Recently I was nearly bitten by a rattlesnake and then I caught covid. I realized I may be one flap of a butterfly’s wings away from a major catastrophe. As a man and as a provider, the biggest fear I have is dying young and being unable to take care of my wife and aging parents. It turns out, there is a solution out there to protect us from unexpected events. It’s called insurance. Being aware of its existence for just about my whole life I had convinced myself that I really didn’t need it.

I grew up in a retail bank branch and spent 10 years of my early career selling financial products. I have never been a fan of insurance, it amounts to what is essentially an extra tax on income.

I guess when I was younger and formed these opinions about insurance, I didn’t have much to protect, but over the last 15 years my little starter home has tripled in value and my income has grown significantly.

After realizing that the fear of not being able to provide for my family if I died early was probably the biggest thing that kept me up at night, I decided to do something about it and get some dang life insurance. There are two primary categories of life insurance.

Cheap Stuff

Term Life

Term life insurance is cheap. It depends on your age and health but getting a quote online is easy. Dave Ramsey recommends 15-20 year terms rather than 10 year or 30 year. I went with a 20 year policy as I already have two small 15 year policies which are about halfway done.

The way term life works is like this: you get a rate, you pay it every month for the term, if you die, your family gets the face value of the policy. Once the term is up, you get a few years where you can extend it, I guess in case you’re dying and haven’t died yet, and can’t get new coverage.. but it is expensive.

Experts recommend getting 10-12x your annual income in life insurance. Some calculators I used recommended about 20x. I think you’d need to consider your debts, goals, and liabilities, if you have kids, that may drastically change how much life insurance you deem appropriate.

I bought a 20 year policy for 500k that did not require a health screening. I’m paying $37 per month. Then I found another carrier through Costco, and bought a second 20 year, $500,000 policy for $24 per month.

I think the best way to deploy life insurance coverage is to buy a few policies from different highly rated carriers and ladder them. Every 3-5 years, re-assess, and add coverage so that you never find yourself with the majority of your coverage expiring all at once.

Choosing A Term:

You can buy term life for terms as short as 5 years and as long as 40 years, however, the longer the term, the more expensive the policy. Dave Ramsey recommends 15-20 year policies, so I decided to listen to his advice since Dave Ramsey is an old school guy that hates wasting money.

AD&D – An Even Cheaper Option With Some Catches

Accidental Death and Dismemberment is a very cheap insurance product, and it’s cheap because it doesn’t cover any health related deaths. This kind of insurance only protects you from death by accidents.

If you’re under 44 years old, death by accident is the number 1 killer, yet most experts don’t see AD&D as a replacement for life insurance. Most policies have a lot of exclusions, and reduced payouts for dismemberment – meaning the insured didn’t die but just lost a limb.

I was able to get a $100,000 policy for $10 bucks a month through my local credit union’s affiliate, TruStage, but after doing more research I may cancel it. I initially liked it once I found out that at my age I’m most likely to die in an accident and saw it as a way to cheaply boost how much coverage I have, but after doing more research it seems most recommend skipping AD&D and just sticking to term life which covers death by accidents and illnesses.

The policy I purchased increases by 5% per year over the first 10 years without any increase in premium. That means my $100,000 in coverage will climb to $150,000. Some advantages to AD&D is that since heath issues aren’t covered, health isn’t a factor in the pricing. There’s no physical, and the coverage doesn’t have a set term, it lasts until the age of 70 and even after that you can continue coverage. Another oddity of AD&D is the policy amount is often double or triple the face value if the insured dies in a public transportation accident, such as an airplane, taxi, or ferry. AD&D might be good for someone who flies and travels a lot or who works in an accident prone job like construction, manufacturing or farming. It also might be good for someone who has serious chronic health issues and can’t qualify for traditional life insurance but wants some coverage.

Pricy Stuff

Whole Life and Universal Life

Whole Life and Universal Life are life insurance policies that last your whole life. They provide a cash value, and you can even borrow against them at a set rate. The problem with these policies is that 20 years ago they may have made sense, but these days, we can get better returns for less cost using an S&P index fund, or other high yield savings, without the cost of the insurance component.

