Beating Broke

Personal Finance from the Broke Perspective

When Do You No Longer Need Life Insurance?

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No Longer Need Life Insurance?

Life insurance is the most affordable peace of mind that I can think of.  For usually less than $100 a month to cover both you and your spouse, you can rest easy knowing that if something happened to you or your significant other, your family would be taken care of.  When you’re deeply grieving, you won’t need to worry about making a house payment or taking care of your kids.  You and your family will be protected financially.  But when do you no longer need life insurance?

Life insurance is meant to be a temporary measure.  You shouldn’t need it forever, which is good because it gets significantly more expensive as you age.  What gets a bit tricky is predicting how much life insurance you need and when you will no longer need it.

My husband and I bought life insurance 15 years ago, when our oldest child was just four months old.  We got a 20 year policy, so our oldest will be nearly 20 when our policy expires.  Our youngest will be just 14 then, so we are planning to buy another policy that will overlap our current one.  We’re wrestling with the idea of just getting a 15 year policy or a 20 year policy.

If you’re like us, trying to decide how long you need life insurance coverage and how much you need, here are some variables you may want to consider:

How Long Do You Want to Cover Your Children?

You’ll definitely want to have insurance coverage until your youngest child turns 18.  Many people decide to carry coverage until their youngest child is 22 or 23 because college can be so expensive.  If you or your spouse dies, your child may need to rely on part of the life insurance money to help pay for the remainder of college.

When Do You No Longer Need Life Insurance?
Photo by John-Mark Smith on Unsplash

How Many Years Are Left on Your Mortgage?

While this variable may not affect how many years you want coverage, it may impact how much coverage you should have.  You want to make sure you have enough life insurance to pay off your mortgage, plus more to cover other expenses.

Does Your Spouse Have a Medical Issue?

If your spouse will have trouble working thanks to a medical issue, you’ll want to carefully consider both the length of time you’ll need insurance and the amount.  You’ll want to keep your coverage until you’re financially secure enough that your spouse will have enough money to survive even without life insurance.

Does Your Spouse Have a Career?

If your spouse has stayed home with the kids, how easily will he or she be able to re-enter the workforce if you die?  Don’t take this lightly.  Entering the workforce after a long break can be very difficult.

Mary is a family friend who is a stay-at-home mom.  Her husband was killed in a car accident when he was only 32.  Thanks to his life insurance policy, she was able to stay home with her children until they graduated high school.  Because she invested the policy wisely, she never did re-enter the workforce.  Instead, she volunteered in her free time.

How Much Debt Do You Have?

Again, this is a question of how much coverage you will have.  In addition to your mortgage, you want to make sure there is enough life insurance to cover your remaining debts such as car loans, student loans, and credit cards.  In many states, even if your spouse dies, you may still be held liable for these debts.

Choosing how much life insurance to get and for how long requires careful consideration.  These questions should help you make the right choice.

Are there any other variables you use to consider how much and how long you should have life insurance?

Clever Tips for Saving Money on Insurance

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Saving money is a topic that is on most people’s minds. Whether it’s spending less on groceries, powering down the utility bill, or shopping for the cheapest gas, there are plenty of great tips floating around the internet. You may have tried some of them yourself, hopefully with great results. However, there is always room for improvement when it comes to balancing the family budget.

If you are taking a hard look at your budget, you’ll need to categorize the ways you spend money. Some monthly costs are fixed, and others are flexible. Likewise, some costs are “needs,” while others fall partway into the “wants” category. Insurance is definitely a “need,” but there are ways to trim down the monthly bill. Read on for a few clever tips to help you keep saving money on insurance.

Own Less

They say the more you have, the more you have to take care of. It’s true. Owning things comes with responsibility, which invariably leads to an outflow of cash. For instance, if you currently own three vehicles, consider selling the one you rarely use. You’ll put money in your pocket from the sale, and you will save on your monthly auto insurance premium. Other possessions can be pared down, as well. Homes, valuable collections, and expensive equipment can all be downsized in the interest of saving money.

