Life Insurance Ugh Why

“We need to talk.”

Why would he do that to me? Was he trying to raise my blood pressure, a la that brilliantly diabolical email exchange? Didn’t he know I never want to talk in the evenings after wrangling and feeding and finally managing to steamroll the toddler and get her to sleep, at least not about seriously and weighty matters such as end-of-life planning?

I glared at my husband, who should know better. He glared back. With a theatrical sigh, I stopped playing Words With Friends on my phone and said, “Okay, fine.”

He wanted to talk about life insurance.

We used to have a policy, back when we were both gainfully employed, or rather he did. It came via his law office and guaranteed me, I don’t know, some huge amount of money should he get snuffed out. I didn’t like to think about it, frankly, and never found out the details. When his corporate gig ended, so did the insurance.

“Do you get anything?” I asked him at some point. “For all that money you put in?”

“Nope,” he said. Nothing but peace of mind.

“God!” I said. “What a racket.”

He explained to me, carefully and with a minimum of emotion, why life insurance — term, in our case, for at least until Babygirl goes to college — is not a racket but rather an excellent investment, even if there is not a return. I knew he was probably right but the topic made me simultaneously bored and anxious, and I wriggled away as fast as I could by promising I’d look into it.

Well, so, I’m researching. Here’s some Investopedia background on term life insurance:

term life insurance is the best choice for most individuals because it is the least expensive type of life insurance and leaves money free for other investments. Permanent life insurance, the other major category of life insurance, allows policyholders to accumulate cash value, while term does not, but there are expensive management fees and agent commissions associated with permanent policies, and many financial advisers consider these charges a waste of money. …

When you buy a term policy, all of your premiums go toward securing a death benefit for your beneficiaries, who are usually your spouse or children. Term life insurance, unlike permanent life insurance, does not have any cash value and therefore does not have any investment component. However, you can think of term life insurance as an investment in the sense that you are paying relatively little in premiums in exchange for a relatively large death benefit.

For example, a nonsmoking 30-year-old woman in excellent health might be able to get a 20-year term policy with a death benefit of $1 million for $480 per year. If this woman dies at age 49 after paying premiums for 19 years, her beneficiaries will receive $1 million tax-free when she paid in just $9,120. Term life insurance provides an incomparable return on investment should your beneficiaries ever have to use it. That being said, it provides a negative return on investment if you are in the majority of policyholders whose beneficiaries never file a claim. In that case, you will have paid a relatively low price for peace of mind, and you can celebrate the fact that you’re still alive.

The tax-free part is important and worth underlining: life-insurance payouts do not count as gross income and do not need to be reported to the IRS. (Maybe that’s why they’re so appealing to potential murderers?) Still, $480 a year is $480 a year. If I pay someone nearly $10,000, shouldn’t I at least get a used car or an MFA out of it?

CNN Money says I should suck it up:

Contrary to what all too many insurance agents will tell you, you almost certainly don’t need to have life insurance for your entire life. You need it most when you’re a young adult with young kids, when you have yet to build up assets that your family can fall back on if something happens to you. If you die while your children are still in diapers, where’s the money going to come from to raise and educate them? Right: life insurance. Once they’re grown up, you no longer need it.

Do you do the mature thing and pay for life insurance, for the sake of your kids and/or your spouse? Or are you throwing caution to the winds and encouraging others to do so too?

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