Why We’re Not Buying Life Insurance (Yet)

Corey —  November 4, 2009 — 6 Comments

       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.

Our Situation

       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!

Corey

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Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.

6 responses to Why We’re Not Buying Life Insurance (Yet)

  1. My wife and I followed a similar course of action when we were married – we were both professionals and had no outstanding debts other than our mortgage, which the surviving spouse would have been able to manage on his/her salary. Our situation is different now that we have a newborn.

  2. Thanks for taking the time to comment, Patrick! It’s easy to get insurance later when you actually need it. I just don’t see the point in paying for it when you don’t need it. We’ll definitely be getting it as soon as we know kids are on the way though (not after we have them).

  3. Hi Paul, I really like the info you have on your site. My background is in engineering but I am making a transition into financial planning (currently waiting somewhat anxiously for CFP(r) results results…) and I think our views on the planning process and industry are fairly aligned. I know this is an old posting but I have one comment I’d like to add. I am in a similar situation, married, no kids, no large debts, etc. but I chose to buy life insurance. For about $250/yr (each) we are both insured for 500k. The reason we did this is to guarantee that we will have insurance if/when we decide to have children or otherwise require it. We felt that paying the premiums removed the risk that one of us might be uninsurable due to an unforeseen health issue. This is definitely not the best path for everyone, but for people who are more conservative/risk-adverse or perhaps have a family history of health issues occurring at a young age it may be something to consider.

  4. Thanks for commenting, Mark! You do bring up a good point. Getting life insurance early is certainly something you should keep in mind if there’s a family history of health problems at a young age or if you’re just worried about your ability to get coverage in the future. This is why it’s important to meet with an unbiased advisor. An article on the Internet can’t cover all possible scenarios and provide advice that based on your unique situation. Hope you passed the exam!

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