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A Time to Challenge Cookie Cutter Financial Advice

by Shawanda Greene

Post image for A Time to Challenge Cookie Cutter Financial Advice

Now that I’m back from vacation, I’ve been pondering a blog post that’ll knock your socks off. The financial argument I’m about to put to you is profound, earth shattering, mind blowing even. It is radical. I might go so far to say that it’s soul shifting.

Let’s talk about life insurance.

Wait! Don’t leave.┬áThis is good stuff. Just hear me out.

I’m not going to bore you with complex life expectancy data from actuarial tables. Or get into the differences among term, whole, variable, and universal life insurance policies. I can’t. I’ve done next to no research on this topic. I trust you have the good sense to do it yourself should you consider what I’m suggesting.

There are occasions where I have no choice but to challenge standard financial advice. If you’ve read a few personal finance blogs, watched the Suze Orman Show, listened to a Dave Ramsey podcast, or browsed through Money Magazine, then you’ve likely been advised to pass on life insurance if no one depends on your income.

I don’t have a term life insurance policy for precisely that reason. Plus, I figure if I’m dead I’ve got my own problems to worry about. The living can figure out how to feed themselves. I’m joking…kinda.

But seriously, I believe the decision to buy life insurance deserves more thought. My closest friend was diagnosed with breast cancer when she was 27 years old. Shortly afterwards she suggested I obtain life insurance because a cancer diagnosis could severely limit, or eliminate, my chances of obtaining non-employer provided life insurance. I disregarded this suggestion as pure foolishness because I wasn’t married, I didn’t have any children, and there was no one else who’d hurt financially if I was to leave here.

Five years later, another close friend is diagnosed with soft tissue sarcoma at the ripe old age of 37. As far as I knew, both of my friends were healthy. Now, I’m thinking. What if I have children? What if I get married? What if I’m stricken with a major illness that’d render me uninsurable before I get married…before I have children? Term life insurance isn’t that expensive for a young, healthy individual. Could I spare a few dollars to secure the financial futures of my nonexistent husband and offspring?

But enough about me. If you’re planning on getting married or having children, do you think it’s worth it to jump the gun and purchase life insurance in anticipation of these major life events? If you decide to get the insurance, your risks are you’ll have wasted money on an unnecessary financial instrument when you die an old, ashy, childless, spinster. If you decide against it, your decision could cost your future family their financial security.

What are your thoughts?

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{ 12 comments… read them below or add one }

NCN September 9, 2009 at 11:18 PM

I’ve had term life insurance since I moved out of my parents’ home. I bought it because it was inexpensive and the rate quotes are usually lower for younger folks. I think it’s a good idea to buy some term, no matter your situation, just to make things easier for those who are “left behind” when you pass. I think I bought a 100K policy when I was 19. It was 20 yr level term. Once I got married (and again when we had kids) I purchased other policies, for larger amounts.
-NCN

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Carla September 10, 2009 at 12:12 AM

Life insurance is not something I want to think about right now. I currently have a policy from my now former employer and was thinking about getting a separate policy. An agent told me I have to wait to see what type of MS I have before they would move forward with applying and either way, my rates will me really high. Ill pass for now.

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Tia September 10, 2009 at 3:10 PM

I have life insurance with my job, but I purchased separate life insurance after taking a personal finance class during my MBA program. While there is a lot of “insurance” policies out there, life insurance is one that I think is a must. I have a five year old, so I wanted to make sure that he was taken care of if something happened to me. (I’m only 28.) The stories you shared make a compelling argument to get insurance while you are young instead of waiting. Let’s not forgot my story about cosigning, my family member has me as the beneficiary of her policy to free me from her debt. Its like a business plan or a life plan, you should always tweak it to match your current lifestyle.

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Torrey September 10, 2009 at 3:39 PM

I did not have a term life insurance until I got married about three years ago. The one thing I do not have are the specific insurance policies (i.e. cancer, heart attack, etc).

I really do not think I would have life insurance if I was single with no dependents, though. If I did, it would just be enough to bury me if I died, although I guess savings could be used for that as well.

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Shawanda Greene September 15, 2009 at 11:25 PM

I’ve never seen a cancer or heart attack insurance policy, but I’ve heard of them and they sound like garbage. Standard health insurance should cover these ailments.

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Donna Freedman September 11, 2009 at 1:49 PM

I am divorced and my only child, a 31-year-old daughter, is on disability following a neurological illness. A few years ago I got life insurance even though I was financially very pinched, for the same reason you cited: Get it now, while I’m still in my 40s and have no health problems.
I don’t know what kind of estate I will be leaving her — but I do know that there will be a chunk of insurance money that will help her with a big-ticket item such as a house or an investment plan so she will not be impoverished later in life.

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Shawanda Greene September 15, 2009 at 11:38 PM

That’s very thoughtful of you. Looking out for your daughter like that. Even after you’re independently wealth, it seems like a good idea to consider whether you should drop life insurance coverage. You still might want to transfer the risk to your insurance company. The concept is similar to me choosing to carry insurance on my car even though I own it outright. I rather pay the insurance company $63 a month to assume the financial risk of replacing my car than to go without auto insurance and risk losing the value of my car in the event of an accident.

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My Journey September 28, 2009 at 3:47 PM

Donna,

Did you purchase term or whole life? If you purchased term like many of the pundits proclaim as the only choice, there is likely not to be a “chunk of incusrance money.”

Lets say you are 40, and you bought 20 year term then that brings you to 60 and her at 51. Odds say you aren’t going to pass away prior to 60, yet she still needs that money, depending on the neurological illness.

Just some thoughts.

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Goran September 11, 2009 at 4:46 PM

This is excellent advice!

First I’d like to do the numbers. It should be possible to calculate the yearly cost of signing a life insurance now against what we would save up getting it later, minus the higher premium.

It’s also about genes. Cancer has a strong genetic factor. Do you have any diseases running in your family? If you don’t then I wouldn’t worry too much. Not unless you are, say, confronted with carcinogens every day at work, smoke or live in a radon house.

Then again it’s different in our country. 90% of our working population has a life insurance through our employer. I just checked with the university where I work and I’m covered. Private life insurances are better, but for me personally it’s difficult to justify the extra cost.

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mapgirl September 11, 2009 at 5:12 PM

hm. I didn’t realize the medical component. That’s a very good idea. I carry more life insurance than *I* need because my sibling would be stuck holding the back taking care of my undersaved parents in their retirement. So I have extra life insurance right w/my parents as beneficiaries.

Is your mom’s retirement settled yet? Right now the market is crazy so if she’s not set for retirement, you should factor that into your coverage amount too.

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Shawanda Greene September 15, 2009 at 11:29 PM

You pose a valid question. If I’m financially unable to provide for my mother, then she’ll rely on Social Security. Although she’s not technically dependent on me, I don’t want her scraping by on government subsidies during her golden years if I’m not around to take of her.

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Kacie February 9, 2012 at 1:41 PM

My husband and I each have term policies, but we're married and have two kids. Even if we didn't have kids, I think it would be reasonable to get a cheap term policy, because like your friend noted, it can be hard to get insurance if you have a medical condition pop up.

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