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Do I Need Life Insurance? (Part 1 of 5)

Do you need life insurance?

Yes. But first…

How does life insurance work?

Put simply:

  1. You pay an insurance company some money each month
  2. You die
  3. The insurance company pays a bunch of money to someone else

It can get a lot more complicated than that, but for now, those are the basics.

Why should you get life insurance?

Let’s say you are married with two kids. Both of you work and are doing very well with controlling your finances. Now pretend that your spouse dies in a car crash. As gut-wrenching as that is to think about, how are you going to pay all those bills with one income? Who’s going to babysit the kids or get them to school? Who’s going to cook? Who’s going to do the laundry? Who’s going to mow the lawn?


The death of a spouse is terrible in the first place, and now it is up to you to pay off all of your debt (credit cards, mortgages, home equity loans, car loans, etc.) and take care of your family.

Considering all of that, how would you feel if a check for $500,000 came in the mail and you didn’t have to pay any taxes on it? I’m sure it would feel pretty good, and that’s why you get life insurance.

What does life insurance protect?

It protects your family from your death by replacing your paycheck. The above example highlights how difficult life can get when a loved one passes away, and if you are a single parent, it will be even more difficult on your kids.

I had lunch with an insurance agent the other day, and he mentioned that one of his clients (let’s call him Bob) was about to lose his mother’s house. Bob’s mother had passed away with no life insurance or any other assets besides the house. Bob scraped just enough of his own money to have a funeral and bury his mother, but he didn’t have anything left to get the house out of probate (wills are a whole other subject). If Bob’s mother had even a $20,000 life insurance policy, she could have saved her son a lot of trouble.

How much does life insurance cost?

This is where it gets complicated. The cost of getting a life insurance policy depends on things like:

What if you are not married and have no kids?

Consider getting enough life insurance to cover your final expenses and leave the money to your closest relatives. A small policy can be very affordable. You could get a larger policy, but remember that you won’t get to enjoy that money. You’ll be dead.

Are you convinced to get life insurance?

The next step is to figure out how much you need by reading the second part in this series.. If you have any more questions, feel free to send me a quick email.