yogiii
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Post by yogiii on Mar 24, 2011 7:49:17 GMT -5
Reading the other life insurance thread got me thinking ... I need to get some. We currently have a 10 month old and are both working and make about the same $ (within 5k of each other, work in the same field). We have about 16 years left on the mortgage. We will probably have 2 kids, another in a couple years. I was thinking about getting a 20 year term policy. What is the typical figure? 5x income for each?
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Havoc
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Post by Havoc on Mar 24, 2011 8:12:22 GMT -5
I am not too big on "rules of thumb" when it comes to insurance... I have a deep-rooted suspicion that they were developed by insurance companies to encourage everyone to buy a certain level. I think it really depends on where you are financially and what your goals/needs are. For us - we just re-did our policies to a 20yr term since we've had 3 kids since our initial insurance assessment. To figure out our coverage amounts, I just took our real estate debt amounts, added enough to pay the bills (w/o mortgage expenses) for 3 years, money to add to kids college funds, and $100k extra to cover any crazy uncovered medical expenses, funeral, and random stuff. However, we keep a good EF and have a bunch of assets that could be sold if needed, retirement is pretty much taken care of, and the kids college funds are already off to a good start, so for us the cash is to stabilize rather than to be a windfall (ie, make it so that RE doesn't have to be sold in down markets, and the family will have time to adjust w/o making quick and possibly rash decisions). You will want to do things differently - like possibly build in a bigger college fund, account for retirement goals, etc.... probably best to write down some figures, discuss with Other Half, and stare at them a few days to make sure nothing else occurs to you before you pull the trigger on an amount. Good luck! ![:)](//storage.proboards.com/forum/images/smiley/smiley.png)
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Wisconsin Beth
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Post by Wisconsin Beth on Mar 24, 2011 8:21:21 GMT -5
DH and I have been discussing this off and on for a couple of years now, with both of us shifting positions back and forth.
My theory is that we need to have enough insurance on each of us to pay off everything (mortgage, cars, etc.) including the funeral; living expenses for a year (because if I need to take time off from my job to mourn DH and help the kids deal with his loss, I don't want to have to be worrying about grocery money); and some to bank for the kids college, if they go. For us, about $250K should cover this. But medical bills aren't included in this, so I'm starting to think bumping up the numbers is good.
DH started by thinking we needed at least $500K, then dropped that to $100K and now is closer aligned to my $250K figure.
We each have some insurance from our jobs and whole insurance for each of us at about $50K. DH wanted whole and I wasn't in shape to logically discuss it at the time of the decision. Now he wants to shift from whole to term. We're 40/41 and have 2 toddlers so we'll go with 20 year term, when we shift it in the next few months.
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jeffreymo
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Post by jeffreymo on Mar 24, 2011 8:24:12 GMT -5
We were in a similar situation last year. We finalized our 30 year term policies as our son was turning 1 year. We plan to have a few more kids over the next 5 years, and settled on the 30 for this reason. Our policies are approximately 10X our salaries. I plan to re-evaluate when I reach 40 to gauge where we're at, particularly in regard to the kid(s) college funds. A big part of the benefit calculation was college tuition for 2 kids.
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Urban Chicago
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Post by Urban Chicago on Mar 24, 2011 8:27:59 GMT -5
We calculated to have enough for each of us to cover the following:
Pay off the house Pay all expenses for 2 years Hire a nanny/housekeeper for about 10 years (I figure by then, the kids should be able to stay home alone for a few hours until work is over). College for 2 kids(this really throws things off, since if I go 1st, DH will have to pay for college, where tuition is a benefit at my job).
Obviously, this would be a totally different calculation if you don't have kids, or if yours are older than ours.
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yogiii
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Post by yogiii on Mar 24, 2011 8:39:34 GMT -5
Thanks for the responses jeffreymo - I was basically thinking the same thing 5x income (or 10x each salary). I guess I'm a little torn on 20 vs 30. My reasoning with 20 is that we've got 16 years left on the mortgage which is our biggest expense (we live in a HCOLA). We're currently maxing our 401ks/Roths and the little guy has a 529 with mostly small contributions from his grandparents. I'm the CFO in the family, so going over this with DH won't be much help. He just really isn't very interested and trusts my judgement ![:o](//storage.proboards.com/forum/images/smiley/shocked.png)
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Post by 2girlzdad on Mar 24, 2011 8:40:55 GMT -5
As others have said it varies by age, income, industry, number of kids, etc. We have two separate 20 year term, overlapping policies of $500k each. So, until 2021 we have $1 mm Each. In 2021 our 2 dd's will be almost 21 and 19. From 2021 thru 2031 we will carry $500k each (as the first policy lapses). In 2031 we will be 64 and 62 and really shouldn't Need death insurance at that time. We also have healthy college funds (over $110k combined at this time) and mortgage debt of under $100k.
