Can't Afford Life Insurance - What to Do?

Updated on April 06, 2013
M.T. asks from Saint Paul, MN
16 answers

Hi, we've been looking into life insurance. We decided term, about 250,000-350,000 for 30 years. We're in 40-45 year range. We decided on 30 years because we still have almost full 30 years on our mortgage, and came up with the coverage amount from the remaining mortgage amount plus some living expense for our son (per months amount x 12 x 18 years). 350,000 also includes expected college cost for our son, 250,000 doesn't. (No inflation taken into account, which it should, but we can't really increase the coverage amount beyond this)

We both work, so we'll get term insurance for both of us. However, finances have been tight these days, and we feel like we cannot afford the premiums. The monthly premium will pretty much take up all of the amount that we've been able to squeeze and save each month (outside of retirement account).

So, in this case, should we get life insurance? We don't want to get into debt when we have something unexpected come up and not have savings (because we've been paying all extra money into life insurance). It doesn't seem to make sense to reduce the amount to contribute to retirement to pay life insurance premiums.

Just wanted to get others' opinions on what to do in this kind of case. Thank you!

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answers from Honolulu on

You need coverage. Look at 10 year level term or 5. When things improve get the 30 then. You need to be responsible now.

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answers from Boise on

Let me start by saying I am a wife of an insurance agent.

Now, let me say this...I have also spent a few years doing historical research of the 1930s depression, the Weimar republic hyperinflation, and economics, after the 2008 stock market crash. One of the books I read was the book: "Money Mischief" by Milton Freidman, a top economist. He tells exactly what happens when a country doesn't produce goods anymore, and starts printing money to get out of debt.

We are in trouble. We have a freight train coming at us here in America and most of us are asleep. Already, we have begun to hit inflation. You can see the devaluation of the dollar (IE:inflation) by tracking what is happening with gold. In the past year, gold has gone up 30%. That means that the dollar is worth 30% less than a year ago. That also means that the dollar value of stocks has gone down 30%, even though they report the market climbing- that money is worth 30% less and so you have lost money on stocks- not gained it. !We had a half percent inflation of food costs in January. The consumer price index forecast is scheduled to go up a half percent every month, with .7 % toward the last months of 2011. That means by the end of this year- the 'forcast' is about a 6 % increase in food. That is not counting the increase you will see in gas and electricty costs. 2012 will find inflation rising much more swiftly.

It takes anywhere from 2-4 years for inflation to hit once printed money has been dumped into an economy. If you look at the charts, money circulation had a relatively steady horizontal line, until 2007, where it shot up almost vertical. The money bailout printed by Obama , JUST by the year 2009, was more than the 1930 depression bailout, the Korean War, he Iraq war, and the 1980 S and L crisi bailout combined.

If we take a moment to look at what happened in Weimar Germany in the 1920's when they printed money to pay debt- we can see that although the first stage of inflation for them was 1915, they entered 1918 with a relatively low consumer price index of 140%. By 1920 there was a 500% increase in the CPI and food was 3/4 of a families income. Two years later, in June 1922, the CPI was 700%... and then, If THAT wasnt bad enough, HYPERinflation hit and all hell broke loose. A wheelbarrow of money couldnt buy a loaf of bread- but you could'nt find one on the shelf even if you wanted one.
Our current CPI is 220% and climbing monthly......
You need to seriously consider if you want to do this right now, especially since you cant afford to do it. Money is losing value, so are bonds,IRAs' saving accounts, etc..anyone relying on pensions will be in deep crud.

Gold (esp. collector coins like old american gold coins) , silver, oil, dehydrated foods and bulk stored grains, etc will maintain and increase thier value in the years ahead.

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answers from Omaha on

Can you afford a lower amount of life insurance? Lets say $100,000? If so, then I would go that route. I do understand your worries; however, it would be better to have some insurance to help out then to have none at all. Maybe in a few years you will be able to afford a larger plan and then you can change it.

This is what I would do for now.
Good luck!

2 moms found this helpful


answers from Boston on

I am also the wife of a financial planner. A financial planner who was just diagnosed with colon cancer. Probably the second thing he said to me was "well, now I'm uninsurable." He's 40 years old. I gotta tell you, as totally scary as this is, and it's pretty darn terrifying, it's nice to know that if, heaven forbid, something happens, my kids and and will be taken care of.

The thing about insurance is that, for most people, it's a waste of money. But you don't know if you're going to be one of those people it's a waste for or one of those people that it's the best investment they ever made.

So I don't know exactly what to tell you, but my gut says that you need to get _something_. Try to find a plan where you can increase the amount of coverage without further medical testing. Then when things aren't so tight you can add a little more. But to my mind, it does actually make sense to reduce payments a little into retirement, because again, as soon as you know you need insurance, you can't get it.

Good luck.

