Opinions requested on life insurance

[beanmaestro]

My wife is now officially knocked up, and we figure it’s time to get some life insurance. I’ve read a lot of articles on the subject, and played with a number of calculators, many of which are written by purveyors of life insurance and are trying to convince me that my wife need anywhere from $900k to $3.3M if I die.

But before I discount most of these calculators as hoplessly interest-conflicted, I thought I’d ask the folks here. So here goes…

Basic questions:
– Do you insure on the low side or the high side of the calculators? Or well below it?
– In calculating need, do you plan to pay off the house? pay whole family’s expenses till retirement? The online calcs like to assume this…
– Do you insure past the time your kids go to college?
– Is there any reason to get a whole life policy if we could put the extra into a 401k?
– Does anyone have a term policy that lowers in value as you age; I’ve seen mention of these, but few quotes for it.

Specifics, in case anyone wants to think harder:

Liabilities:
About $650k in total (mostly mortgage) debt,
Total expenses around $72k/year
Current saving rate around $40k/year, maxing retirement accounts
One in the oven; planning to have a second around 2013

Assets & income
$750k house
$230k in retirement accounts
$10k in taxable accounts
My income ~ $110k
Wife’s income ~ $40k, voluntarily part time, but she’s turned down $80k jobs. Planning to stay part-time after baby.
Could rent a room for $1k/mo if desired
Both of us have engineering PhD’s
Wife is hot; Would remarry in 5 years if I died

[patientrenter]

5 years, eh?

Before tax, you earn $140K. After tax, maybe $100K. 5 years of that is $500K. Buy a term policy for at least $500K. Then your wife won’t have to work for those 5 years. Consider 10 or 20 year level premium term. Shop around at the online quote systems. I’d look at amounts up to $1 mill, if the premiums are good.

If you are an employee, you may have group life benefits from work. Check that first.

[patientrenter]

5 years, eh?

Before tax, you earn $140K. After tax, maybe $100K. 5 years of that is $500K. Buy a term policy for at least $500K. Then your wife won’t have to work for those 5 years. Consider 10 or 20 year level premium term. Shop around at the online quote systems. I’d look at amounts up to $1 mill, if the premiums are good.

If you are an employee, you may have group life benefits from work. Check that first.

[patientrenter]

5 years, eh?

Before tax, you earn $140K. After tax, maybe $100K. 5 years of that is $500K. Buy a term policy for at least $500K. Then your wife won’t have to work for those 5 years. Consider 10 or 20 year level premium term. Shop around at the online quote systems. I’d look at amounts up to $1 mill, if the premiums are good.

If you are an employee, you may have group life benefits from work. Check that first.

[patientrenter]

5 years, eh?

Before tax, you earn $140K. After tax, maybe $100K. 5 years of that is $500K. Buy a term policy for at least $500K. Then your wife won’t have to work for those 5 years. Consider 10 or 20 year level premium term. Shop around at the online quote systems. I’d look at amounts up to $1 mill, if the premiums are good.

If you are an employee, you may have group life benefits from work. Check that first.

[patientrenter]

5 years, eh?

Before tax, you earn $140K. After tax, maybe $100K. 5 years of that is $500K. Buy a term policy for at least $500K. Then your wife won’t have to work for those 5 years. Consider 10 or 20 year level premium term. Shop around at the online quote systems. I’d look at amounts up to $1 mill, if the premiums are good.

If you are an employee, you may have group life benefits from work. Check that first.

[garysears]

I’m not an insurance expert. My basic philosophy is to separate needs from wants. When I was still single I determined my goal with life insurance was simply to not be a burden on anyone else if I were to die. I just wanted my revolving debt paid off and funeral expenses covered. I rejected thoughts about a potential windfall I might “gift” the family. Likewise, when the whole life peddlers came and I was unable to determine a significant benefit vs term insurance and investing the difference, I opted for term for the flexibility and simplicity. I am confident today that was a good choice.

Now that I am married with a child I am “underinsured” when the insurance sellers look at my situation. I was told by the USAA rep I should consider $1-$2 million. I only have 500k (SGLI plus a 100k term policy) but I am happy with that. I think 5x income is reasonable advice given your house is not upside down. If need be your wife could sell the house and downsize significantly.

For me, I am happy to have enough to pay off my soon to be mortgage, leaving over half as a cushion for my wife. With minimal housing cost she would be able to support herself on a low wage part time basis if required (we will have rental income with our property).

The ability to pay off the mortgage with some combination of savings and insurance is HUGE in my opinion. If she can drastically lower the monthly cash flow requirement by retiring the mortgage, your wife will have great flexibility financially.

