Life Insurance: What Would Happen if You Died?

Life Insurance What Would Happen if You Died - picture of family cutout cupped in someone's hands

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What a somber topic indeed.  Yet, no matter how uncomfortable the topic may be, the fact remains that we’re all going to die sooner or later.  We don’t know when, or where, or how it will all take place…but it’s inescapable.   In fact, it’s one of the very few guarantees in life.  Since I work in a mortuary, I probably think about death more than any person should.  I help with countless funerals and have written thousands of obituaries.  And unfortunately, some of those obituaries were for people who died far before their time.  As we all know, life can be unfair.   

Don’t Fear the Reaper

This is why I’m glad that I have life insurance.  My husband and I both have term policies worth 250K.  Because we bought our policies in our 20’s, our premiums are dirt cheap.  My monthly premium is around $22 and Greg’s is about $25. Since our policies are “return of premium,” we are due to get back all of the money that we paid in over the thirty-year term.  So, in about the year 2036, we will get the $17,000 back that we paid in.  I think that’s a pretty sweet deal, and it’s like getting super bonus points for not dying.  Cha-ching!

$250,000 is a lot of money, but sometimes I feel like we need to buy additional life insurance.  Insurance companies even make it easy for you these days as you can apply online. However, since our expenses are so low, I’m hesitant to purchase any more coverage.  My gut tells me that $250,000 is the right amount, and that it would be enough for the surviving spouse to take care of our children.

But, am I right?

I was curious whether my assumptions about our life insurance were correct, so I started tinkering around with some online calculators.  Amazingly, Yahoo! thinks that I don’t need any life insurance at all.  However, Bankrate is a little more realistic.  Their online calculator thinks that I need about $300,000 in life insurance.

Things I Need Life Insurance For

Believe me, dying young is not in my master plan.  However, I would much rather be safe than sorry.  Beyond funeral expenses, there are so many life events that I would want my life insurance dollars to help fund.  Some of these are:

  • My daughters’ weddings
  • My daughters’ college tuition
  • Vacations for my husband and children
  • A cash cushion that could help my family weather any financial hardships

If something were to happen to me, I definitely wouldn’t want my family to struggle.  I want them to have enough money to be able to enjoy life in my absence.  Having life insurance brings peace of mind, and it’s one expense that I never mind paying.

How about you guys?  How much life insurance do you have?  How did you determine the right amount for your family?

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  1. I admit to not even having thought about life insurance yet. But other than my cats I no family or dependents at the moment so it’s not real high on my priority list. I hope that my passive income stream as generated by my dividend paying stocks will eventually become a form of life insurance, since my goal is to be able to cover all of my expenses into perpetuity.

    1. I don’t blame you for not getting life insurance if you don’t have kids or dependants. It sounds like you would have enough assets to cover your final expenses anyway.

  2. Life insurance isn’t needed by all. But if you have someone that depends on you financially, then yes it’s needed. We both have policies that are decently priced and went through an online broker to find the best deals. It was painless and pretty easy, aside from the at home nurse who came to take samples.

  3. This post is perfectly timed. My employer offers a modest amount of life insurance, but I think it it’s only enough to cover funeral costs. My husband and I have been thinking about whether/how much life insurance we need, and when we need to buy it. We don’t have kids yet, so we’ll probably wait until we do.

  4. Life insurance is hugely important. I’m curious how you guys arrived at 250k per person. From what I know about you (mortgages, young kids, two incomes), I would have guessed that you would want more. I’m just interested to hear how you envision that money being broken up if it’s needed.

    We have a lot of insurance. We have $1.5 million on me and $1.25 on my wife, both for 30 year terms. I came to these numbers though a pretty detailed analysis that factored in lost income, childcare, mortgage, college costs, as well as social security benefits we might receive. We were pretty surprised by the amounts, but in the end it’s really pretty cheap and our biggest goal is making sure our kids have what they need.

    On a side note, if you’re looking for quotes a great site is They don’t collect any contact information and they don’t actually sell you anything, but they give you really accurate quotes.

    1. When we bought it in our 20’s, we didn’t have kids and we only had the one house that we lived in. I’m not sure how we decided on 250K at the time. I actually think it was suggested by the agent that sold us the insurance!

