Our Life Insurance Plan

Chris Huntley just launched a huge life insurance movement called the Whole Life Insurance Rebellion.  Whole Life is generally pushed as an investment, but it is not a really good one…

As I have mentioned before, Mr. BFS and I purchased a 10 year term life insurance policy for each of us after we decided to both go self-employed.  The reasoning was that we’d save enough in 10 years to be self-insured by the end of the policies.  Or in the unlikely event that we decided to have a child, we would want to revisit the policies anyway.

The Whole Life Option

We did look into a whole life insurance plan, but the premiums were 7 times higher.  It seemed to be like investing in a single company with A LOT of money with the hope of around 4% returns over 40+ years.  In 40+ years, I would hope any children we had would be taking care of themselves and I could make better returns with our Roth IRA’s or our SEP IRA.  Higher premiums, no diversification, and worse investments returns than I was already getting with retirement accounts – NOPE.

Our Current Plan

Our current term life insurance policies cost us $32 total per month.  It’s $14 for me and $16 for Mr. BFS.  The policies are for $250,000 each in case of accidental death.  It seems to only cover $37,500 each if we die from natural causes.  Even though I didn’t exactly realize this little point before, this sort of coverage suits us right now since $37,500 would cover our funeral costs and $250,000 would cover the funeral and could even pay off our current mortgage.  Or one of us could live off of $250,000 (or what’s left after the government takes its cut) for at least 4 years even if we completely stopped working.

Contemplating Our Options

As we get a little older, I realize that we may need to look into our options.  If we decide to have a kid, we’ll need to raise our coverage.  I’d want to make sure the surviving spouse has enough to live on with our kid for 2 years without working AND have at least a little to cover some of the larger kid expenses that will pop up like braces, a used car when they learn to drive, and even a little help with college.

If decide to stay kid-free, we still only have 5 years left of this plan.  We’re probably not going to be so well off to be self-insured as I thought, although we do keep healthy savings just in case.  I think another 10-20 year policy for each of us could do the trick though.

What do you think?  Term life or whole life?

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