The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

July 24, 2009

Life Insurance Part I

Filed under: Excel fun, Personal Finance — Tags: , — thebalancedspreadsheet @ 11:38 am

Life Insurance is an important step in the financial planning process.  There are many questions to ask when purchasing life insurance, such as how much insurance to get, what kind of insurance to purchase, how long do I need insurance, and most importantly do I even need life insurance?  We will try to tackle those questions today and tomorrow show you the simulations I ran when my wife and I purchased life insurance for me.

Do you need Life Insurance?  It all depends on your situation, but if no one depends on you for financial support then you probably are ok without it.  Also if you are older, the kids have moved out on their own, and you have built wealth, you can probably pass as well.  However, if you are in any other situation, I think life insurance is a MUST for your family in case of death.

How much insurance do I need?  This is the topic of great debate.  It really just depends on what you are going to do with the proceeds.  If you are trying to pay for just the funeral and other misc expenses, a small $25,000-$50,000 policy is fine for you.  Some people just want to cover their mortgage and other debt, while others want the proceeds to cover lost income.  A good rule of thumb when covering lost income is to get insured for about 8 to 10 times your income level.  But not too much more then that, because if you are insured for any more you might be better off dead then alive, and you will have to start sleeping with one eye open. 😉

What kind of insurance do I need? There are two basic kinds of life insurance.  Term and Whole life.  Term insurance is coverage for a specific period of time, usually in 5 year increments, at a fixed annual premium as opposed to whole life where the policy is in effect for your whole life as long as the annual premiums are paid.  Whole life policies also have an investing part in the plan usually known as the cash value.  The cash value is a dollar amount that builds over time and can be redeemed when the policy is cancelled.

How long do I need insurance?  This only applies to term insurance because with whole life you are covered your whole life.  You need coverage as long as someone will depend on your wealth.  We decided to go with a 30 year term.  We are predicting by this time, any children that we will have will be out of the house if we do a good job of parenting 🙂 . This also gives us plenty of time to build wealth so we will be self-insured after the term expires, making life insurance unnecessary. 

Decision-After deciding that we needed about 30 years of coverage for me, we then decided that on $500,000 worth of coverage would be adequate for now.  After running some online quotes at Zander Insurance and Life we came up with the following quotes:



Annual Price

Per month




Term life 30 yr



Return of Premium 30 yr **



**Return of premium is a term policy that returns all premiums if at the end of the term the policy is not redeemed.

We ended up going with the regular 30 year term at $375 annual premium.  Tomorrow we will go why that was the best deal financially in the long term and not just because of the price.



  1. Here is another view of whole life vs. term life

    Comment by ysdata — July 24, 2009 @ 7:54 pm

  2. […] topic is Term Life vs. Whole Life insurance.  I wrote back in July about life insurance and compared term vs. whole  and wrote about my decision to go with Term.  I feel that term is […]

    Pingback by Media Monday: Term vs. Whole Life « The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice — May 24, 2010 @ 7:34 am

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