[garysears]

I’m not an insurance expert. My basic philosophy is to separate needs from wants. When I was still single I determined my goal with life insurance was simply to not be a burden on anyone else if I were to die. I just wanted my revolving debt paid off and funeral expenses covered. I rejected thoughts about a potential windfall I might “gift” the family. Likewise, when the whole life peddlers came and I was unable to determine a significant benefit vs term insurance and investing the difference, I opted for term for the flexibility and simplicity. I am confident today that was a good choice.

Now that I am married with a child I am “underinsured” when the insurance sellers look at my situation. I was told by the USAA rep I should consider $1-$2 million. I only have 500k (SGLI plus a 100k term policy) but I am happy with that. I think 5x income is reasonable advice given your house is not upside down. If need be your wife could sell the house and downsize significantly.

For me, I am happy to have enough to pay off my soon to be mortgage, leaving over half as a cushion for my wife. With minimal housing cost she would be able to support herself on a low wage part time basis if required (we will have rental income with our property).

The ability to pay off the mortgage with some combination of savings and insurance is HUGE in my opinion. If she can drastically lower the monthly cash flow requirement by retiring the mortgage, your wife will have great flexibility financially.

[garysears]

I’m not an insurance expert. My basic philosophy is to separate needs from wants. When I was still single I determined my goal with life insurance was simply to not be a burden on anyone else if I were to die. I just wanted my revolving debt paid off and funeral expenses covered. I rejected thoughts about a potential windfall I might “gift” the family. Likewise, when the whole life peddlers came and I was unable to determine a significant benefit vs term insurance and investing the difference, I opted for term for the flexibility and simplicity. I am confident today that was a good choice.

Now that I am married with a child I am “underinsured” when the insurance sellers look at my situation. I was told by the USAA rep I should consider $1-$2 million. I only have 500k (SGLI plus a 100k term policy) but I am happy with that. I think 5x income is reasonable advice given your house is not upside down. If need be your wife could sell the house and downsize significantly.

For me, I am happy to have enough to pay off my soon to be mortgage, leaving over half as a cushion for my wife. With minimal housing cost she would be able to support herself on a low wage part time basis if required (we will have rental income with our property).

The ability to pay off the mortgage with some combination of savings and insurance is HUGE in my opinion. If she can drastically lower the monthly cash flow requirement by retiring the mortgage, your wife will have great flexibility financially.

[garysears]

I’m not an insurance expert. My basic philosophy is to separate needs from wants. When I was still single I determined my goal with life insurance was simply to not be a burden on anyone else if I were to die. I just wanted my revolving debt paid off and funeral expenses covered. I rejected thoughts about a potential windfall I might “gift” the family. Likewise, when the whole life peddlers came and I was unable to determine a significant benefit vs term insurance and investing the difference, I opted for term for the flexibility and simplicity. I am confident today that was a good choice.

Now that I am married with a child I am “underinsured” when the insurance sellers look at my situation. I was told by the USAA rep I should consider $1-$2 million. I only have 500k (SGLI plus a 100k term policy) but I am happy with that. I think 5x income is reasonable advice given your house is not upside down. If need be your wife could sell the house and downsize significantly.

For me, I am happy to have enough to pay off my soon to be mortgage, leaving over half as a cushion for my wife. With minimal housing cost she would be able to support herself on a low wage part time basis if required (we will have rental income with our property).

The ability to pay off the mortgage with some combination of savings and insurance is HUGE in my opinion. If she can drastically lower the monthly cash flow requirement by retiring the mortgage, your wife will have great flexibility financially.

[garysears]

I’m not an insurance expert. My basic philosophy is to separate needs from wants. When I was still single I determined my goal with life insurance was simply to not be a burden on anyone else if I were to die. I just wanted my revolving debt paid off and funeral expenses covered. I rejected thoughts about a potential windfall I might “gift” the family. Likewise, when the whole life peddlers came and I was unable to determine a significant benefit vs term insurance and investing the difference, I opted for term for the flexibility and simplicity. I am confident today that was a good choice.

Now that I am married with a child I am “underinsured” when the insurance sellers look at my situation. I was told by the USAA rep I should consider $1-$2 million. I only have 500k (SGLI plus a 100k term policy) but I am happy with that. I think 5x income is reasonable advice given your house is not upside down. If need be your wife could sell the house and downsize significantly.

For me, I am happy to have enough to pay off my soon to be mortgage, leaving over half as a cushion for my wife. With minimal housing cost she would be able to support herself on a low wage part time basis if required (we will have rental income with our property).

The ability to pay off the mortgage with some combination of savings and insurance is HUGE in my opinion. If she can drastically lower the monthly cash flow requirement by retiring the mortgage, your wife will have great flexibility financially.

