life insurance how much does one person need??

[Snoopy2645]

Ok I am married with 3 kids & oldest has a different father so I need to make sure she is taken care of too if I died tommorrow with 3 kids & a husband should I go with a big policy or a smaller policy thier is not much difference in cost but I am a penney pincher some months I squeeze my pennies to get all I can out of them!!

[pearlieq]

Re: life insurance how much does one person need??

It really depends on what your family's needs would be if you were to pass away (God forbid).

Do the kids already have college funds? Would your husband need child care if you were to pass on or are the kids pretty much old enough to be without?

Do you provide income to the family? Would that need to be replaced if you died?

[Ima saver]

Re: life insurance how much does one person need??

I have no insurance because my husband does not need my income. I had a 10 year term policy of my husband, but after the 10 years, the premium went to $1600 a year. We have decided to just save as much as we can and self insure ourselves!

[Joan.of.the.Arch]

Re: life insurance how much does one person need??

We bought term policies (several different ones put togeterh for an overall plan) none of which will extend past the youngest child being 18. Parental income would be hard to do without before high school graduation gives kids the ability to work full time if necessary. I would say our coverage was minimal. We did not get enough to pay for college. Just enough to pay for the house and minimal expenses of raising the kids to adulthood. Of course the value the term insurance will pay declines over time, but that is okay---the amount we need to raise the kids to adulthood is small as the years to adulthood become smaller.

Don't forget to re-evaluate along the way, though. Not only do needs change, but rates on policies change. You might actually get a better deal in the future.

[TBH]

Re: life insurance how much does one person need??

I would recommend going through a couple of online life insurance calculators.

MSN's life insurance calculator
Dinkytown.com (lots of great financial calculators)

There are several others out there.

In our case, we wanted enough insurance so that whatever parent was left could pay off the house, invest the rest of the insurance payout, and use the proceeds to supplement but not completely replace lost income. The principal could then be used for college.

[TBH]

Re: life insurance how much does one person need??

And yes, I am definitely in favor of term policies.

[Saving in So Cal]

Re: life insurance how much does one person need??

I have insurance at work in an amount that will pay off the house and cover my daughter's college. My husband would receive my survivors' benefits from my pension and my daughter would receive some SSI, so I haven't worried about covering my income, especially since the house and college are covered.

My husband's insurance situation is basically the same except that we pay for his policy entirely on our own.

[RJB1180]

Re: life insurance how much does one person need??

Insurance is great but with your living situation, you should have a lawyer prepare a will so that your other daughter is covered, including future custody arangements etc.

[Snoopy2645]

Re: life insurance how much does one person need??

Well in our state their is a joint custody law so if I die she would go straight to her dad so no worries for her in who she would live with. But I had a 100k policy & switched to 250k I am just wondering if I need that much KWIM I will be honest here I dont bring in much income but without me here I am not sure dh could keep the kinda hours he does he works from 2pm to 3am sometimes 8 days in a row might be hard to find childcare with those kinda hours ya know so that is a big part of it. BTW kid are 2, 5, & 11

[greedy4chips]

Re: life insurance how much does one person need??

Snoopy,

If your DH won't be able to work or work much less hours then you should figure in a term policy based on 10x his income minimum. The idea is the surviving spouse will be able to be a stay at home parent and live off the insurance if need be. In your case I would think a 20 yr term policy would be the best so that your youngest is 22 when it expires and hopefully done with college expenses.

[Crystallas]

Re: life insurance how much does one person need??

250k will be a mamouth of a diffrence over 100k in 20 years. But as it is called insurance, you can also set up other funds with those extra pennies that could arguably be worth more by the time you were to pass away and also serve as an emergency fund while you are alive.

[Snoopy2645]

Re: life insurance how much does one person need??

thats what I keep wondering should I be putting money into an EF or to life ins & yes I did sign up for a 20yr term policy

[poundwise]

Re: life insurance how much does one person need??


I believe in term life insurance, however, I would all-but-completely ignore the usual recommendations from insurers and agents. They aren't exactly fair estimators. I often hear the figure of 10x your annual income. For most people, I think that's nonsense unless your spouse is, and will be, completely reliant on your income.

I think its a good idea to have enough to cover any of your 'final' expenses, pay off any debts and the house, and supply some cash based on perceived need.

Don't get caught up in getting the most you can afford or providing for absolute worst-case-scenario. Get a good amount and then focus on taking care of your present finances to make your bank and investment accounts as healthy as possible.

Another consideration, put all of your wishes in writing (will, etc.) and, if you are the one who takes care of the finances in the household, make sure you provide adequate information to your spouse to sort it out as easily as possible. This is just as important as the money. If your husband/wife just lost you, they don't need hassles.

[sweeps]

Re: life insurance how much does one person need??

Keep in mind also that life insurance proceeds are not taxable. So a benefit of X times your annual income is actually worth more than working X years at that salary (and getting taxes taken out).

[TBH]

Re: life insurance how much does one person need??

Keep in mind also that life insurance proceeds are not taxable.

Are you sure, Sweeps? If you own a policy ensuring someone else's life and you're the beneficiary, it's not taxable. If they own a policy ensuring their life, and you're the beneficiary, it is taxable like any other inheritance.

Married spouses who inherit do not have to pay inheritance taxes. Anyone else does.

My spouse and I are unmarried, and we didn't know when we bought our life insurance policies that we should each buy insurance on each other. So we each own our own insurance policies, and the proceeds will be taxable in the event that we need them. Of course, we hope never to need them, but still.

Just wanted to add that so people in our situation would know that your statement doesn't apply to them.

This also means if you both die and your kids are the secondary beneficiaries, they do have to pay taxes on the proceeds. So you may want to take that into consideration when deciding how much to buy.