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answers from Lincoln on

You have got some decent advice here, but I cannot believe that no one has pointed out what the real problem is which is that, like a lot of people, you are overextended on your home mortgage! First of all, most financial experts advise against 30 year mortgages and only recommend 15 years or less! You are talking about not having your home paid for until you are 70-75 years old! That is much too late! You cannot count on making mortgage payments at that age because you might be dead, in ill health, replaced by a younger (and less costly) employee, and if you draw social security, your earnings will be limited by it. You need to downsize your home to something you can have paid for in 15 years max. You said life insurance premiums would take all the money away from being able to have an emergency fund. Obviously, if you downsize to a home with a 15 year mortgage, that would free up money for an emergency savings fund and for life insurance premiums, plus you would not need as much life insurance or for as long of term because your home will be paid for sooner! If you have any car loans, same goes for them - downsize to something paid for! You will sleep better!

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answers from San Diego on

i would suggest getting the lower year 5 or10 etc rather than 30 you should be able to convert it into something else when you are ready. i don't know your health or expenses but perhaps get one term and one whole life policy which can act as a "savings account" its grows a slow rate after a few years you could have a decent amount to borrow against your policy. also check out other companies. many companies offer discounts if you have multiple lines of insurance such as auto or homeowners.
dont rush into it study up or find a trustworthy friend to help you through all the red tape. plus you can always get more/different insurance later perhaps certain health issues are boosting your premium ie smoking, overweight, job dangers etc. good luck its hard to suck up the money for something that doesn't help you now but it is so important that you are going to take care of eachother if something happens.

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answers from Duluth on

well, are you going to get a tax refund this year? really, it shouldnt be that expensive to pay it in full for a year with your tax refund. this is what we do. really, you cant afford NOT to get life insurance; if something were to happen to one or both of you, you are leaving someone with a HUGE burden. have you heard of dave ramsey? he teaches only to get term life, and only for as long as you plan on being in debt. sure, short term it doesnt look like it would work, but there are ways to better your whole picture. i highly recommend looking dave ramsey up and trying to find a class that might be near you. if nothing else, you can buy a home study kit, or just get information right off his website.

in reality; with the whole picture of what dave ramsey teaches, it IS worth it to reduce retirement to pay life insurance, at least for now while you are still in debt. he teaches steps to get out of debt, and improve your whole financial picture, and by the time you follow all the steps, you are not only self insuring yourself, but you are also guaranteeing that your retirement will be sufficient. step one is to get 1000$ into savings any way possible in the shortest time possible. sell something. stop eating out. budget so you know where every cent is going; use only cash. use your tax refund to put this 1000$ away. basically its a cushion in case something happens while you are on the next step.

the next step is to snowball off your debt. list your debts from smallest to largest (contrary to highest interest rate and etc) and start paying as much as possible on the smallest debt. again, dont eat out, sell things, etc. as soon as you pay that small debt off, put the entire amount you paid on that debt onto the next smallest. you can easily see that as you pay off one debt at a time, the amount you are paying toward a debt increases, and the "snowball" gains momentum and grows and pretty soon (typically in 18 months) you are out of debt! we are 13 months from our dave ramsey class, and we have only around 8000 left from a previous 15-20000 debt. it is overwhelming to think you could pay off that much debt in a year, but amazingly, being sensible about money, not buying things you dont have cash for, and cutting out extras really helps. we have used a lot of tax refund money toward debt instead of toward frivolence. dont get me wrong, we used 1300 last year toward 2 family trips and this year will probably do near that again but we got more than that in our tax refunds, and sold other things to pay off debt as well. its amazing the things you can think of. do a garage sale (or plan one for the very near future). sell on ebay (there are even shops that charge a small fee to do this for you). try bookoo, an form of online garage sale. (dont know about availability of bookoo nation wide, but its worth a shot).

anyway, just getting organized about money is a great idea, and dave ramsey is teaching thousands and thousands of people how to do this; he has thousands that get to call his radio show and scream "IM DEBT FREE!!" you have no idea, at this point, how gratifying that is.

step three is to get 3-6 months living expenses into that savings, then paying off the mortgage, getting all proper insurances, retirements, investments, etc.

anyway, i encourage you to check it out and do the class if you can. if not, start thinking about budgeting, reducing expenses any way you can (meals out, frivolous shopping, vehicle change/examination, no cable, cell phone plans, etc) and paying off debt so that you dont have to live this way. trust me, it seems impossible now, but it really isnt. it really is a way we can live. in this country, we screwed ourselves by always spending what we didnt have, and borrowing to have it. we dont have to live that way! people are gradually learning how to have patience, use cash, buy only what they have the cash for, etc. people are even having the ability to save money and buy a house IN CASH, and never have a mortgage! amazing!? but so totally awesome.

anyway. get the life insurance with some extra money. it will at least give you the peace of mind. if the rates you are looking at seem high, call around, get estimates from other companies. like i said, use your tax refund. isnt life insurance worth more than whatever frivolous expense it is that people think they have to use their tax return for? and that way, you could pay for the whole year, and not worry about it. i dont know your whole picture or anything, but my husband and i in good health just paid for a year's worth of term life insurance (20 year term - trust me, you go with dave ramsey's plan, you wont have your mortgage for 30 years, and if you do, just renew for a 10 year plan when you cross that bridge! LOL) and we paid a total of 491$ for both plans through american family. again, i dont know your whole "picture" or your health or anything, but you can do things to reduce rates too if you are a smoker, work to quit. things like that.

anyway. you can do it. check out dave ramsey. good luck!