      A lot has changed since then. We have some liabilities but more than enough assets to cover them if something were to happen.

      We each have a policy through work as well, although I think those policies are only for 20 or 30K.

  5. Stephen @ Simple Economist says:

    Perfect timing for us too. We just got new quotes and new policies last week. After the kiddo we decided it was time to have it in place. The goal is to cancel it before the 20 years due to FI but it is nice right now.

    We switched for a return of premium type policy to a standard level term. We are paying about $16 & 18 a month each for 400k. The other policies were just a few bucks more a month but when we calculated the savings 12 x 20 years we will end up saving $3000+ (using the difference to pay of our house and we didn’t even calc interest earned in that).

  6. I have a crappy policy via my job and a policy my grandfather got me when I was a baby (it’s a variable life kind of thing that he paid for completely at the time and now it is self-sustaining). He was lied to about that product and it pretty much soured him on insurance and the gentleman who sold it to him is no longer allowed to sell insurance in this state.
    We had a child last year and have decided we will continue to self-insure (outside of the above mentioned policies). Some would call us crazy, but we have enough assets that if either one of us passed away the other would be more than fine. Couple that with zero liabilities and it just makes it that much easier of a decision. You can still call me crazy, but that additional $40-$50 a month we would pay for a premium just goes into an investment account instead of to an insurance company. Besides they don’t build those giant insurance office buildings because lots of people are making term life insurance claims, so I will play the odds like they are.

    1. lol, you’re funny. No, I understand. That is the reason that we have relatively low coverage at 250K. We just don’t need any more.

  7. This is something that has really been on my mind lately. Between our mortgage and student loans I really want to make sure that if one of us passes that the surviving spouse doesn’t have to worry about debt. I plan on shopping for life insurance this year, and I think $300k would be the minimum I’m looking for. Ideally the surviving spouse would not have to work, at least for a few years, either. I know a librarian when I was in college whose husband passed and she had a really, really hard time with it and eventually resigned. I want to make sure if that happens that debt or not having enough money to live off of for a while is not a factor.

  8. We have about the same amount as you guys. Both my wife and I bought the majority of it when we were younger to take advantage of the lower rates. We’ve actually been thinking of getting more coverage now that we run our business. You have the childcare costs that would come into play and either one of us would likely continue to run the business. We also have a pretty cheap rider on our mortgage ( I believe it’s roughly $10/month) that would pay off the mortgage in the event of an accidental death.

  9. I have life insurance through work; since I don’t have a spouse or kids I just need to make sure my estate is divvied up the way I want when I die, whatever expenses I have (such as a mortgage) are covered until my assets are sold/disbursed and there’s enough money to cremate me. Oh, and that there’s a good new human for my cat if I was to go soon. I may get a plan outside of work just in case, though.

  10. We oriented our policy amounts on our spending; I’ve wanted Jen to have at least a five year period where she could live at our current standard of living if I keel over. Now that we’ve whittled down our spending, that period is even longer. Jen has a smaller policy.

  11. My husband and I both have 20 year term life insurance for $750k each. We have a 8 year old and a 4 year old. In addition, I have a 45k whole life policy my parents bought for me when I was a kid. For the $750k policies, we pay $72 each a month. I think part of that was because we were in our late 30s when we got it and I remember my husband’s was delayed a while in processing because he has mild asthma and for some reason the fact that he needed to use an inhaler a few times a year caused concern. My $45k policy costs me $160/year which I pay in one installment.

    We also have a revocable trust set up for the kids and all our assests, including the life insurance, to be paid to the trust if we die. I just wanted to make sure my kids are taken care of until they are old enough to take care of themselves financially. They will be 21 and 25 years old respectively when the term policies expire.

  12. Our company offers good life insurance options that are pretty cheap. They give us free of charge the amount of our salary. Then you can buy up to 6 times your salary not to exceed $1 million. I think I have 5 times and pay roughly $7 per pay check. If something happened to me my wife could easily continue living in the house and possibly pay enough of the mortgage down to move to a more affordable place leaving her with additional money. My wife works for the same company so I have asked her to start bumping hers up as well. We also have AD&D coverage which adds another $500k on top if qualified. Whenever I think about this, I realize I am worth more dead than alive. Sad.