Most experts do not recommend paying for these policies due to the opportunity cost of using the money by investing it into the stock market.

I skipped these kinds of policies.

Potentially Pricey- Paycheck Protection – Short Term and Long Term Disability Insurance:

In the State of California, I pay for SDI or State Disability Insurance through my payroll deductions. I assumed this was all I needed. It turns out SDI will cover me for up to 52 weeks, but only for a portion of my income. The rest would need to be made up by depleting my sick time and vacation time.

Worse, if the disability prevented me from working for longer than 1 year I could go on long term disability and potentially start drawing my pension at a reduced rate. Most people don’t have a pension, and would end up hoping to get on SSI.

Long Term Disability coverage protects a percentage of your pay for a long period of time, and can protect you up to retirement age. Pricing depends on the amount of your coverage, the exclusion period or the amount of time you’re disabled before coverage kicks in, and the amount of time you’ll be paid.

Dave Ramsey recommends getting long term disability coverage for as long as possible and in an amount that covers 60-70% of your take home (after tax) pay. He recommends getting at least 5 years of payments, but if it makes sense, you may choose a longer period. I chose up to the age of 65. This makes it possible for me to have a little extra income until I can draw social security.

Protecting your paycheck every month typically costs 1% to 5% of your income. That’s steep, especially on the higher end. After taking to someone at meetbreeze.com, I learned that since I am already covered by my pension plan, I’m able to cover the difference of what my existing protection would cover for less than $50 a month. This is Do you need life or disability insurance?far less than 1% of my income.

The fact that I aready have long term disability through work saved me a bundle, but the other factor that really lowered my costs was that in California, SDI lasts up to 52 weeks. By setting my exclusionary period to 52 weeks, I was able to save about $360 per year. This is because the carrier won’t have to pay up unless something happens to me that is so bad, I am out of work for an entire year. The default period for most people is a mere 90 days. There are a lot of things that can put a person put of work for 90 days, but a fair fewer that should take over a year to recover from.

By combining these protections together I’m able to protect nearly 100% of my existing pay until the age of 65.

Do you need life or disability insurance?

It depends on your situation, but at the very least I recommend sitting down and looking at what the stats are and what the math is for your unique situation. Things to consider are how much debt, cash, and investments you have as well as the health of the people in your family who share your genes and lifestyle. Also spend some time to find out what your benefits are at work and how much protection you have baked in.

If you have kids, a spouse, or a paycheck to protect you may need to consider getting some coverage. A million dollars of term life coverage is about half of what I pay for internet access. It seems crazy not to get some when you put it in perspective, especially when it buys not just protection but peace of mind.

Honestly, I feel as if a deep, psychological and primal fear has been eased, a heavy weight lifted from my shoulders. I know that if I become chronically ill or die within the next 20 years, my wife won’t have to move, she won’t have to re-marry for financial reasons, and she won’t have to go back to work without taking time to heal. This is a really big deal for me. I’ve seen first hand what the early death of a spouse can do to a family’s sense of security and it is devastating and it’s even more critical today when most people’s living costs require two incomes to just tread water.

Even more relieving is knowing that if I do somehow become disabled, I’ll still have an income and still be able to take care of things like I always do. I have seen first hand when both partners are sick and one of them who is sightly less ill has to keep pushing to keep the health insurance turned on. It’s a brutal and relentless grind that puts massive pressure on someone who’s health is failing.

Every night since doing this, I fall asleep knowing I’m protected from the two of the worst things that can happen to me in life. As we get older, we feel tired when we wake up, we get bumps, bruises and aches and pains. We wonder if this is going to be the thing that turns into cancer, a surgery, or some other chronic illness. I don’t know how to put a price on not having to worry about the financial implications of getting older. It’s literally priceless. I never expected to be able to resolve these concerns in this system and of course while I do care about my health, and want to live for as long and as well as possible, I have spent a few bucks to separate my financial situation from my physical health and wellbeing.

Overall I highly recommend at the very least educating yourself about the tools available and forming a realistic picture of what the odds are and what resources you’d need to rely on and then if you don’t like what you learn, get some coverage. You’ll be glad you did.