I started writing this and found that the post became enormous. So here is part 1 of the life insurance post. Tomorrow I will have part 2.
If you ever want to have a really uncomfortable conversation with your significant other, start talking about life insurance and what makes sense for the two of you. Of course, life insurance is an important element of financial security for many (but certainly not all) of us, so it’s a conversation you need to have, but it’s a really morbid one. Plus, you’ll find out what type of life your spouse would want after you’re pushing daises which is kind of weird in its own right.
For Foxy Lady and me, we certainly didn’t think about life insurance before we got married, and really didn’t give it a lot of consideration until we had the little guys. As a single person, I don’t really think life insurance makes sense—if you die your family and friends will be sad, but you really aren’t leaving anyone in the financial “lurch”. Your funeral and final expenses might cost a few thousand dollars, but that’s really it. Your 401k and other assets should more than cover that.
Once you get married (or act like you’re married, such as living together and sharing expenses), but before you have kids, the equation starts to change. If both of you are working, you’re going to gravitate to a dual-income lifestyle. If one of you unexpectedly died it would be a sad event, and now the surviving spouse would have to cope with life on a single income instead of the double income. Maybe that’s a big deal, and maybe it isn’t. This is important especially if the surviving spouse was making less money than the one who died. This is a bit of a judgment call.
For Foxy Lady and me, when we were at this stage of our lives we had the attitude that the surviving spouse would keep working and just kind of continue life like before we were married. Again, it would be very tragic and I don’t mean to diminish that. Foxy Lady is the love of my life and my life partner, and if anything happened to her, emotionally I would be crushed. But from a financial perspective, before we had kids, I would have been fine, so it wasn’t something that justified us getting life insurance.
And then the kids came, and this is where the equation really changed for us. Now if one of us passed away, we wouldn’t just be leaving the grieving spouse to take care of him/herself, but we’d be leaving two little guys whose employment prospects wouldn’t be all that good for at least a couple decades. All joking aside, losing a spouse sans kids would be a bump in the road financially, but one we could probably overcome. After all, we had jobs and supported ourselves before we got married so why couldn’t we do it again? But with kids, your expenses are higher and there’s just a greater sense of responsibility for those you’re leaving behind. At least that’s how we felt. So after we had Lil’ Fox we got life insurance.
What do you want life insurance to do for you?
The first thing you need to do is figure out what you want life insurance to accomplish; this is where you start having those uncomfortable conversations with your spouse about what they’d do after you died. I figured that Foxy Lady would mourn my loss, wearing all black and lamenting her widowhood until she joined me in heaven. She surprised me when she said that she’d move on. After putting some serious thought into it, she said she would want to remarry so the boys would have a father figure. For her, life insurance would serve as a bridge between my death and her moving on with her life. Assuming that she married a good guy with a decent job (see how it gets uncomfortable? I’m starting to think about the guy she’ll be with after I’m dead), she’d be fine after a few years.
For me it was different. I grew up with a stepmother and know firsthand how challenging that type of relationship can be, for both the adults and the children. When Foxy Lady and I imagined life if she passed away, I wanted to be able to raise Lil’ Fox (at the time Mini Fox hadn’t arrived yet) without the expectation that I would find someone to try to fill in that motherly role, both in terms of child-rearing and income. Financially, that meant that I needed to be prepared to become a single income family.
So for me, I “needed” more life insurance for Foxy Lady than she needed for me just because of how we would move on in the event the other one passed away. But that balanced out because at the time I was making more with my job than she was with hers. My higher income meant I needed less insurance for her, but my desire not to remarry meant I needed more—so that balanced out. Her lower income meant she needed more insurance for me, but her desire to find another spouse over time meant she needed less—again balancing out. Really, really morbid, and I think this is why conversations about life insurance are so hard. Seriously, who wants to think about these things? But if you want to be responsible to those you might leave behind, you have to.
So there you have it, part 1. Tomorrow I’ll post part 2 on how we decided which kind of policy to get and how much. See you then.