When should you consider obtaining a life insurance policy?

I recently came across your teachings a couple of weeks ago, and I’m already making progress on Baby Step 2. However, I’m unsure if I should purchase a life insurance policy now or wait until I’ve fully paid off my debt. To provide some context, I am currently single with no dependents, and my total debt amounts to $44,700. I do have a $25,000 life insurance policy provided by my employer. What would be your recommendation in my situation?

If you have a genuine need for life insurance, it shouldn’t be considered a part of your Baby Steps; instead, it’s a crucial element of your budget that should be addressed promptly. However, based on the information you’ve shared, it seems that your current life situation doesn’t warrant a significant life insurance policy. Since no one is financially dependent on your income, the $25,000 policy provided by your employer should suffice to cover any final expenses in the event of your passing.

The primary purpose of life insurance is to financially support those who rely on your income after you’re gone. I would typically recommend having a life insurance policy worth 10 to 12 times your annual income if someone is financially dependent on you. For instance, if your annual income is $80,000, you should consider a policy ranging from $800,000 to $960,000.

In your current circumstances, my suggestion would be to hold off on purchasing an additional life insurance policy. If you eventually get married or have children, that would be the appropriate time to consider acquiring one. In such a scenario, both you and your spouse should aim for 15- to 20-year level term policies with coverage amounts equivalent to 10 to 12 times your individual incomes.

Lastly, I would advise against purchasing any type of life insurance other than level term life insurance. The reason for this is that it provides coverage until your debts are paid off, and you and your spouse have accumulated enough savings that life insurance is no longer necessary. Achieving financial self-sufficiency is a significant milestone, and it’s a wise goal to strive for.