1 mom found this helpful


answers from Appleton on

Check with your mortgage company, you may already have mortgage insurance. Many lenders include a decreasing term life insurance policy with your mortgage. A decreasing term policy decreases at the rate your mortgage does and pays off the house at time of death.
I know term life insurance seems like a better deal but isn't. A whole life policy will build cash value as you pay into it. In case of emergency you can borrow on that cash value, if you do not repay the loan the amount comes off the benefit at time of death. Also if you get a term policy now you are paying a premium for a 40-45 yr old person, if you wish to continue the policy at the end of the term you will pay a premium of a 70-75 yr old. Only if you then qualify for life insurance. If you or your hubby get cancer or heart disease you won't qualify for life insurance. Your best option is to take out a whole life insurance policy on both of you for a smaller amount that has the ability to grow or add on more insurance as you are able to afford it.
I had a license to sell life insurrance years ago and would never advise anyone to take out term insurance, unless it is to cover a mortgage.
As far a college goes, don't worry about it, you can take out grants and loans to cover tution.

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answers from Minneapolis on

I second (third? fourth?) what everyone has said. Get less insurance. Some is better than none. Decide what you can afford, and get insurance that matches that. I totally get that it's not the ideal amount of coverage, but every little bit will help, should something happen.

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answers from Glens Falls on

You could look at decreasing term insurance where the benefit goes down as you age - it's intended to cover mortgages where the balance is also going down. I think your financial institution might also have mortgage insurance available that covers both of you (as it's unlikely that you would die together) with decreasing term coverage. Because the benefit goes down when the risk to the carrier is going up (as you age), this might be cheaper.

1 mom found this helpful


answers from Pittsburgh on

I forget the percentages but you're more likely to become disabled than killed so I would focus more on making sure you have disability insurance rather than life insurance.

Do your employers not offer a group plan?

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answers from Los Angeles on

Hi M.! You have done a good job of getting started with the amount of life insurance you should get, but I really want to impress on everyone the fact that this is not an "extra" in life - it is a necessity.
Have a look at for some more help in finding ways of getting this into your budget. I've even written a ebook on this that visitors can ask for free of charge.
Take care!
Rowena Y


answers from Washington DC on

such a good question, and such a difficult one to answer!
i totally agree that it's not smart to reduce your retirement contributions.
i think i'd go with a shorter term so you have SOMETHING in the next 5-10 years. yes, premiums will go up as you age, but you do also have to think of the now, and as the wise galiski points out, we're in the midst of a financial crisis (which, if it really crashes, could result in some insurance companies defaulting on payouts.)
bear in mind, this is coming from the woman who cancelled her excellent whole life policy about 20 years ago because she totally bought into 'buy term and invest the difference.' our term policies are nearly up and now we're over 50 and facing shopping for new ones.
i don't regret many decisions in my life, but i would sure do that one over if i could.
:/ khairete



answers from Charlotte on




answers from New York on

Such a timely question! We spent about two hours with our financial planner last night discussing our investments, retirement allocations and life insurance options. I would suggest making an appointment with whoever is "managing" your 401/403 and seeing what they think.

In our case, our planner suggested that we purchase the life insurance, but pay it as a one-time annual fee b/c it was significantly less expensive and it "locks-in" the rate.

I have to ask, though- is your premium high due to medical conditions? We are both in th3 30-40 range and have no "risk factors" and were quoted 30yr term at around $40 per month with my husband's being slightly higher b/c he's a male.

Get multiple quotes and meet with your account manager- they are charging you a quarterly "fee" to manage your account, so please use them! Ours literally laid-out our finances for the next 30 yrs if we changed nothing, if we "upped", "reduced", "reallocated" and has created a plan that makes sense for us.


answers from Houston on

Could you cut down the amount? How about leaving your son's college out of it? What about cutting the amount of insurance down for the higher wage earner? My husband's policy is much higher than mine bc he is the wage earner, but if I were to go suddenly, he would still be working. My policy is just literally enough to cover the house and funeral costs, his policy is enough to cover the house, the funeral, a little time to get things together and enough for me to go to school or something like that. I think you absolutely need insurance, but maybe cut the amount some so that you aren't over extending yourself now. Plus if one of you passed suddenly, the other would still have a job, so you may want to just make sure you can cover the house and funeral expense. You can always increase it later, and you can save for your son's college in another manner, it is not necessary to include it in the insurance. Why not save for that in an interest bearing account that will help you out as you save? We are planning to fully fund each of our children's college at age five. We will be putting the amount we need in a 529 plan. You can learn a lot about that by checking out Dave Ramsey, either online or look into one of his books. Very informative!! Good luck!

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