Last month, I posted several articles about life insurance. Today, I’m going to tell you why my wife and I have decided not to buy life insurance yet.
We’re a young married couple with no kids (and none on the way). We’re both very healthy and both of us have college degrees. Michelle’s is in nursing and mine is in financial planning. The only debt we have is my student loan, which is very manageable and has a low, fixed interest rate of 4%. We also have an adequate emergency fund and we’re saving for a house.
If One of Us Dies
In my articles I’ve advised you to only buy life insurance if you actually need it. You must determine if there is a true risk that needs to be insured. Figuring this out means that you need to ask yourself (and your spouse) what life will look like for the survivor. After going through this process, Michelle and I determined we don’t need life insurance.
If I die, Michelle is fully capable of earning more than enough money to cover her needs. We do not have nor are expecting children, so she would be free to work as much as she needs to. We also do not have a large amount of debt that depends on two incomes. Because of her ability to earn a good income through nursing, Michelle would be able to meet her needs even if I die.
If Michelle dies, I would also be able to manage. I’m in the process of becoming self-employed, and as it is right now I may not earn much money for quite a while. In the short run, we will be depending on Michelle’s income for our needs. But if Michelle were to pass away, we would have enough savings to cover my needs for a year while I start my business. If the business is not providing enough income for my needs at the end of that time, I’d need to find another way to earn some income. Even though the job market is not very bright for financial planning right now, I am comfortable taking the risk that I would have to do something (possibly anything) to earn money while I continue working on my business.
So for us, there’s no financial risk if either one of us passes away prematurely at this time in our life together. That could easily change though if one of these three situations occurred:
We Have Children
Once children are on the way or in the picture, we’ll be looking at this question again. Michelle will likely be at home more to take care of the children, and I’ll be the primary earner. At that point, if either of us were to die the survivor would need some financial help to make things work well. We’ll both get life insurance then.
One of Us Becomes Disabled
If one of us were to become disabled, we’d need life insurance on the non-disabled person to help cover the cost of care in the event of a death. If the disabled person were to die, it would likely improve our financial situation. But if the non-disabled person were to die, the disabled person could need quite a bit of help.
We Take on Debt That Requires Two Incomes
The only way this is likely to happen is through a mortgage, but even then it’s highly unlikely. We’re not going to push ourselves to purchase a house that requires a mortgage payment dependent on two incomes. Our plan is to save up a large enough down payment so we won’t need to take on too large of a mortgage. My ideal is actually to build my own house for cash, but we’re not sure if that’s what we’ll end up doing.
What Should You Do?
My point in sharing our decision is not to tell you that this should be your decision as well if you’re in the same situation as us. The lesson here is that you must look at your own circumstances, ask the right questions, and then determine what you should do. Don’t go buying life insurance just because someone tells you to. Make sure you need it first!