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schildi
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Post by schildi on Mar 24, 2011 9:24:54 GMT -5
DH and I have been discussing this off and on for a couple of years now, with both of us shifting positions back and forth. My theory is that we need to have enough insurance on each of us to pay off everything (mortgage, cars, etc.) including the funeral; living expenses for a year (because if I need to take time off from my job to mourn DH and help the kids deal with his loss, I don't want to have to be worrying about grocery money); and some to bank for the kids college, if they go. For us, about $250K should cover this. But medical bills aren't included in this, so I'm starting to think bumping up the numbers is good. DH started by thinking we needed at least $500K, then dropped that to $100K and now is closer aligned to my $250K figure. We each have some insurance from our jobs and whole insurance for each of us at about $50K. DH wanted whole and I wasn't in shape to logically discuss it at the time of the decision. Now he wants to shift from whole to term. We're 40/41 and have 2 toddlers so we'll go with 20 year term, when we shift it in the next few months. Yeah, this is not an easy decision. We are about the same age, have two kids also, but if I follow your math, Beth, we would need no life insurance at all. Not sure if I am comfortable with that thought, but there is some logic behind it. As you get older, you need less and less life insurance (hopefully), as assets should grow.
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TD2K
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Post by TD2K on Mar 24, 2011 10:02:30 GMT -5
I'm basically self-insured. I did try that Met-Life linsurance calculator you may have seen advertised on TV thinking "okay I don't need life insurance" and that is what they said.
I do have a bit of insurance through work but that's it.
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Deleted
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Post by Deleted on Mar 24, 2011 10:03:05 GMT -5
For us we also included what we already had in savings and figured out social security benefits.
Please get your life insurance ASAP - DH was diagnosed with a disease that makes it impossible for him to be insured a few months after we got his policy.
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Deleted
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Post by Deleted on Mar 24, 2011 10:05:40 GMT -5
We have enough in savings and passive income to be self-insured but chose to get life insurance anyway. Life insurance is cheap.
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phil5185
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Post by phil5185 on Mar 24, 2011 10:32:25 GMT -5
We have about 16 years left on the mortgage. We will probably have 2 kids, another in a couple years. I was thinking about getting a 20 year term policy. What is the typical figure? In your case I would get 30-yr-term. Your 'unborn' may be a Dependant thru age 24, ie 26 or 27 yrs from now. Most would advise against paying the mortgage, usually it is best to keep things 'as they were', at least for a few yrs. That means that you should get enough insurance to provide an income that would make the monthly payments. Probably $500k each, the cost is likely about $250/yr. And look at disability insurance. With a sudden death, the family loses one salary and spends about $15,000 for a funeral. But with a disability you lose one salary, plus you may have lingering care expenses for several yrs. We're retired, so we are self-insured - ie, no Dependants to provide for. If I die the cost to the household is $15k for a funeral which is offset by no longer needing $20K/yr or $30k/yr to feed and amuse me. So the break-even point is less than a year (yipe). And no disability insurance is needed - disabled from doing what, collecting my SS checks?
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Wisconsin Beth
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Post by Wisconsin Beth on Mar 24, 2011 10:46:34 GMT -5
Yeah, this is not an easy decision. We are about the same age, have two kids also, but if I follow your math, Beth, we would need no life insurance at all. Not sure if I am comfortable with that thought, but there is some logic behind it. As you get older, you need less and less life insurance (hopefully), as assets should grow. Yeah Schildi, I'm not comfortable without any insurance either now that we have the kids. And Phil's right, we need disability insurance beyond what our jobs include. And long term care insurance too. Although I think from Phil's pov, my house is a financial train-wreck. ![:)](//storage.proboards.com/forum/images/smiley/smiley.png)
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Deleted
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Post by Deleted on Mar 24, 2011 10:50:31 GMT -5
There's always the depressing thought of what happens if both parents die - how much would you need to leave for someone else to raise your children plus provide money for your kids after they become adults? They won't have any parents to give them money in a crunch. Or for a wedding or downpayment.
