OT: Term life insurance

[arv]

I got approval for term insurance and need to decide what dollar and term years to select.
I thought fellow piggs might have gone through this decision process. So wondering what you consider to make a decision for term dollar amount and years. Thank you for your advice.

[NotCranky]

You have to go based on your own case. My wife and I got 20 years when the first kid was born . We didn’t get that much
250k each, house was already nearly paid off but we didn’t have much other than that. We know family has the money to raise kids too if something happened but what we have should cover it easily and help kids launch too. College is already covered by grandparents unless some disaster strikes. . Still, going to shop around and get a few more years and higher dollar amount like some other posters have done recently. Just like playing the lottery.

I think I would go for a longer term from the start, but I am not sure. The real financial planners here can answer that. We only paid $14 and $19 a month all along so that seems like a bargain.

[ljinvestor]

Look at current debt and future responsibilities you would like to cover such as raising kids or making sure loved ones could transition comfortably. 20yr plans typically offer the best bang for your buck unless you feel pretty comfortable that you are only protecting a 10 or 15yr need. 25 & 30yr plans get a little expensive IMO.

What carrier did you get approved with? Check their conversion options as many carriers allow evidence free conversions to permanent product in the first 20yrs up to age 70 or 75, but with so many products out there some may not have any conversion option or just allow for the first 10 years. A good conversion option helps if you have major health issue or become un-insurable during the initial term and want to continue coverage after that term at reasonable rates.

If you are younger and got approved at a good health class where rates are cheap then I would consider going for a higher death benefit amount when estimating your need, especially if the contract allows for future face reduction which most should. Pricing by the carriers is usually banded at $250k, $500k, & $1,000,000 so you can get better price per $1k when you hit those. Hope that helps.

[CA renter]

How old are your kids? Plan to have any more? Do you have family who could care for them in the event you and your spouse/co-parent both die? Are those family members fairly well-off, or do they struggle financially? Do you have a SAHP who would have a difficult time transitioning into the paid workforce if something should happen to the income-earning spouse? How old are you now, and how healthy?

Personally, I think it’s best to max everything out as far as the term and benefit amount when you are young and healthy.

We basically did what Blogstar did, above. We have 20-year policies that are at the 10th year, and we’ve recently purchased 15-year policies for higher benefit amounts because we had another kid in the meantime, and need to cover for all of their living expenses, including college, until the youngest is at least 23. We also have other assets, so they/we are not entirely dependent on the policies, but it sure feels nice to know everything should be pretty much covered in the event something terrible happens.

[arv]

Thank you every one for the responses.

I got approved by AIG. They have conversion option to fixed product. Also they provide conversion option to a new Term with in first 2 years.

The yearly rates I got are
1million 20year for $594
1million 30year for $1094
500K 20 year for $329
500K 30 year for $589

I have a 6 year old and one on way.

“California Life and Health Insurance Guarantee Association” provides coverage protection upto 300K or 80% of the death benefit. Should one divide policies into multiple amount policies?

[UCGal]

We looked at what would make it possible for the surviving parent to get by. For us – that was a paid off house.

So we got term for the amount we owed on the house for each of us. We got 10 year term because we had a plan in place to pay off the house w/in 10 years. Our term is about to expire (and we owe very little on the house and will lump sum payoff the house on my birthday this year.)

Other folks look at different aspects – folks in retirement age might look at pension/ss hits if the person dies. If you have 2 earners SS – the surviving spouse will get the higher of the 2 SSs – but if they need BOTH to survive – then term insurance is needed to make up for the budget shortfall. Same idea with pensions – if there’s no joint survivorship option on a pension – you can cover this with life insurance.

You’ll have to look at your own situation and needs.

[Author]

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