Life Insurance Changes

This post is part of the Life Insurance Movement that is being promoted by Good Financial Cents.

In the past year my wife and I graduated from Financial Peace University and listened to Dave Ramsey's advice of looking into getting 10 times our income in term life insurance.  We got several quotes and found that Zander Insurance was a great broker that got Anna and I both our best quotes.  So we signed up, canceled our old policies and are cashing in the cash value of William's Gerber Life Insurance policy that after doing the math was ripping us off.

Why 10 times our income?
We chose to get 10 times our income because when that money is invested in a good growth stock mutual fund the interest could replace the lost income of either Anna or myself if something would tragically happen to one of us.

Why term life insurance?
We chose to do term life insurance because it is cheaper and we will be disciplined enough to invest the difference in a Roth IRA.  Traditionally, an IRA invested in a good growth stock fund will get much better returns than that of a cash value life insurance policy.  Life insurance should not be where you make your investments because returns are historically low.  When you die with cash value, the insurance company keeps the cash value.  Also, the fees deducted from your returns are extremely high.

Additionally, fifteen years from today when William is grown and has graduated from college, we will be debt-free (including our mortgage) and we should have investments that have grown to a substantial amount in order to allow us to become self-insured.