A few years back, my husband and I realized we needed more insurance coverage than just our renter’s insurance and our car insurance, we needed a life insurance policy in case of an unexpected and unfortunate event: death. We had been married for a few years, were still young, and discussed how our lives would be affected if one of us were to die unexpectedly. We had already been living on a combined income and the thought of losing half of an income due to death made us uneasy. We also worried that we wouldn’t be able to afford the cost of funeral preparations in such an instance.

Our renter’s insurance would replace any items lost in a fire or natural disaster, but only covered medical expenses, not funeral arrangements or a lump sum payout at the time of death. And our car insurance would only cover death in the case of a car accident. But what if one of us died crossing the street or falling from a ladder?

We researched both permanent life insurance and term life insurance. A permanent life insurance policy has a cash value, a small portion of the payments are invested. A term life insurance policy has no cash value, but the payments are usually much lower increasing in increments over time. Because we were young, our late twenties, our premiums for either type of insurance plan would be low. However, we had a budget of how much we could spend on a policy that would (hopefully) exist for many years to come.

After weighing the benefits of premium life and term life, we decided to purchase a term life policy for $100,000. This amount felt like just enough to help pay for an unhappy change of life event, cover any funeral preparations, and the lost salary for a short period of time allowing the surviving spouse to recover both emotionally and financially. We also chose this type of plan because we felt that as we became more financially secure in our late 40′s and 50′s, we may not need a life insurance policy. If we held onto our policy for 15 to 20 years, we would only have paid in about $12,000. This seemed like a good financial choice: pay $12,000 and in the event of an unfortunate death, one of us would receive $100,000.

What really made me choose against purchasing a permanent life policy was that when I was younger, I purchased a policy that I eventually cashed out. Feeling as if I might be tempted to repeat my actions, I decided that a term policy would keep it simple and safe. Neither of us would be able to convince the other to cash it out for a trip to the Bahamas, a flat screen TV, or a new car.

On our term policy, our payments would be based on our current health and age. I qualified for the lowest payment bracket, $10 a month. However, my husband, being a smoker, was viewed as a health risk. His monthly payment was more than three times mine, $33 a month! As shocking as the price difference was, we still felt it was a good option. For less than $500 a year, we can rest assured that in case of an unfortunate event, the other person will have some peace of mind knowing that they can take their time to recuperate and resume their lives without sinking into financial ruin.

Have you purchased a life insurance policy for your family? Which policy did you select and why?

My husband and I purchased term life insurance a few years back with the idea that if either one of us kicked the bucket, so to say, earlier than anticipated, we wouldn’t be financially decimated by that experience. (Emotionally is another topic, obviously!) Our policy was inexpensive, about $40 a month, for a policy worth $100,000 in case of death and it covers us up to the age of 80. Term life insurance policies have no cash value, so there would be no way for us to cash it out. When we signed our policy, this was best option for our situation since we still weren’t financially responsible at the time and couldn’t afford the premiums on a whole life policy.

Last year, we added a travel accident rider that is worth twice the amount of our original policy. This covers car accidents, plane accidents, pretty much any accident where one is physically moving to and from a place. This week, my husband had to travel to a funeral. As I was booking his flight on Monday, I realized I had forgotten to pay the annual premium on this rider! Now, I’m not wishing any ill-will on my husband (I love him!), but the idea of him traveling clear across the country and NOT having this additional policy in place made me nervous. As he was traipsing across the country on a total of 4 plane rides then renting a car and driving on snow-covered roads, I knew we had to remedy this before he left. With a quick call, we made our payment and settled my uneasy mind.Yes, I know. This sounds very shallow, wanting to make sure I eek out every dime possible in case of death. But that’s what life insurance policies are for!

A few years ago, National Geographic posted a chart showing all the possible and probable ways to die. With death being a 100% sure thing at some point in one’s life, it was an interesting tidbit of information. If you look below, you’ll notice heart disease is the primary killer among humans followed by cancer, but motor vehicle accidents are 4th! Plane accidents involving deaths are pretty low, coming in 13th, just after bicycle accidents. Funny thing, I’m not so sure my rider covers biking, an activity I do frequently. Take a look for yourself:

Ways to Go from National Geographic and 10 Minute Math

Do you have a life insurance policy that covers your spouse? What about travel accident insurance? If you don’t have a policy, what reasons made you decide to forgo one? Is this just a morbid topic that you rarely discuss with your loved ones?