Insurance is a tricky topic. On one hand, I really appreciate the fact that our insurance is there for us should I or my spouse get sick, in a car accident, or have something happen to our home.
On the other hand, I really hate the fact that our monthly bills for all this coverage add up to well over $500. Over $500, every month, when I can’t remember the last time either one of us went to the doctor. I haven’t had an incident with the car since I was in college. And nothing has ever happened to our home. (And yes — knock on wood!)
I’m grateful that nothing has happened in the time that we’ve been paying for all the insurance we need to hold. But we did decide that we weren’t going to increase the amount of insurance that we have. For that reason, we make the conscious decision to not purchase life insurance.
My Problem with Life Insurance
In my experience, optional insurance — meaning insurance coverage you aren’t required to hold by law — comes with sleazy salespeople who aren’t interested in providing you with value and a product that you need. They’d rather push the package the offers them the best commission, not one that is suited to your unique situation.
Of course, this is probably really unfair assessment of the insurance industry. But it was my experience, and it irritated me to no end that someone who called themselves a qualified professional
encouraged tried to scare us into buying whole life insurance when we clearly did not need a product like that.
I’ve also been frustrated by the amount of content out there that says when you hit a life milestone like getting married or buying a home, one of the practical issues you need to handle is purchasing life insurance. While this may be true for some Millennials, it’s not the case for everyone!
Why We Passed on Life Insurance
The bottom line is that you only need life insurance if someone else depends on the income you make to survive. This means if you have kids, yes, you probably do want to look into a life insurance policy because those little guys completely depend on you to provide for them.
But my spouse and I aren’t interested in having kids. Here are the other reasons we decided not to bother with life insurance:
- We both work and make roughly the same amount. We don’t rely financially on one or the other.
- We don’t have student loan debt or credit card debt that would become a serious burden if one of us were to pass away.
- We do own a home, complete with mortgage — but the payment is manageable and we also have lots of equity in the home.
- We have money in the bank and in investments that would pass to the survivor.
Additionally, my spouse does receive a small amount of life insurance coverage for us via his employer. It’s only a $20,000 policy on each of us, but that would be enough to cover immediate needs in case the worst were to happen.
Do Millennials Really Need Life Insurance?
Yes, I can see where someone could argue that life would be a lot easier (financially!) if something were to happen and the surviving spouse did have life insurance to help make up for the loss of the double income we enjoy right now. But we’ve agreed we’d rather not add to our monthly expenses right now, especially as we could live off one income currently if we had to.
Everyone’s situation is unique and different. If anyone does financially depend on you, then you do need to look into getting some sort of term life insurance policy to protect your loved ones.
Track All Your Accounts With Personal CapitalPersonal Capital lets you see all of your accounts in one convenient place. Sign up now for free.
And if you’re free from debt, don’t have many responsibilities, and are on the same page with your spouse, significant other, or involved family members? Then you can make your own decision on whether or not you need to purchase life insurance.
Chris Holdheide says
Great article Kali, I have to agree with you for the most part in that I use to sell life insurance myself and a lot of it is about the commissions. I even drank the kool aid per say and bought the expensive variable universal life policy.
Then last year I did a review on my policy and decided to revamp it by switching to a 30 year term policy with a higher death benefit and a return on premium rider so if I don’t end up using the policy I can get all the money I paid in minus the cost of the rider or convert it to a paid up policy.
As far as everyone needing life insurance, I don’t think everyone needs it. If you don’t have kids, and you don’t have a whole lot of debt, life insurance isn’t a real big necessity. However in my case it would be to risky with a mortgage, 3 kids, and a business to run.
Kali Hawlk says
Thanks for sharing your experiences and thoughts, Chris! I completely agree that it really depends on how much financial responsibility you’re carrying. We only have the mortgage, but if we had anything else — kids, debt, two variable incomes, etc — we’d definitely look into the appropriate coverage.
I am glad I’m not the only one in this boat. EVERYONE I know that I can think of is one the life insurance kick it seems… I agree there are some circumstances that would warrant it more than others. I can say that I don’t even know what it would cost me as I have not explored it.
But yes I am not married and have no kids so no real incentive to take care of anyone in the event something happened to me. I have a 1.5x salary that would be paid out from my employer. My insurance plan is in my net worth which is currently about 5x my annual salary. I can say I have that comfort in knowing a tragedy would not financially impact my family members. Sure there is the future income loss but I would hope the savings I do have would provide the time and means to figure something else out before the money runs out.
Kali Hawlk says
Right there with you on that thought process, Tim. Sounds like just through your employer you have more than adequate coverage should anything happen.
People definitely need to do their own research based off their own situation to determine whether or not life insurance is necessary. It simply isn’t a requirement for everyone.
We don’t have life insurance, but we have been thinking about it. I think we will wait until we have children though!
Kali Hawlk says
That sounds reasonable. I definitely believe those with children (or planning to have kids) should have some level of coverage so your kids are taken care of financially should you no longer be able to do so.
Kevin H @ Growing Family Benefits says
Insurance purchases are always calculated gambles. Your health and plans for children can change at any time. Buying a policy when you are young and healthy makes things more affordable over time, and makes it easier to show evidence of good health.
Given your circumstances a whole life policy may not have been the right fit. A term life policy might be far more affordable. You mention that your mortgage payment is “manageable” with both incomes. If you lost one income you might not be able to refinance to tap the equity you cited, and might be forced to sell.
Harry Campbell says
Go with term until you can afford to self-insure 🙂
Kali Hawlk says
Sorry Kevin — I meant that our current mortgage is manageable on a single income. We would have never bought our home had the payment been so high we’d need two incomes to handle it.
And this was certainly part of our discussions. Our plan would be to sell the house immediately should something happen to either one of us. With the mortgage being our only financial responsibility, we felt comfortable foregoing life insurance.
Aldo Rancier says
If you don’t have any dependent then you don’t need life insurance. And even when you do, if you are working on your financial independence, term life insurance should be enough. After you have enough in your nest egg to leave your family financially secured, you don’t really need life insurance at all.
Kali Hawlk says
That was our biggest deciding factor — we don’t have kids or want children in the future. With us both making about the same income, neither one of us are more reliant on one than the other and no one else is dependent on us, either.
Kimmy Burgess says
Yes, some people don’t believe in insurance. For them, it is a conditional contract with a promise of potential future financial benefits, in which they don’t believe in. Many others are confused about insurance choices. You will find this is a very common problem. Little understanding with so many choices mske them puzzled.