There’s a necessary evil when it comes to money. If you are serious about money and securing a financial future for your family, you simply must do it.

Your blood = money.

Tomorrow morning I’m going to have a visitor that will demand my blood in exchange for financial security. There’s really no reasonable way around it. I will need to submit to the torture… for a life insurance policy.

If you are visiting this site, chances are you consider your money important. And I bet you have (or will have) a family or other important people relying on you to take care of them with that money. The honest truth is we never really never know when our life will end. In the case where it ends sooner than expected, it is your responsibility as a provider to make sure those that depend on you are taken care of.

How much coverage do you need? I’ll point you to a few resources below that will help you answer this question. What I’d like to share with you is something most people don’t think about. I like to call it ‘policy layers’.

Layers of coverage can be used to increase or decrease your life insurance coverage based on lifetime events. By purchasing different policies with differing dollar amounts and terms, it is quite simple to structure a coverage plan that will self adjust over time.

Let’s go through a simple example. Let’s use a typical family of four with life events that include marriage, births of two children, the children growing up and leaving the nest, and finally retirement.

Let’s start with a simple illustration that shows the policy layers with the appropriate terms.

In this example, the breadwinner of the family marries his (or her!) spouse at age 25. Shortly afterwards, he decides to buy a life insurance policy to provide for his wife should something happen to him. This coverage is likely on the smaller side, perhaps enough to pay off their home mortgage and provide living expenses for 5-10 years.

After 5 years of marriage, the couple decides to have a baby and realize that they need more coverage. Instead of canceling or upgrading the existing policy to get more coverage, a second 20 year policy can be purchased to cover the additional needed security to raise the child and send her to college. This is repeated above for the second child.

This simple layering technique allows you to let each policy expire after it has served its own distinct purpose. In the case of each child graduating college, moving out and starting their own life, the 20 year policy expires just as it is no longer needed. Similarly, the 30 year term policy makes sense while the couple is growing their retirement accounts and paying down their mortgage. By the time they reach age 55, they will have likely accumulated enough net worth not to need the original policy.

To save the most money over the course of each policy, I recommend term life insurance. You get the highest coverage for the lowest premiums - plain and simple. I consider other life insurance products to be great money makers for insurance companies, but not for the policy holders. If you just pay for the coverage you need and stash extra cash elsewhere, you’ll likely be far ahead of the game. I just don’t buy the ‘forced savings’ arguments out there for whole life and return of premium policies. Do your own research and decide for yourself. Just make sure you don’t neglect this financial necessity!

Here are some links for further reading & research:

Term or Whole Life?
This is a good article at SmartMoney.com covering the differences between term and whole life.

Life Insurance Needs Estimator
This is a very good calculator you can use before buying a policy.

Insure.com
I bought 2 life insurance policies from Insure.com thus far. The rates are unbeatable.