Question: I'm 38, my wife is 33. Our only debt currently is a $350/month car payment and $120/month student loan payment. We currently rent but are looking for a house and are thinking of starting a family. We are both employed full-time. Should we have life insurance? What type of policy should we have (30-yr. level term)? And the BIG question: how much? I'm concerned that insurance companies are incentivized to tell me I need more life insurance than I do. Could you recommend a reliable and unbiased source or tool for estimating how much life insurance you actually need? I also have life insurance through my employer (at no cost to me). Should I consider this when estimating how much life insurance I need since if I lose my job, I lose this life insurance as well? Thanks, Brian, Boston, MA
Answer: Life insurance is a must-have financial product for any couple with children. Although the reasoning is different, I also think that most couples without children should have life insurance on each other.
The best policy is probably term life, a low-cost policy that offers a pure death benefit. I like the idea of having some insurance outside work, though you're right to take advantage of the option at your job.
Here's my reasoning. The life insurance policy gives your wife a financial buffer if you die--and vice versa. It gives her the money to grieve without worrying about making the rent and the utility bill.
Of course, people deal with grief in different ways. It isn't always easy to know in advance. She has a job, and the best therapy might be to keep working full-time. She might want to work only part-time or even stop working for awhile. The same goes for you if she dies. The life insurance policy gives you and her choice to cope with tragedy without the stress of making a living, at least for a period of time.
If you agree, the policy doesn't need to be very big. You might decide to buy enough insurance to cover one year's worth of anticipated expenses. You might decide on more or less, but that's a good starting point for your discussion. You can figure it out on your own and then go online and shop for term insurance with highly rated companies. Two places to start your web search are insweb.com and insure.com.