Ways to Save Money

This Husband’s “I Love You Money” Isn’t Just a Romantic Gesture

May 14, 2016
by Susan Shain
Contributor

I’ve always assumed life insurance was:

A) boring

B) unnecessary

C) only for rich people

But I just read a blog post that may have changed my mind.

Dr. Beard, the blogger behind Beards & Money, calls life insurance “money that says ‘I love you’ to your family beyond the grave.”

How Does Life Insurance Work Anyway?

There are two main types of life insurance: term and whole.

With term, you make monthly payments for a set amount of time — often 20 years — and if you die within that period, your beneficiary receives a lump sum of money. If you live past the pre-negotiated term, the insurance company keeps the money.

“I have a 20-year, $500,000 term life insurance policy that I started when I was 30 years old,” Beard explains.

“If I die before I’m 50 years old, my wife will receive half a million dollars, completely tax free,” he says. “We pay less than $30 per month.”

The assumption is in 20 years you’ll have savings and assets that can provide for your family — so term insurance is “an inexpensive way of providing financial security” in the meantime, explains The Motley Fool’s Matthew Frankel.

Whole life insurance, on the other hand, lasts as long as you stay alive, but the premiums are often 10-20 times more expensive than term policies.

Though I encourage you to do your own research, the consensus seems to be term life insurance is the better choice for young people with families.

“Dollar for dollar, term gives you the most protection for your money,” says personal finance website Kiplinger.

“Basically, I’m investing a total of $7,000 over 20 years to absolutely insure that my family is provided for if I die,” Beard explains. “That’s a GREAT deal.”

And he encourages you to do the same.

“If you don’t have a significant net worth, and particularly if you have a family, then you need to stop reading this silly little blog RIGHT NOW and go buy a term life insurance policy,” he writes.

He recommends SelectQuote (and no, that’s not an affiliate link from either of us).  

Why “I Love You Money” is Important

You work hard to provide for your family while you’re alive — and I’m guessing you’d want to do the same if you were to unexpectedly die.

Beard’s wife is a stay-at-home mom, and if he dies, he wants her to keep her job.

“I want her to have the freedom to continue to stay home, and to keep her and my children’s lives moving along as normally as possible,” he writes.

“So I have built a pile of ‘I love you money’ that should allow her to do just that.”

And it’s a pretty decent pile.

If Beard died tomorrow — after factoring in a paid-off house and retirement savingshis wife would have a net worth of $772,000, allowing her to withdraw around $31,000 per year for life.

It might not sound like a lot, but the Beards are already a frugal family, and his hypothetical budget shows, at least financially, her lifestyle wouldn’t really change.

With just $30 a month, $7.50 a week or $1 a day, Beard can rest assured he’s provided for his family.

Even if both you and your partner work outside the home, an unexpected death would drastically reduce your household income. So, in my opinion, life insurance still seems worth it — especially if you have kids.

As Beard says: “I love you, honey. I had enough sense to cut back a latte or two per week so that you could be financially set forever if I should die.”

And really, what’s more romantic than that?

Your Turn: Do you have life insurance?

Susan Shain, senior writer for The Penny Hoarder, is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.

by Susan Shain
Contributor for The Penny Hoarder

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