Why Getting Life Insurance ASAP Is Important for Frugal Parents

I love sharing posts about how I've flubbed up or am currently messing up. Ok, I don't love it, it is embarrassing, but a) if I make a mistake at least I want you to learn from it and b) you can see I'm human just like you. So this post is one of those things, about a mistake I have made because I thought pushing it off wouldn't be a big deal but now it will end up costing me much more money. In short, life insurance for parents should be purchased ASAP and not pushed off.

Let me tell you about my situation.

Way back when, when we were extremely non well off financially (ok, that is a severe understatement) the thought of getting life insurance, or any other insurance beyond health insurance (which is practically free where I live) was not something we felt we could even consider. When you can barely afford to buy food or pay rent, insurance seems very much like an extra. We couldn't add anything else, no matter how important, to our expenses.

My then husband, at some point, signed us up for something that he said would be like an alternative to life insurance. The way it worked was that a bunch of different families signed up for this "service" and there were no monthly payments, but if someone who was signed up for it did die, then everyone who was a member would pay a set fee. So some months you pay nothing and some months you paid a small amount. Theoretically it seemed like a good deal, as long as you didn't think too much about how it would be down the line. Because they were marketing it towards younger couples, but as the families in it got older the risk of them dying would be higher, and it could get to the point where there are multiple times a month or more that you'd need to pay into it, and the rate would just increase every year. Essentially, when it got to the point that your family would be at higher risk of needing it, it would be less sustainable to be a part, and more and more families would drop out, and the payout one would get would be much smaller. Not a good idea.

At some point, we did get life insurance, but a limited one at that. It was life insurance that we got when we bought our house as part of our mortgage as our mortgage lenders required. If we would die before the mortgage was finished being paid, the insurance would pay off the rest, which is definitely a help, and something many parents think about when getting life insurance, as it makes their children have the ability to have a roof over their heads, should worse come to worst.

But a roof over ones head is just part of what life insurance is about. Should something happen to me, I would want to make sure my children are provided for. I know a family that the husband was the main provider for the family and in a freak accident he was fine one day and within a few days later he was being buried. In such situations, when the family is already reeling from such a big blow, for the family to then need to have the mother work a full time job to support them would be just another tremendously difficult change, which fortunately this family did not need to do because the father had life insurance. 

As a single mom, though, there are different factors and complications than before, as life insurance for parents who are divorced is more complicated. You can have a situation with shared custody, but even with both parents working life insurance would be advisable because if one parent dies, the other would get full custody and all expenses and not have any more child support or alimony.  One can take out a life insurance on their ex and pay the premiums so that they can still benefit if something happens to them. Or if the ex no longer is in the picture, life insurance for the custodial parent becomes extra important because then the child could be left without anyone to support them.

I will confess that though I know the importance of life insurance, once I got the mortgage life insurance, getting life insurance has been put on the back burner. But now I am in a bit of a bind. Over the past few years my health situation has gotten worse, first mental health related and then in the last year and a half physically as well. To take out a policy on myself will now be more expensive than it would have been earlier, before I developed these health issues. If I hadn't slacked off, it would have been better off, and now once I get a policy I will have higher monthly premiums. 

When I do get life insurance, I will probably get term life insurance, as rates are lower, because there isn't an automatic payout. With term life insurance, once the time period is up, if neither person died then there is no payout, but that is fine, because hopefully by that point your mortgage would be paid off, your children grown up, etc... so they'd need that money less. Saying what's the point of paying for insurance if you won't get any money from it is like saying what is the point in paying for health insurance if we end up being healthy- insurance is preparing for the worst, but better not have the worst come and have your money be "wasted" than needing the insurance and getting your "monetary value for it". 

Yes, life insurance is a complicated topic, but since you never know when health issues might come up (I never expected them to, I'm still quite young!) its better to apply ASAP and lock in rates so you don't end up regretting not having gotten life insurance earlier. As parents, it is our job to take care of our children, even after we're gone, and life insurance is one of the more important ways to do so.

What do you do about life insurance for your family? What type, if any, do you have, and how did you make that decision, factoring in frugality?