By Eric on June 26, 2012 9

5 Steps to Setting Up a Term Life Insurance Policy

Does anyone else hate paying for life insurance?

Oh, just me? OK.

For the longest time I could not get myself motivated to take the plunge and purchase term life insurance as Dave Ramsey suggests.

Life Insurance

The concept makes sense in my brain. I know it’s relatively cheap per month, but I always felt the need to gamble on the premise of not ever needing to use it, so why buy it?

When we had a baby, my mindset shifted pretty quickly. Actually, before she was born I finally took the plunge to get some life insurance. I simply couldn’t stomach the thought of suddenly leaving Kelsey and Rooney on their own with my income gone and no way to pay the mortgage and keep up with the bills.

I think one of the reasons I didn’t want to take out a life insurance policy was that it just seemed like it would be a lot of work. I don’t particularly like filling out paperwork, and what about the pesky screening they sometimes make you go through? Annoying. Again, having a baby was my motivation to actually move on this action item that had been sitting on my list for more than a year.

If this is something you’re thinking of doing for yourself (actually, for your family) here are the steps broken down that I had to go through. My hope is to break down the scary monster so that you, too, will go get the all-important term life insurance to protect your family, heaven-forbid something tragic happens.

5 Steps to Setting Up a Life Insurance Policy

  1. Get a recommendation. For me, I went with Zander Insurance. Highly recommended by Dave Ramsey. They were fantastic. Customer service was phenomenal! This was before reconnecting with the Conroys. Kelsey is currently working with them to get her policy set up.
  2. Fill out the paperwork. There will be paperwork. No way around it. But! It’s not that bad. Just the standard questions about your overall health and any family history issues.
  3. Send in the paperwork. Fill it out and send it back. Then you just get to wait. Let them do the work for you. This was a big misconception that I had about the whole process. I felt that I would have to talk with a half dozen people trying to get the best price and coverage. Zander did all that for me and gave me the best price for what I was looking for.
  4. Schedule the screening. I think it’s pretty common for life insurance companies to request a screening prior to starting your policy. Yes, it was annoying that I had to spend one lunch hour getting a screening done, but in the end, it just wasn’t that big of a deal. I think I psyche myself out sometimes with these types of things.
  5. Wait for the results. After the results were in, it was simply a matter of signing some brief paperwork to get the policy started. It’s set up on auto draft on a monthly basis and I don’t even have to think about it.

The peace of mind is worth every penny I pay for term life insurance. Again, I hope Kelsey never has to cash in on the policy, but having it in place makes me feel like I am doing the right thing for my family. After I had the term policy in place, I was able to cash out a whole life policy that my mom had set up when I was a wee little guy. It was enough to pay for my new (refurbished) MacBook. Thanks, Mom!

FYI: Dave Ramsey suggests a policy that is 8-10 times your annual income until you can become self-insured through building wealth over an extended period of time. Term life policy only. No whole life! Read this article for more information.

For a baseline read this article on the Simple Dollar of Life Insurance Loopholes to Avoid.

Do you have term life insurance? If not, what’s holding you back?

Facebook Discussion

Facebook Discussion

Eric

Husband to Kelsey. Father to Rooney. Follower of Jesus. Born and raised in Iowa. I like blogging. Bulleted lists excite me. Thanks for stopping by.

  1. I felt the same as you when I first started with my company and was making benefit elections. Fortunately, my basic life insurance policy is company-paid (2x annual base pay) so it required little from me to set up at the time but will require some adjustments for dependents once I’m married and have a family. Like you said, it’s worth the peace of mind knowing it’s in place!

  2. I love following the blog as it covers all basis of a parent’s life which is sometimes hard to grasp!

    I truly believe that life insurance is a necessity. You have done a great job to debunk a few thoughts about getting life insurance. I would like to offer a few more:

    1. Please get at least some term insurance outside of your employer. While it is a great benefit, you never know when you may lose your job or become uninsurable and can no longer get life insurance. Plus most employers life insurance benefit is non-transferable.

    2. Every person should decide why they want life insurance to determine the best policy for them. I think Dave Ramsey has some great ideas but it doesn’t always work for everyone.

    3. Find an life insurance agent (such as myself) that doesn’t push just what they want to sell. The agent should be open to helping you completely understand the policy or policies you are purchasing.

