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- I found a cheap life insurance provider, but my husband wanted to just put the money down.
- I reached out to financial planner Ryan Nelson to find out if investing is wise.
- If I die early, the investment account may not be large enough to match my life insurance.
After having a baby last year, my husband and I agreed that getting life insurance was an important step to take. Not only do we want to make sure that our child has cover, but we want to take care of each other if one of us dies, and that money is lost.
We spent some time looking into different life insurance policies and found that annual premiums can range from a few hundred dollars to a few thousand dollars. My husband started shying away from the idea of ​​buying life insurance and instead suggested we put that money instead.
I’m still a big fan of getting life insurance, so I recommended the cheapest life insurance plan I found from Corebridge Direct. It offered $250,000 in term coverage for just $13 a month. To help settle our debate, I asked professional financial planner Ryan Nelson if buying cheap life insurance is worth it or if it’s better to invest that money elsewhere. Here is what he said.
Even a cheap life insurance plan is better than nothing at all
When I told Nelson about how I wanted to do a cheap plan, but my husband thought it was a waste, he said not having life insurance can have devastating consequences.
“If you experience premature death and you don’t have life insurance, if you don’t have insurance, it can wipe out many generations of wealth in the family,” Nelson said. “That’s because your financial situation changes overnight. One minute you are accumulating, the next you are just trying to survive.”
Without life insurance, Nelson explained that loved ones can make difficult decisions such as moving to a smaller home, selling assets, withdrawing money from retirement accounts, taking a stressful job to earn more money for the family, and putting back sports, vacations, and other family activities.
He explained that although the chance of me dying at a young age is small, it is a serious matter if it happens, especially in my situation where my partner and I earn the same amount of money for the family.
“Even the cheapest life insurance that costs a few hundred dollars a year and has a $250,000 payment comes with benefits,” he said.
For example, Nelson explained that money can replace a spouse’s income, pay off a loan, pay off a mortgage or car payment, or increase the cost of my child’s education.
Investing the money you would spend on life insurance is a risky and risky process
I asked Nelson what he thought of my husband’s idea of ​​taking the money we would use to pay the life insurance premiums each year and depositing the money. He said that it is not as easy as it seems.
“It takes a certain kind of discipline, knowledge, and luck to put that money away every month to build a nest egg that pays off the money like life insurance would if you die early,” he said.
“Building a multi-million dollar nest egg by putting life insurance premiums into a low-cost fund takes decades,” he said. “You may not live long enough to see it grow to that size. Life insurance buys you time.”
If something were to happen to me in a few years, without life insurance, the money I made may not be close to the same amount the policy would have paid out.
Those who have achieved financial freedom may not need a cheap life insurance plan
I asked Nelson if there was anyone who would be better off jumping to pay for a cheap life insurance plan. He shared that when a person achieves financial freedom, the goal may look different for everyone, they may not benefit from inexpensive life insurance with low premiums.
“There may be a time when it doesn’t make financial sense to have cheap life insurance because you already have other financial resources in place, such as reasonable rates in brokerage accounts and savings accounts that are available quickly, as well. A solid retirement account portfolio can support your loved ones when you die,” he said. .
Nelson said it’s less about how much money a person has in their money and more about how they spend money, where they are in life, health, and other factors that go into evaluating their wealth. A financial advisor can provide insight into what a person needs based on their lifestyle.
“If a person is not sure whether they should get life insurance or rely on their existing assets instead of covering money for their loved ones when they die, they should seek the opinion of a trusted professional with an unbiased opinion on their own. In financial situations, I strongly recommend that they contact an adviser who does not sell life insurance,” said Nelson.
My husband and I don’t have millions of dollars or even hard cash. We do not enter the phase of having financial freedom that can cover my child or both of us if one of us dies. This means that a cheap life insurance plan is better than none at all.
