The Life Insurance Feature My Family Didn't Use—and Why

My husband and I learned about life insurance when we were expecting our first baby. Getting a policy was one part of our financial preparations to start our family on steady footing. We had a hard time deciding between a term life insurance policy (inexpensive, but coverage eventually runs out) or permanent life insurance (lifelong coverage as long as the premiums are paid, but generally a higher price tag).

So our financial planner suggested a convertible policy. With a convertible policy, we’d start out with term coverage, but we could switch the same policy to whole life if we chose to later (worth noting that if we—or anyone—chose to increase the overall coverage amount, that’d be subject to new underwriting).

Eight years (and two more kids) later, we’ve learned a lot about what it takes to make our family run. We’re much more confident about what we need—and what we don’t.

Our Future Savings Are Growing

Term life insurance generally works on the assumption that you’re providing financially for your family. Often, that means earning income, although you can also get coverage as a stay-at- home partner, like I did, to reflect the value of your contributions at home. One reason why it makes sense for a term policy to come to an end is that this often coincides with your income- earning years coming to an end, too.

When you stop working, the idea is you’d have enough resources to take care of your family’s needs, through whatever combination of retirement savings, Social Security or pension income. Some people feel comfortable about their ability to provide for themselves and plan an inheritance for their loved ones. A whole life policy might be helpful if your working years extend longer than that, or if you value lifetime coverage (which some think of as a guaranteed “inheritance”) in the form of a life insurance benefit, as long as you keep up with your premiums.

In our case, our latest review of our finances shows we’re on track with retirement savings and making progress building savings for our kids’ education. By the time our current life insurance policy ends, our current habits should put us in a strong position to cover our needs ourselves.

Our Time With Dependents Will End

For now, we’re still buckling car seats, cutting up spaghetti and picking up rain boots scattered in the hall. Our kids are dependent on us from the moment they wake up to when we tuck them in at night (and often enough, during the night, too). The whole reason we got life insurance was to have an added layer of financial protection to help give us peace of mind. Every spilled cup of milk is another reminder that our finances and resources revolve around taking care of people who depend on us.

But as many folks like to remind us, these years may go by faster than we expect. No one knows for sure what the future holds, but for now we have every reason to expect our kids will grow up to leave home and support themselves as young adults. (My 5-year-old has picked out a house across the street, so she can come over for snacktime every day.)

Some families in our circle are preparing differently. Their kids have physical or mental health conditions that mean they’ll keep needing care throughout their lives. A whole life insurance policy can be a helpful component of their financial plans to provide for their children’s needs.

Whole Life Premiums Are Often More Expensive Than Term Life Premiums

Cost shouldn’t be the main factor in deciding whether to get life insurance. That’s because there are affordable coverage options out there, and even a higher premium can be worth it if the value of the coverage and peace of mind make sense for your family.

That said, busy families often have plenty of expenses. You don’t need to overinsure yourself.

Whole life insurance premiums tend to be significantly more expensive than term life premiums for the same coverage. If we converted to a permanent policy, we could pay several times the amount we’re paying now. Unless we have a real need to secure that additional coverage, I’d much rather save that money for college or plan a family trip.

What Could Change Our Mind

For now, my family feels confident sticking to a simple term life policy set-up rather than switching over to whole life coverage. That said, never say never. There could still be good reasons for us to consider additional coverage down the line.

Our job status could change

Our plans for future savings are based on our current working arrangement. If my husband came to me and admitted he’s always dreamed of quitting his job to open his own cupcake shop, I’d want to support him—but we’d need to take a hard look at how the switch would affect our financial future.

You can estimate life insurance coverage needs based on income, but what you earn can fluctuate throughout your career. A major job change could make us reevaluate how long it might take (or how much we’d need) to feel confident about going without a life insurance policy. We might decide that a big change like that would leave us unable to save enough to be fully independent by the time our term policy runs out.

Our youngest may still need us

We got our policy while I was expecting our first, before we were sure how many kids we’d have. Our youngest is still only 2 years old. Based on our term length, she should be in college by the time our policy ends, well on her way to adult independence. But what if we’re wrong?

We don’t know what the job market will look like for new grads or if our kids will ask for help paying for a grad school program after college. Who knows—we might even have a surprise baby and restart our calendar all over again.

If the structure of our family changed, we might either want to get another term life policy or switch to permanent coverage.

Our health could change

Over 25% of the U.S. adult population has some form of disability. While my husband and I are in good health, there’s no guarantee this will continue. If a disability affected either of our ability to work, that could impact our savings or estimated care costs, which could mean we’d need to extend our life insurance coverage.

A change in our health might also impact what kind of life insurance we could get. Being younger and in better health helps you qualify for lower rates than being older and in less good health. A new term life policy may still be cheaper than converting our current policy to whole life, but one perk of convertible life insurance policies is that you can generally convert to whole life without undergoing another medical exam. If our health necessitated it, we might choose to go that route. The right choice would depend on our health condition, rates and how long we’d need coverage.

Term or whole life can be the right fit, depending on a family’s individual needs. For now, we feel confident that we have what we need and likely won’t take on more coverage. I can also appreciate the different choices some friends are making, and I know signs to look for in case I need to reconsider my own best insurance arrangement.

Personal views and opinions expressed are those of the contributor and do not necessarily reflect the views of Fabric by Gerber Life.

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