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tskeeter
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Post by tskeeter on Mar 24, 2011 11:03:23 GMT -5
I think Urban hit on something most people never think about while trying to figure out how much life insurance to buy. That is the cost to acquire the services that each spouse provides to the family. Maybe one spouse manages the investment portfolio, and after they are gone the portfolio will have to be managed by a professional at a fee of $10K a year. Who will clean the house, prepare the meals, do the laundry, and shuttle kids between activities? How about the cost of additional child care, which is likely even if the family loses a working spouse. How will the lawn get mowed, the gutters cleaned, the snow shoveled, the windows caulked, the bedroom repainted, the car washed, minor car repairs and the taxes get done? The cost of replacing the services provided by a spouse could be significant and, if a spouse were to pass away at a young age, could go on for decades.
Even if you think the expenses that are reduced as your family shrinks would offset the value of any services provided by a deceased spouse (you're planning to sell hubby's fishing boat (s), 4 wheeler, 4 X 4, snow mobiles, jet skis, hunting rifles, collector muscle car, 80 inch TV, and the socks laying on the bedroom floor), taking the time to think about what your spouse contributes to your family should make you appreciate them more. Maybe you could even get over the sock thingy, or the 47 pairs of shoes.
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DVM gone riding
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Post by DVM gone riding on Mar 24, 2011 11:39:22 GMT -5
tskeeter you made me laugh, Karma for you!!
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❤ mollymouser ❤
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Post by ❤ mollymouser ❤ on Mar 24, 2011 13:42:52 GMT -5
Currently, we have life insurance on my wonderful DH of $1.2 million. (Basically, we're insuring the loss of DH's military pension for me.)
I'm technically uninsurable (medical reasons), but qualified for a spouse policy through the military, so there's $100,000 in coverage for me. That should cover pet sitters for our cats should something happen to me.
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cronewitch
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Post by cronewitch on Mar 24, 2011 15:14:42 GMT -5
As a reduction in need think of if the single parent might remarry or hookup. If say a 25 year old parent of a 1 year old were to become a single parent the infant would get SS survivors. The parent would work, pay daycare, feed the family and that sort of thing without help. They will need some money but the infants SS will help some and when they meet someone like the Brady bunch kids and somehow form a family they may be just fine.
So if you look at the adults and see them as being very marriageable in the future you only need to provide enough to help not to total replace yourself forever. How many divorced parents are in worse shape since they don't even get SS for the kids or no child support?
If I was a great young adult, nice body, nice personality, good education and sweet children I would think even $200K would last me until I would probably find the right step parent for my child. I would consider staying alone forever a low posibilty. On the other hand if I was sickly, badly out of shape or had bratty kids I might need more since my odds of remarriage would be lower. A young heathly adult isn't likely to be single much past 5 years of losing a spouse. If they are they can downsize and might anyhow. If you might have handicapped children I would make it more than a million depending on the handicap. My niece has 2 million on her husband, when her daughter was born with Down Syndrome he said he never wanted her to work again.
Remember when you die your student loans die too. The family will have one less person to feed, cloth, transport house and entertain. So you might only need to replace half their income or value to the family in the way of services.
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TD2K
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Post by TD2K on Mar 24, 2011 21:00:20 GMT -5
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formerexpat
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Post by formerexpat on Mar 24, 2011 22:26:11 GMT -5
Hoping your wife will be married again within 3 years if you pass?
My advice would be: monthly obligations / 0.03.
This will give you pre-tax investment income to cover your monthly obligations.
For example:
monthly obligations - $3.5k yearly obligations - $3.5k x 12 = $42k $42k / 0.03 = $1.4m life insurance
$1.4m investments drawing 4% = $56k; leaving roughly $14k for taxes to be paid on investments.
This was my formula. However, we are also a single income family and I didn't want to put my wife in any sort of bind and allow her to gather herself should I pass. I also included 529 contributions & retirement savings in my calculation so my wife wouldn't have to stop those.
If she were to pass, she's insured at $750k which would yield $30k a year at 4% withdrawal. That would cover day care and other annual increases in expenses by not having a SAHM. [/size]
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Deleted
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Post by Deleted on Mar 24, 2011 23:46:05 GMT -5
I just want to point out that some families accrue considerable medical/credit card bills when a spouse is ill. Life insurance can cover those costs if the person passes.
People seem to be assuming that the person will be hit by a bus and it will be over in an instant. In other cases you may have a partner that's ill for months or years - where you take unpaid family leave to take care of them or hire help. Some people even lose their jobs while taking care of an ill family member.
