminding students that glue is for paper and not their hands, and 8,012 other things. There are days when it feels like my passion might kill me, but I don’t actually think about dying. It turns out, though, that ignorance isn’t insurance against dying.
$50,000 Doesn’t Cover Much
After I took the time to actually review my benefit plan offered through my work, I learned that my district provides $50,000 worth of coverage. While that’s certainly a step in the right direction, we have six-figures worth of debt, not five. Oh, how I wish it were five. It’s also true that while my husband would receive an additional payout from my pension should I set off for the great schoolhouse in the sky before him, that’s only $30,000 or so.* That’s still not enough to pay off our mortgage. Not even close.
My husband will have many decisions to make upon my death. Whether or not to bury me in my Jimmy Choo shoes (yes!). Whether or not he should keep making weekly contributions to his Roth IRA without me around to nag him (also yes!). He would also have to decide if he were going to stay in our house and so many other things. If I want him to be able to make optimal decisions, asking him to start out with six figures worth of debt on a $50,000-a-year salary seems like a terribly selfish way to do that.
*I say “or so” because the great state of No State Budget also doesn’t update pension information often. I have access to information that’s current up to two school years ago. Helpful.
Cover Your…Self
While I can’t say that I’ve optimized all of my benefits during this open enrollment season, I feel much more confident in my decision about life insurance. For starters, I need more of it. For a couple who has yet to slay the mortgage monster, term life insurance is an excellent CYA. I do hope to reach some semblance of financial independence sooner rather than later. When that glorious day comes, there will be confetti GIFs, blog celebrations, and less of a need for term life insurance. But we’re not there yet. And that road to financial independence would become much more challenging should it suddenly turn into a solo mission.
I have the benefit of picking up extra coverage through my work, but you know I had to put my shopping skills to good use. In addition to getting comparison quotes for our home and car insurance from Select Quote, I got the scoop on their life insurance offerings as well. It was quick and painless. And it helped me understand the value in spending my cash now to care for my family later.
If you’re not sure if life insurance is the right fit for you and your family, explore your benefits and ask your questions. I’m in no hurry to head to the ultimate recess in the sky, but we can both breathe a little bit easier when it comes to our mortgage now that we’ve talked more about money after death. And that ignorance and fear that I’ve been carrying around? Well, this is one part of my financial life that I feel much better about.
So Tell Me…Where do you stand on life insurance? What other benefits or coverage options should I explore this open enrollment season?
This post was sponsored* by SelectQuote, but all thoughts and opinions are my own. Seriously. Who else do you know who would overlook a magnet when putting a cookie sheet in the oven? 100% Penny.
*FinCon2017 or bust, baby!
Mr. Groovy and I both had employer life insurance with a payout of 2X our salaries. Several years ago we both got term life policies. Although one broad standard is to buy 10X your salary, we went with $250K each, which is certainly less than that. But with no debt and no kids that’s what we were comfortable with.
Are you going to get term policies? I’m sure the quotes you got were pretty cheap. Since you don’t have children I would think about going with a $500K policy for each of you.
Edit: But if the difference in price between $500K and $1M is minimal, I’d go with the $1M.
Yes, definitely term! And that’s really helpful. I was thinking of adding another $150k. But I suppose for a few dollars a month, it makes sense to get even more coverage.
The other one you both 100% need to have, through work or otherwise, is disability insurance. I’ve been looking into it, and realistically, “future earnings” are the biggest asset any of us alleged-millennials have, so it’s important to know how much you’re covered if you couldn’t work! As a teacher you’ll (hopefully) have a much easier time of it because you won’t change employers as much as people in the private sector (three jobs in four years, hiiiiii) so once you know your work policy, you should be all set!
But yes. Disability insurance.
I do have disability/accidental death and dismemberment. It was really eye-opening to see how my district values my limbs and eyeballs. Oof.
Agree with Des that Disability Insurance is super important, it’s also pretty expensive sadly. My individual disability insurance policy costs more than double my life insurance…and my life insurance could be cheaper. 😀
You could say I’m currently on the beer truck plan:
-My life insurance will pay out my parents a million bucks if I get fatally run over by by a beer truck.
