Life Insurance Choices

**MonkeyMama** · 09-01-2010, 11:30 AM

Originally posted by LivingAlmostLarge View Post

Prices for life insurance:

The price differences are $448/annually for $1 million/20 year term, $740/annually for $1 million/30 year term, $798/annually for $2 million/20 year term, and $1418/annually for $2 million/30 year term.

What do people think?

I wouldn't pay for the $2 million policy unless I felt I needed it, personally.

I usually see advice to get the shorter policy. But rates are so low at current, that I would just get the longer term, considering your situation. I would think you want insurance until your kids are grown/done with college. That's a wee bit more than 20 years, plus you said you plan to have more kids, which would sway me to the 30 year term policy.

I thought the 30 year term was a steal, but we were only 25-ish when we bought it. If I was 40 when I bought my current policy (almost grown kids), I'd think the 20 years would suffice. Our insurance policy is primarily for the kids - we don't rely on each other so much financially.

The simple answer - don't buy more than you think you need. What is the insurance for? How much would you need and how long would you need it? Since you live in a high cost area, maybe the $2 million is more necessary so that you could pay the mortgage and have money to live on, if something happened to one of you.

**LivingAlmostLarge** · 09-01-2010, 03:15 PM

MM what do you pay? And how much more expensive are you paying? I guess we just didn't need it till now.

I am going to guess $2M will cover the house and college and just about everything. Probably a little overkill, but I feel like $1M isn't enough. $1.5M as a compromise?

I'm wondering if we should do 20 years because we plan on self-insuring at some point.

**jIM_Ohio** · 09-01-2010, 04:47 PM

20 years is what you need
I agree with MM that you need probably 22 years... but the question would be how much money do you expect to have in 10-15 years- think 401k etc... to point where those final two years, its probable your net worth could fund what the lapsed life insurance used to.

**ramirezhenry55** · 09-02-2010, 01:27 AM

Here in my country where life expectancy is a bit shorter compared to others, it is advisable to just get the 20 year term so we could still enjoy it with the kids.

**whitewater30** · 09-02-2010, 10:22 AM

Go with 20 year term worth about 10x your annual income.

**disneysteve** · 09-06-2010, 06:37 AM

I think it all depends on your needs. How old are you? How old are your children? What debts do you have that you would want insurance proceeds to cover? What other expenses do you want the policy to cover?

Keep in mind, too, that $1 million and $2 million aren't the only choices. You can get any amount in between those two points. I used to have $1.5 million. Last time I changed policies, I cut back to $1.25 million because I had paid off my student loans and accumulated more personal savings. The next time I change, I'll probably reduce it down to $1 million since we are now debt-free except the mortgage, are several years older, our daughter is several years older and our personal wealth has grown. The need for insurance gradually diminishes as you get older if everything else is going along as it should.

**LivingAlmostLarge** · 09-15-2010, 11:06 AM

31 and 33. Mortgage is $417k. Car $20k. $20k student loans. $175k in retirement and I think another $40-50k in taxable accounts. Yeah I know right now we are conserving cash because we're in flux. Next March we'll know our jobs, move situation, and will pay off our student loans and car or not if we need the cash to move.

One baby (7 months) no idea when we're having more. 20 years at 10x is at least $1.5M at least.

DS, how often do you scale back? And did you get a whole new policy? Was it cheaper?

**frugalgirl** · 09-16-2010, 05:05 AM

Originally posted by LivingAlmostLarge View Post

31 and 33. Mortgage is $417k. Car $20k. $20k student loans. $175k in retirement and I think another $40-50k in taxable accounts. Yeah I know right now we are conserving cash because we're in flux. Next March we'll know our jobs, move situation, and will pay off our student loans and car or not if we need the cash to move.

One baby (7 months) no idea when we're having more. 20 years at 10x is at least $1.5M at least.

DS, how often do you scale back? And did you get a whole new policy? Was it cheaper?

You are both relatively young. You may be in the situation where your income may likely rise significantly due to promotions in your young careers and, if you are taking into account salary replacement (going by the 10X your salary rule, for example), you would find yourself significantly under that number in 5 or 10 years. Would either of you ever stop working to care for your children? That would impact the amount of savings you expect to have over time and thus the amount of coverage you would want to have to protect your family. I would err on the side of longer term and larger amount. I'd take the peace of mind of the longer term. You can always change policies if you want to scale back at some point but you will never get the price of the longer term policy being offered to you now at your age.

**MonkeyMama** · 09-16-2010, 05:38 AM

Originally posted by frugalgirl View Post

You are both relatively young. You may be in the situation where your income may likely rise significantly due to promotions in your young careers and, if you are taking into account salary replacement (going by the 10X your salary rule, for example), you would find yourself significantly under that number in 5 or 10 years.

Agreed.

I have found that we felt we needed more insurance with time. We got our insurance in our 20s. (Obviously we will need less, with age, but when you are younger, you are working against inflation with a longer term. So you feel you need more before you get to the point of needing less).

All that said, I really think you just need to get something, anything. It seems you have been reflecting on this for many months. Procrastinating/no insurance is the worst predicament to be in. & is where most people find themselves. I'd get something and then reflect on it some more. You can always change it!

**LivingAlmostLarge** · 09-16-2010, 08:55 AM

I should add we have some insurance through my DH's work. We bought $750k the maximum allowed. And he's the sole breadwinner. We also bought the maximum disability long term on him post-tax as well. We are definitely hoping for a big jump in salary because we both just finished up graduate degrees.

I finished up school in July and am looking at jobs and staying at home with the baby. I applied on the west coast but not where we live.

MM I need to just buy it I think. This weekend.

Life Insurance Choices