Life Insurance: Paying for kicking the bucket.

Up until I bought my house, I never really gave much thought to purchasing life insurance. Prior to buying my house, I was single, had no dependents, was debt free, and had a fair bit of savings. If I was to die, my death wouldn’t put anyone in financial trouble, so there wasn’t really a need for it. Now that I have a mortgage, life insurance has come back on my radar.

The only reason I’ve given life insurance any thought of late, is my mortgage, otherwise, nothing in my life has changed: I’m still single with  no dependents. I hate the thought of my parents (who are currently my beneficiaries) being saddled with that debt, should something happen to me. My first hint that life insurance and mortgages seem to be connected came when I was getting my mortgage. The mortgage specialist at the bank asked if I wanted mortgage disability and life insurance. Thankfully, I’d done a bit of research and had seen the CBC Marketplace special on mortgage life insurance, so I knew I’d be better off declining the bank’s offer and getting insurance on my own.

Gold plated coffin? I can't think of a better way to say 'screw you' to the pallbearers.

Life insurance is a tricky thing, there’s lots of options in terms of coverage, type of insurance (term vs. permanent), and of course insurance companies to choose from. My two biggest questions when it comes to life insurance are: do I really need life insurance, and if so, how much? I don’t view insurance as an opportunity to leave oodles of money to my beneficiaries in the event of my death (sorry kitty, you’re not going to find yourself on one of those richest pets in the world lists) or a way to have a really opulent funeral. Frankly, a plain ‘ole pine box would suit my corpse fine. The only reason I would want life insurance, is to make sure my debts (aka the mortgage) and the cost of putting me six-feet under would be covered, that’s it. Nothing more, nothing less.

I do have some life insurance through my work benefits. Right now, my coverage equates to 200% of my annual earnings. My annual earnings are approximately $54,000, so my coverage would be $108,000. That amount would certainly cover the cost of a funeral but not my entire mortgage, which is approximately $140,000. To cover my mortgage and a funeral, I figure that the amount of coverage would have to be around $150,000. However, there’s no reason my parents couldn’t sell my house to cover the mortgage since the mortgage is less than what the house could be reasonably sold for. I’m fairly certain that the house could be sold for $180,000 (at the lowest) and that it wouldn’t take too long to sell either, given the location, size and look of the place. Even if the house took a couple months to sell, my work benefits would cover the mortgage payments for a while. Given that, I’m not sure that I really need much more life insurance that what I already have.

Of course, should I find myself a man, settle down and make some dependents, I would absolutely re-evaluate my life insurance needs. As it stands now, I think everything will be covered if I kick the bucket. Have you given much thought to life insurance? What factors influenced your decisions regarding life insurance?

Have a good ‘un

Country Girl

Categories: Unavoidable Costs | Tags: , , | 11 Comments

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11 thoughts on “Life Insurance: Paying for kicking the bucket.

  1. I have enough life insurance to pay off what debt I used to have and to cover some expenses. Being military some of the expenses would already be covered but the coverage I have is very reasonably priced so there is a little more coverage than necessary.

    Good things to think about though. I remember going to see Dave Chilton (The Wealthy Barber) at a talk and he said someone like me (single, no mortgage) didn’t need to have life insurance but I still feel better knowing my family wouldn’t have to pay for anything and would have a little extra for unexpected things or for the future.

  2. Both my husband and I have $500,000 of life insurance outside of our work benefits because we would need to take care of our daughter and any future children we have. Work benefits are nice but can be cut any time so I don’t depend on them. Plus, we have both changed employers in the last 5 years.

  3. Barb

    Just wondering what or if you chose any insurance? I am in the same exact position ( life and work wise) at the moment but just getting into a mortgage and faced with insurance. To me mortgage life insurance seems to be a waste of money. I can take out additional insurance through work which seems to be a better option as it’s a set payout if I pass and doesn’t depreciate like mortgage insurance, at least someone besides the bank is getting my money.
    I think I have made my mind up but just wondering others input on a similar situation.

    • Hi Barb. I decided not to get any extra insurance and definitely no mortgage-life insurance. My current coverage through work would cover the cost of a funeral as well as all my bills for a fair bit of time. I expect my beneficiaries to sell my house, so there’s no real reason to have a big life insurance policy when there isn’t anyone but myself depending on my income.

      • Barb

        Thanks for the response , gives me more food for thought 🙂

  4. I guess I’m confused. Do relatives of the deceased up in Canada owe the debts of the deceased? I could understand if you were to leave the house for someone then they could use the life insurance money to pay it off. But I doubt your parents, in your untimely death, would want to keep your house. I am not trying to persuade you to not buy. I think life insurance is cheep if you get Term life insurance.

    • The executers of my estate would be responsible for my debts if I were to die. My only debt is my mortgage – and I do expect my parents would sell my place which would cover the mortgage. That’s why I don’t really need life insurance, in my opinion, even if it is cheap. It would just be an extra payment to someone. While nice, I think it would be more beneifical to save the money I would spend on life insurance.

      • Ok that makes sense. In the US the estate is responsible for it’s only debts. Unless someone co-signed or something like that. So if the estate has more debts than assets the assets are liquidated, the debts are paid as they can be and the rest are just written off.

  5. Verona

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