I was once a young invincible. For the early part of my 20s, I arrogantly skipped health insurance and routine medical tests because I knew I was going to live forever.
Much has changed. I’m still enjoying the last year of my 20s, but with a wife and a 17-month-old child, I no longer feel indestructible. I still ache, for instance, from a kick to the ribs during a casual soccer game a couple of weeks ago; and it’s impossible to hide each morning from the grating reality that the top of my head carries less hair than it did before.
As you intertwine your life with another’s, you generally picture the positives: a lifelong partnership and family. You imagine all that you’ll experience together. You don’t quite realize, or at least I didn’t at first, that you slowly become dependent on your partner to afford your shared life.
Which is why I found a recent survey from Bankrate to be troubling: It found that 37% of parents with children under the age of 18 do not have life insurance. And among those who do, almost half carry policies with protection of less than $100,000 — barely more than two years of median household income.
Moreover, it’s not just an affordability problem: More than a quarter of those earning more than $75,000 don’t have coverage.
“This is a tough topic to talk about,” says Bankrate’s Doug Whiteman. “Life insurance is a reminder that we are mortal and don’t know when our time will be up.”
Of course, purchasing life insurance is perhaps the last thing on the minds of new parents — even in our least sleep-deprived moments, my wife and I certainly weren’t thinking about how much coverage we needed and what type. But this is a discussion you need to have with your family.
How Much Coverage?
Figuring out how large a policy you’ll need depends on a number of factors. As MONEY’s Kerri Anne Renzulli points out here, you’ll need to have a solid grasp on your debt, monthly spending, monthly savings, and your long-term savings goals before you know how much insurance to purchase. Ideally, your policy should cover immediate items like funeral costs as well as longer-term goals like college tuition, replacing future earnings you would have accrued.
Dallas-based financial coach and planner Katie Brewer recommends selecting a 20- to 30-year term policy that covers about 10 times your earnings. The calculator from Life Happens, which asks users to input future income needs, college expenses and debt, can help you gain a sense of how much you’ll need.
Chances are that you can find low-cost insurance options through your employer; you can also check out Mint.com’s life insurance calculator for more coverage selections. You can also hire a fee-only certified planner to walk you through your assumptions and calculations and help you find adequate coverage.
There are any number of financial obstacles you’ll incur throughout your lives that will be the source of stress and worry. How will you afford retirement in this low-rate world? Send your two kids to a good college? Withstand an unexpected career setback? In truth, these concerns can only be addressed with hard work, financial discipline, and a little luck.
But life insurance is different. It’s a relatively simple, pretty inexpensive mechanism to ensure that your loved ones needn’t worry for cash should something happen to you.
Not that anything ever will.