Pay a Higher Deductible

A quick look at online insurance plan comparison tools will show you that monthly premiums are lower when a plan has a higher deductible. Shouldering a $1,000 deductible is basically like insuring yourself. If you are a safe driver, you never leave the coffee pot on when you leave the house, and your home has an alarm system, go for the higher deductible and keep saving on insurance premiums. On the other hand, if you have a history of recklessness and you’re always strapped for cash, paying more per month and having a lower deductible might be in your best interest.

Ask for an Annual Review

Because a lot can happen in a year, it is wise to take an annual look at your insurance needs. As your family ages, your needs will change. Children become teenagers with a driver’s license, which can result in higher auto premiums. However, when they grow up and move out, you may qualify for lower premiums again. As you and your spouse age, your insurance needs will change too, especially if you decide to downsize your possessions.

Shop Around Every Year

Shopping for insurance has gotten easier, thanks to the internet. If you feel like you are spending too much, take a moment to use an online tool and shop for a better deal. Learn more about your options, and make an informed decision. You may be surprised at the money you can save each month.

Learning how to save money on your monthly expenses can be a lot of fun. After all, a dollar saved is a dollar earned. Saving money on insurance is simpler than you might imagine if you use the tips mentioned above.

Why We Don’t Plan to Renew Our Homeowners Warranty

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Our house came with a homeowners’ warranty.  The realtor we worked with, noting that our air conditioning unit was 18 years old, told us to make sure to keep up with the warranty because that would cover the cost of replacement on our central air unit.

At $650 a year, keeping up with the homeowners’ warranty to replace a $4,000 to $6,000 central air unit that was on its last legs sounded like a good deal.

Homeowners’ Warranties—Buyers Beware

Last year, one week into home ownership, our hot water heater died, and we got a glimpse of how the homeowners’ warranty worked.

Homeowners WarrantyI was not impressed.

We had to work with a specific company, I’ll call Company A, designated by the homeowners’ warranty, to replace the hot water heater.  Company A asked me to call my home owner’s insurance to see if they would pay to have a different company, Company B, come clean up the water damage.  (We had very little water damage, but Company A’s repair man assured me we’d get mold, even though we’re in Arizona with very little humidity.)  Luckily, I didn’t do that because Company B wanted to charge us $1,000 to clean up the water.

Clearly, Companies A and B must have had kickbacks with one another for business referrals.

Also, I thought we’d only have to pay the $75 service fee to get our hot water heater replaced, and then the homeowners’ warranty would pay the rest.

Wrong.

We still had to pay $375 more for parts and repairs that weren’t covered under the homeowners’ warranty.

The homeowners’ warranty paid $650, so that year, despite the annoyance and out-of-pocket expenses for the hot water heater replacement, the policy paid for itself.

Homeowners’ Warranty Will Only Help If the Appliance Dies

This year, after much thought, especially considering the bad experience with the hot water heater, we decided to renew the policy.  We paid another $650.

And then, our air conditioner started the march to a slow death.

First, it worked over time, running all the time, but it couldn’t seem to cool the house.

When our next electric bill came, it was $120 higher than usual.

But, the homeowners’ warranty wouldn’t pay anything for the air conditioner unless it was not working at all.

We called our own repair person and paid $200 to have two pounds of Freon replaced.  Two months later, and the cycle is repeating itself.  The air conditioner is working constantly, but the house is not cooling.  I’m guessing we are already out of Freon.

Now, we’re faced with a choice.  Wait for the unit to die so the homeowners’ warranty will cover the cost of the replacement, or replace it ourselves.

If we wait for the unit to die, the homeowners’ warranty may cover the majority of the cost, but we would have no say in the company doing the work or the replacement unit.  Meanwhile, we will keep paying to replace Freon and having higher than usual electric bills until the unit dies.

Or, we could replace it ourselves and stop the flow of wasted cash and energy caused by the old air conditioner.  We could choose the company we want to work with and what model we’d like as a replacement, the more energy efficient, the better.

While a homeowners’ warranty can save people money, in the long run, for us, it seems to be too much of a hassle and too restrictive to keep up with.

Do you have a homeowners’ warranty?  If so, do you find it valuable?