This is a post in a series about young single, married folks or life partners and their financial lives. How should it look? I call these folks, Mad, Slammin’ & Cheddar!!
So let’s get some definitions out of the way:
- Mad – as in “Mad Props”, “Extreme”, paying or giving proper respect…to yourself in this context
- Slammin’ – as in good, great, excellent…as in your bad yourself
- Cheddar – as in becoming wealthy, having lots of money…as in yourself becoming “Mad Wealthy!!”
Anyway, if you’ve lived under a rock, some of these terms might be new to you. They’re some of today’s best slang that are fun to use at parties and embarrass you, your friends, and family.
When you’re an MS&Cer, you might be wondering, “Hey, do I need or does my counter-part need Life Insurance? How’s a Mad, Slammin’ piece of Cheddar (young folks) suppose to view life insurance?
Well, if you’re young and single, you don’t need life insurance. Not even the life insurance possibly coming out of your paycheck. If nobody depends on you for their livelihood then there’s no reason to have it. So, if you have the option to not have that come out of your paycheck then cancel it and save or invest the extra green twinkies.
And that is the key. If someone (partner or partner with children) is dependent on you for paying stuff, then you need life insurance. Term life insurance only!! Term life insurance is life insurance for 5, 10, 15, 20, or 30 years. That is the only life insurance you need. Just plain old term life insurance and it’s sometimes called level term life insurance because the payments are level over the life time of the term.
How much life insurance should you and your partner have? Browse over to Kiplinger.com and check out the life insurance calculator. Where do I get term life insurance? You can start at SelectQuote and you want to make sure you pay a fixed rate over the course of the term life insurance. Look for solid companies with a minimum of an “A” rating.
If only one person in the relationship is bringing home the bacon, you still need to consider life insurance for the stay-at-home person. If you’re working and you lose your spouse and you have children, then you need to be in a position to pay for help for your children.
There are many suggestions on how much life insurance to have. Some suggest enough to help get through the tough time of surviving the loss of your partner. Some suggest as much as you can afford that will pay off a mortgage, pay for the kids to get through college and allow the survivor to recover from such an event. Your own situation and beliefs will help determine how much term life insurance you need.
When you or your partner collects the life insurance, they would invest that money in a safe investment vehicle that would help pay for the necessities in life for a long time. The ideal situation is being able to invest all of the money from the term life insurance and the money you make off the investment would help pay for everything you need to help pay for without dipping into the actual amount of the term life insurance.
So if you’re a 40 year-old man and you have a $1,000,000.00, 20-year term life insurance policy that you’re paying around $100.00 a month for, then that million is payed out to your spouse if you lost your life. For simplicity sake, let’s say your spouse invests the million in something that returns 10% annually. They could then live off of $100,000.00 annually and not have to use any of the million to survive on. Just the money the million generated in earnings.
One extra step: Wrap your term life insurance up in a revocable living trust as the beneficiary and if both spouse and partner lose their lives at the same time then your wishes will be carried out as you described in the trust. We’ll leave trusts for another time.
So there you go all you MS&Cers. Go out and take care of one another. Remember, that’s part of that love thing you mentioned at the alter.