  13. Vanessa and I don’t have any right now, but that may change in the coming years. Being so young, we just haven’t shopped around, but I think we will soon.

  14. I don’t have life insurance because it’s just me (sigh). But if I were to get married that would be something that would be a priority.

    1. I don’t blame you as long as you have enough to take care of your final expenses!!! =)

  15. I don’t have any life insurance right now. It is one of those things that I have thought about a lot but never got around to. It would be a good idea to get it now though since I am in my 20’s and can probably lock in a good rate. I just don’t know who I would choose to be the beneficiary. I could always leave it to the ex husband since I know he will always have our daughters best interests.

    1. Couldn’t you make your daughter the beneficiary?

  16. I see life insurance as income replacement and covering any debt. The best way to do that inexpensively is term life insurance.

    1. I agree. I have never understood why anyone would buy whole life!

  17. I don’t have life insurance yet, but if we’re fortunate enough to have kids that will definitely be top priority, for the very same reasons you’ve stated. I would want peace of mind to know that lives I’ve brought into this world won’t struggle in case something unfortunate happens.

  18. “My gut tells me that $250,0000 is the right amount”

    I think you have one too many zeros there – otherwise you have an amazingly cheap policy if you’re getting 2.5M in coverage for $22. =)

  19. My husband is in the Navy and his life insurance policy is $400,000. It’s $100,000 for me. I’m not sure how that will work once he’s out but hopefully they’ll allow him to reenlist and make the Navy his career. I have to hope I don’t keel over any time soon because I have over $35,000 in private student loans that my co-signer would become responsible for.

  20. I suspect all that would happen after I die is that a yarn of secrets would unravel, to such a degree Dan Brown would immediately option a book about it. Also, my fiance and family would be more than covered with the $1M I have in insurance. I want them to be like, “Mitch died, but at least I have this Ferrari!” and then never visit my grave.

    Seriously though, the $1M is a hedge against taxation, inflation, and the pain of a hopefully not soon-to-happen event. It is a number that just feels right to me.

  21. I have some life insurance through my employer. I have tried to get insurance through an outside source, but I have a medical condition that makes life insurance very expensive. I have not figured out a solution yet because it will raise my monthly costs by quite a bit.

  22. I have life insurance through my job but once we have a kid I’ll be getting policies for both myself and my fiancee outside of our jobs. I don’t want to rely on being employed when I die for my family to live a decent life.

  23. Ughhhhh I hate reading life insurance posts because it reminds me that I HAVE to do it, like yesterday. We have individual things insured (like our mortgage/debts) but only have a small amount through our jobs. No more messing around since having a kid!

  24. Financial Black Sheep says:

    I was writing a draft on this very subject today. Seems as thought Mr. FBS’s job upgraded his current benefits so we opted for higher life insurance, and both short term and long term disability. It feels good to be able to afford life insurance!

  25. As a single guy, I’ve had $400,000 in life insurance for some time now. It might be too much as it would go to my parents or, if I outlive them, my sister — neither of whom I support now nor have any plan to support in the future. This is one of those things where I’m erring on the side of caution, and it may be costing me more than the downside risk is worth…

  26. Definitely a topic that you don’t jump for joy to discuss but one that must be discussed and planned for. We also have life insurance and decided to elect for enough to coverage our mortgage plus 3 years of after tax income then multiplied that entire number by 10%

  27. I don´t have life insurance right now, but when I someday marry and have kids, whatever comes first, I`ll definitely want a life insurance! I would hate to think of leaving my future imaginary family abruptly, leaving them with the pieces and entering a financially difficult future, as if the loss of a loved one isn´t bad enough, they don´t need to suffer more than necessary.

  28. Very important topic Holly. Sadly too many people don’t think this through. My wife and I both have term policies of 1M each. We decided on that amount because we wanted the remaining spouse to have the option to become a stay at home parent if it was felt that would be best for our kids. Being a single working parent with four kids is doable but would be real tough.