    4. Buying life insurance is not that big of a decision. Some people make it out to be such a huge deal that they keep putting it off and then never get around to it.

    5. Yes life insurance can be confusing, but it doesn’t have to be. My best advice, please DO NOT, I repeat, DO NOT go and search the internet. Find someone that you or your friends trust and talk to them. You will get a feeling from the agent if they are the right fit for you.

    6. 8-10x your annual salary is a great idea, but if the price gets a bit overwhelming or it doesn’t fit into your budget, that is okay. Some life insurance is better than none. If you can’t afford 8-10x the amount of life insurance you need, then maybe start with 2-5x.

    Hope that gave you some more things to think about. If you want to know more, please do not hesitate to send me an email. I would love to help anyone understand life insurance more.

    Amanda Sturgeon
    SturgeonINS@gmail.com

  3. We had it since we purchased our first home since we didn’t want to leave the other person in financial hardship. We increased our coverage when we had our first child so that the surviving parent wouldn’t face financial hardship in the midst of emotional hardship.

    I would also recommend for those that have the time of the screening as a barrier to getting a policy that our company offered for us to either come to their screening location or they would send someone out to our home in the evening or to our work during the day. Very thoughtful since it actually only takes 5 minutes.

  4. Life insurance can be such a hard thing to figure out, there are so many different kinds out there right now. My husband and I just went through the whole process of trying to figure out our life insurance policy and it took us almost a year to decide which one to go with.

    We had originally gone with a company that our investment advisor suggested to us. After going through all the paper work and screening and going with the amounts and policy that he suggested, something just didnt sit right with me and I felt like that was just way too much money. So we cancelled that policy right away.

    I started doing some research online (sorry Amanda) and looking into the different kinds of policies available and the suggested amounts that you should insure yourself for and came up with something that I felt is right for our family. I then contacted another company that actually deals with our house and vehicle insurance and set up a meeting with their advisor. This guy was much better and was willing to give us all sorts of options and suggestions that the other company did not. We ended up going with a universal life insurance policy. It is a whole and term life insurance all in one. We got a certain amount in a term policy that would cover our expenses for the next 20 years if something should happen to the other one and then we got a lesser amount in a whole life policy to cover us long term. What we also did was took out a larger policy amount for my husband, since he makes significantly more money than me, and if anything should happen i would feel the financial crunch more than if something were to happen to me. We figure that after the 20 years all of our major expenses will be gone (house, vehicles, children should be out of the house or close too) so we dont need to carry a large whole life policy. The really neat thing that I liked is we pay into this universal policy for the next 20 years (and payments I feel are really reasonable for us) and after that we have no more payments and are covered for life. I am so happy with what we have now and I am glad we went with the decision that we did. Good luck to all those out there just getting started. The biggest advice that I have is to be patient, look into different options and if your gut is telling you NO listen to it.

  5. Husband and I bought term life insurance right after we got married. We had purchased a home, and in the event something happened to one of us (God forbid) we wanted the other person to have money to pay off all debt with a lot left over. Now that we own two homes and have a baby on the way, we need up our policy.

  6. I am such a huge proponent of life insurance. Because of health issues, my husband and I cannot be approved by any company for life insurance. While it’s frustrating for us, it just makes me push my friends even more to have a plan for their future.

  7. Star’s comment reminded me of something you didn’t touch on Eric.

    Our financial advisor advised that we get a specific kind of life insurance policy for each of our kids that they could take over when they turned 18 the logic being a) that you assume your child will be healthy enough to enter the insurance system themselves but if they can’t b) the policy gets their foot in the door and keeps it there. A huge gift to an adult child for very little $ upfront and over the years.

  8. Thanks for this post. I actually have been thinking of writing a post around this same topic because too few people our age (late 20s/early 30s) have life insurance and it’s soooo important. We applied for life insurance in December 2010 when we bought a house and I was newly pregnant. We qualified at an incredible rate because we were both super healthy. 9 months later, my husband was diagnosed with cancer. Had we not gotten life insurance when we did, we’d have never qualified or would have had to pay very high fees. We learned that it’s best to get life insurance when you’re young, especially if you plan to have children, live off one spouses income and/or purchase a home.

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