Every Friday I take a reader’s question and spend some time answering it. Our question today was submitted via my reader survey. If you want to ask a question, contact me.
If you had to choose between retiring debt and insuring a stay at home homeschooling mom which would be a higher priority and why?
I’m a proponent of debt free living. I’m glad that you’re trying to focus on paying off debt. However, to answer your question, I would buy insurance for a stay at home homeschooling mom.
But, let me clarify one thing – I’m interpreting insurance as health insurance. If you are asking about life insurance, my answer would be the same (though perhaps not as strongly).
We all want our financial momentum to be moving forward. Paying off debt is a great way to progress financially. However, the first step is to be sure that we have protected ourselves from going back further or getting deeper into debt.
Medical bills are one of the leading causes of bankruptcy. Without health insurance your financial condition could self destruct in a moment.
Several years ago my wife went to a walk-in clinic with a pain in her side. She was referred to the hospital emergency room. We drove to the hospital, she laid on a gurney in the hallway for a couple of hours, and we left with vicadin and a bill for about $2,500. And there was no major issue.
The risk of not having insurance is far too much of a risk.
I’ll use a sports analogy for a moment. In hockey, at any time you can pull out your goalie so you can have 6 skaters on the ice. However, the only time teams pull the goalie is when they are down by a goal with only a few minutes left in the game. Though they get an offensive advantage, pulling the goalie is not worth the risk unless you have no other alternatives.
Insurance is a defensive purchase. While you want to get ahead on paying off your debt, don’t open the door to too much risk along the way.
You could consider a major medical policy that has a higher deductible as this would significantly reduce your premiums. However, just be sure you will be able to pay the deductible should there be a family emergency.
If you’re asking about life insurance I would also purchase the life insurance instead of paying off debt.
Raising your child(ren) without a mother around would be an extremely difficult task. Having that life insurance money available gives you the flexibility to put your family first and minister to them through the transition. Otherwise, you will be forced to continue to work to support the family, but also have no options for what to do with your children. The life insurance gives you the flexibility to do what is best for your family.
Oh, and one final thing. If you’re asking detailed questions like this and trying to cut every unnecessary expense out of your budget, then congratulations. You’re on the right track to getting debt free fast. Just don’t take any shortcuts and you’ll be debt free faster than you know.
In this case, term life insurance would be best as you will have much lower premiums and can focus on debt repayment.
Any other advice?