  29. Hate thinking about things like this, but it’s so important (esp. if you have kids). Right now it’s just bf and I so we haven’t really been as thorough as we should be about looking into life insurance. Both of us have smaller policies covered by our employers, but now that we own a home we both need to get larger policies so if, god forbid, something happens to of us, the other could pay off our home and not have to worry.

  30. We have lots of life insurance because we used to owe so much money and didn’t want to leave the surviving spouse with all that debt if one of us kicked the bucket. I will certainly rethink it when our house if paid off. I still think I’d like us to be set up to take a year or more off to deal with everything if necessary. Like you said, it’s really cheap, so why not?

  31. Definitely a morbid topic. I try not to think about my own death, so I am very unprepared for my own sudden demise. However, I don’t have any dependants so it’s not a big priority for me. I do have a small amount of coverage through my work benefits, but that’s all I’m planning to have for the near future.

  32. shamefully, i didn’t have life insurance for the first 6 or 7 years of parenthood. looking back, i don’t know how i lived with that insecurity.

    these days, i have a nice policy that would cover the mortgage and put my kids through college… i know that there is nothing that would replace losing a parent, but i wouldn’t want them to go through losing their home immediately after and as a result..

  33. Great post, Holly!! It’s something I routinely debate with clients. Many don’t want to confront their own mortality, but as you know – too many people die young. I have seen people who have been so incredibly grateful they had a policy in place when the unexpected happened and others try to scrap by while dealing with this huge, life-changing loss.

    Glancing through the comments – the one thing I would mention is that employer life insurance can be a great benefit – but they are rarely or easily portable. So when you quit your job, your coverage ends or you pay more to assume it for yourself. Depending on your situation, it may be smarter to get your own policy and accept any free coverage they offer to boost up your plan.

  34. I am also starting to pay for a life insurance. Though, I am not that specific yet like yours which includes wedding for daughter and their vacation.

  35. Mr. Bonner says:

    Once you have a family, insurance is a necessity. If anything happens to me I just want to rest well knowing my family will be taken care of. We have really cheap term policies, just about what you pay, through my employer. I have 8x my annual salary and $500K for the Mrs.

    When we spoke with our financial planner he said something interesting. Men are more likely to lose their lives while women are more likely to claim disability, so life insurance policies for men tend to be more expensive and long term disability policies for women are more expensive.

    Anyway, in addition to life insurance some things to look into would be long term disability (LTD), accidental death and dismemberment (ADD) and a balloon policy. LTD and ADD are covered by my employer as well and I opt to pay a few extra bucks a month to bump up my long term disability pay to 66%. Hopefully I won’t need it, but my brother got in a bad motorcycle accident and he had carried the additional coverage and it really helped.

  36. I believe we should never fear death. As they say, “There are two things sure in this life — change and death.” The best thing we should do is prepare for its coming. And yes, life insurance is the best way to prepare for it, especially if we have young children who will be left behind.

  37. LeRainDrop says:

    My employer provides a $100,000 term life policy at no cost to me. I also have some sort of life insurance policy through the Polish National Alliance that my grandma started for me as a child and for which I currently pay a ~$130 premium per year (I really should look into what in the world this product is!). Other than that, I have no coverage, as I’m a single gal with no kids yet. Life insurance is definitely an area about which I have such little knowledge but really should get educated.

  38. It’s a very individual decision, but $250,000 sounds about right to me. We carried life insurance on my husband (main wage earner) enough to cover incidentals for a transition to me working full-time. Since I was trained as a teacher, we assumed that I’d be able to get a full-time teaching position. That turned out to be not the case when I tried to teach full-time to help with college expenses. (Husband is still living, thank goodness.) We would have had to reduce our living expenses drastically. We did not plan to cover college expenses with insurance money, much less vacations or weddings. Even so, it would have been difficult. We’d have had the kids go to community college and/or train for a non-college career if they didn’t get scholarships & financial aid to cover most of the expense. The kids would have had to work part-time in high school and college.

    It’s not an easy situation, but it’s important to talk it out and plan accordingly.

  39. Life insurance seems like a waste of money each month until you need it. I am a believer in term life insurance.

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  44. I have life insurance, no will, and small children, what if i died abruptly (god forbid), what will the process be? Who would contact my Life Insurance company? How would my small children know that they are being care of (Financially) even after i died?

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