-My disability insurance will replace my current job income if I get wounded by the beer truck and it causes some sort of permanent disability, but not death. 😀
HA! I love that, TJ. Avoiding the beer truck at all costs is the ideal, but it’s fantastic that you’re covered.
Also, I know you did a post on this topic. Feel free to drop the link in the comments!
Oh man. My in-laws have childproof cabinets that are unlocked with a magnet…that went missing…until they baked a cake. So stinky! Plastic and ovens do not mix well, and I share your pain.
As for life insurance, it’s important to have some outside of work too. If (knock on wood) someone gets cancer and has to quit a job, then the life insurance is gone too and the person is then uninsurable.
Oh my gosh. I was sauteeing a stir fry on the stove and was trying to pop in some egg rolls in the oven as a treat for my husband. I kept smelling the plastic, but I thought it was the stove! Then I saw the orange goo on the oven racks. ZOMG. Not a good dinner!
That’s an interesting point about looking for coverage outside of work. I will have to go back in my benefits plan to see how that works. Like you say, maybe it’s smarter to look for coverage outside. The quotes I got were really reasonable, so it might be time for another phone call.
I wish I could afford more life insurance at my age because I’d hate to leave my wife behind with that mortgage. But I have to agree with Des and TJ on long term disability insurance. That’s critical! Social Security reports that 1 in 4 people currently age 21 will be disabled at some point during their working years. I know for my wife, becoming disabled in her 30’s was devastating, but having that disability insurance money every month helps cover our medical and other expenses. Many people rely only on Social Security Disability, but it can take years to get approved and only covers a fraction of your previous income.
Yes, I have heard the horror stories about waiting forever. This weekend, I’m going to review the amount covered by my work. I may have to up that as well!
Long, long ago, I remember looking at the benefits to my parents’ AAA membership, which included life insurance. I doubt AAA had to pay out often, as it only applied to situations like being killed by being hit with a golf ball or struck by lightning. But at that time, it was an included benefit.
As you look at options, or someday clean out old files, look for such benefits. Consider organizations you belong to or other accounts you have, including credit cards and auto insurance, and see if they offer you anything of value. We get lots of mailings that we have $10,000 coverage from the credit union that has our HSA accounts (if we return the forms), (and don’t we want to buy more?). I don’t think those sorts of places have the best rates, but you might as well put what you do have into a tidy list in the very unfortunate situation that you need it.
We actually went with term life insurance over mortgage insurance that the bank offered. It was less than half the price and covers over 8x what we owe on our mortgage and the mortgage insurance wouldn’t cover all the other costs. Way better decision in our scenario.
Life insurance through your work would likely be cancelled if you needed to leave work… such as with a major disease that will eventually cause your death. If you have an option, I would drop the coverage through work (unless it is 100% free) and pick up independent coverage.
In fact, my two cents, is that in an ideal situation you might consider TWO term insurance coverages. My spouse and I have 10 year term, at 200,000 and 30 year term at 500,000. The assumption is that the 10 year term will see us through paying off the mortgage, the end of life costs such as the funeral, and allowing some time off work. The 500,000 continues on past the point that this term is up, lasting until we are 65. We base our retirement on plans for income from both of us. Some of which lower when one of us dies, such as social security. The second policy is to cover that economic loss for the spouse. (based on a loss of about 500 per month from 65 – 95 then inflation considered). As we get closer to the expiration age on the policy, the less likely the partner is to need it because we will have both been around long enough to supplement the retirement fund ourselves.
We pay more than most at about 160 per month for insurance right now and that will drop to 120 in 8 years when the first policy expires. It would have been a little bit cheaper to get a joint first-to-die policy rather than individual policies but the thinking is that if one of us dies early, the other will still want to have good life insurance for their next partner. 😉
That’s a really important consideration that I hadn’t made! I’m actually expecting some other quotes this week, and I have a few more weeks to solidify things for open enrollment. I will, of course, keep the free (complimentary? included?) coverage from my district and my pension. But I will look into my outside options. Thank you for the insight!