[HLS]

Most important factor is your age/health today.
$1M term may not be enough with inflation.
A 20 year term isn’t that expensive in your 20’s or 30’s. At least cover the kids through college and pay off a mortgage.(declining balance)

If you have are able to create a part time schedule C business, you may be able to deduct the cost of life insurance as a business expense.
(**Consult your tax advisor)

Also, do not discount the value of your wife’s contribution. If something happened to her and you had to hire help to replace her to take care of kids etc while you were making a living, it wouldn’t be cheap. Consider a $500K policy on her.
If you are young, it is cheap insurance.

Even in mid 40’s and decent health, $1M 20 yr term
is around $1500 a year, level premium. When you are younger it’s much cheaper.

Pay your premiums annually rather than monthly or quarterly and you will usually save a bit on the premium.
Find an agent that you like, the pricing is controlled by the insurance company, but the agent gets a nice commission, I think it may be equal to the annual premium, with possible residuals.

Stick with a major well rated company and hope that they are around longer than you are. 😉

Don’t forget that you pay for most insurance policies hoping that you will never need them.
With a term policy, this one is no exception!

The amount you need boils down to how nice you want to be to her next husband, and if you know the joke, don’t worry about your golf clubs as he wont be using them because he is left handed.

[HLS]

Most important factor is your age/health today.
$1M term may not be enough with inflation.
A 20 year term isn’t that expensive in your 20’s or 30’s. At least cover the kids through college and pay off a mortgage.(declining balance)

If you have are able to create a part time schedule C business, you may be able to deduct the cost of life insurance as a business expense.
(**Consult your tax advisor)

Also, do not discount the value of your wife’s contribution. If something happened to her and you had to hire help to replace her to take care of kids etc while you were making a living, it wouldn’t be cheap. Consider a $500K policy on her.
If you are young, it is cheap insurance.

Even in mid 40’s and decent health, $1M 20 yr term
is around $1500 a year, level premium. When you are younger it’s much cheaper.

Pay your premiums annually rather than monthly or quarterly and you will usually save a bit on the premium.
Find an agent that you like, the pricing is controlled by the insurance company, but the agent gets a nice commission, I think it may be equal to the annual premium, with possible residuals.

Stick with a major well rated company and hope that they are around longer than you are. 😉

Don’t forget that you pay for most insurance policies hoping that you will never need them.
With a term policy, this one is no exception!

The amount you need boils down to how nice you want to be to her next husband, and if you know the joke, don’t worry about your golf clubs as he wont be using them because he is left handed.

[HLS]

Most important factor is your age/health today.
$1M term may not be enough with inflation.
A 20 year term isn’t that expensive in your 20’s or 30’s. At least cover the kids through college and pay off a mortgage.(declining balance)

If you have are able to create a part time schedule C business, you may be able to deduct the cost of life insurance as a business expense.
(**Consult your tax advisor)

Also, do not discount the value of your wife’s contribution. If something happened to her and you had to hire help to replace her to take care of kids etc while you were making a living, it wouldn’t be cheap. Consider a $500K policy on her.
If you are young, it is cheap insurance.

Even in mid 40’s and decent health, $1M 20 yr term
is around $1500 a year, level premium. When you are younger it’s much cheaper.

Pay your premiums annually rather than monthly or quarterly and you will usually save a bit on the premium.
Find an agent that you like, the pricing is controlled by the insurance company, but the agent gets a nice commission, I think it may be equal to the annual premium, with possible residuals.

Stick with a major well rated company and hope that they are around longer than you are. 😉

Don’t forget that you pay for most insurance policies hoping that you will never need them.
With a term policy, this one is no exception!

The amount you need boils down to how nice you want to be to her next husband, and if you know the joke, don’t worry about your golf clubs as he wont be using them because he is left handed.

[HLS]

Most important factor is your age/health today.
$1M term may not be enough with inflation.
A 20 year term isn’t that expensive in your 20’s or 30’s. At least cover the kids through college and pay off a mortgage.(declining balance)

If you have are able to create a part time schedule C business, you may be able to deduct the cost of life insurance as a business expense.
(**Consult your tax advisor)

Also, do not discount the value of your wife’s contribution. If something happened to her and you had to hire help to replace her to take care of kids etc while you were making a living, it wouldn’t be cheap. Consider a $500K policy on her.
If you are young, it is cheap insurance.

Even in mid 40’s and decent health, $1M 20 yr term
is around $1500 a year, level premium. When you are younger it’s much cheaper.

Pay your premiums annually rather than monthly or quarterly and you will usually save a bit on the premium.
Find an agent that you like, the pricing is controlled by the insurance company, but the agent gets a nice commission, I think it may be equal to the annual premium, with possible residuals.

Stick with a major well rated company and hope that they are around longer than you are. 😉

Don’t forget that you pay for most insurance policies hoping that you will never need them.
With a term policy, this one is no exception!

The amount you need boils down to how nice you want to be to her next husband, and if you know the joke, don’t worry about your golf clubs as he wont be using them because he is left handed.

[Author]

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