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Peace Of Mind
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Post by Peace Of Mind on Mar 25, 2011 0:52:23 GMT -5
Currently, we have life insurance on my wonderful DH of $1.2 million. (Basically, we're insuring the loss of DH's military pension for me.) I'm technically uninsurable (medical reasons), but qualified for a spouse policy through the military, so there's $100,000 in coverage for me. That should cover pet sitters for our cats should something happen to me. I have insurance on me for enough to pay the mortgage, pay bills until DH gets his head together - and for a kitty nanny while DH is at work. I have it prearranged with a friend/neighbor who knows Molly et al's demands and requirements. ![:)](//storage.proboards.com/forum/images/smiley/smiley.png) Ins. for DH is much higher so I never have to work if I don't want to. The policies on him are laddered as our assets and net worth grow we won't need as much. For those of you who do not have any life ins. yet please remember this: Get term ins. (much cheaper) while you are still younger because it's so much cheaper. It goes up every 5 years you age. Also make sure your cholesterol, blood pressure and weight are within the healthy range as this also makes your rates higher.
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Post by denisem on Jun 1, 2011 2:37:00 GMT -5
A 20-year term life policy sounds about right for you. However, if you also want to ensure your kids are through college before the policy expires, you may want to extend the term by another five years. As for coverage, experts usually recommend getting 15-20x your annual income but that figure could vary depending on your individual needs and circumstances. An alternative is to calculate the face amount of your life insurance plan based on all the expenses you want it to cover. You can also use an online calculator to estimate your life insurance needs. Denise
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morrisr2d2
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Post by morrisr2d2 on Jun 1, 2011 6:15:08 GMT -5
I think people overthink trying to decide on the right amount of term insurance to get, and are afraid if they get to much they are almost gambling to die. Term insurance is SOOOO cheap I suggest always going on the high end. Think of all the mourning/stress/racked-upped medical bills you'll have to deal with upon a loved ones death. Last thing you want to worry about is money as well. I took out a 1.5 million term, pay $67 a month (male, was age 33). Partner also took out $1.5 million, pays $75 a month (male, was age 37). We live in the NYC area and well paying jobs, so $1.5 million made sense.
For most of middle america, get $1M on each spouse and be done. If you are in a HCOL or have are more well off, you may want more.
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yogiii
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Post by yogiii on Jun 1, 2011 7:10:29 GMT -5
I was surprised to see this back up at the top ..
We decided to go with a 25 year term but we only did 500k each. I don't know if we made the "right" decision or not. We've been maxing our roths and 401ks and both decided that if we were to die the other person doesn't need to win the megabucks, the living person wouldn't quit their job, we'd just want that cushion for the kid/kids and taking care of their expenses. Maybe we'll re-evaluate if we have another kid, but at least we have life insurance now (well as soon as it gets approved ...)
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Wisconsin Beth
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Post by Wisconsin Beth on Jun 1, 2011 12:10:51 GMT -5
Good for you. We opted for 25 year term too. And we're waiting to be approved too. We're hoping DH gets premium rates but assuming I'll get standard or worse as I'm overweight. I'm working on it, but still.
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Deleted
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Post by Deleted on Jun 1, 2011 12:20:17 GMT -5
Every time one of these threads comes up it reminds me that I should have life insurance.
Can I just tell my wife to marry somebody else ASAP after I die?
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dancinmama
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Post by dancinmama on Jun 1, 2011 12:23:41 GMT -5
We have enough in savings and passive income to be self-insured but chose to get life insurance anyway. Life insurance is cheap. ![](http://us.social.s-msn.com/s/images/emoticons/thumbs_up.gif) Sometimes I think we could be sisters. DH will be retiring next year and we will no longer carry any life insurance at at that time. We are setting it up so that if something should happen to one of us, the income stream will not change for the other.
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thyme4change
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Post by thyme4change on Jun 1, 2011 12:25:13 GMT -5
We got a 20 year term policy when my son was born - if he is still on the payroll in year 21 and one of us kicks, adjustments will have to be made. Our mortgage will be paid the same year the life insurance expires. I also think that is the year my husband's pension vests. Great year! Because, technically, we could live off either salary, we assumed a slight change in lifestyle should either of us die. We have quite a bit in there - at least enough to cover college (including all expenses.) And probably enough to replace the savings rate of retirement for the other spouse. I believe it wasn't quite enough when the kids were little, but it will be increasingly "well more than enough" as they get older and as our net worth increases. But, I'll just leave it as is, and think of my husband's death as the worst lottery ever. ![:(](//storage.proboards.com/forum/images/smiley/sad.png)
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dancinmama
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Post by dancinmama on Jun 1, 2011 12:26:36 GMT -5
Every time one of these threads comes up it reminds me that I should have life insurance. Can I just tell my wife to marry somebody else ASAP after I die? You could, but it's not a very good plan. ![:P](//storage.proboards.com/forum/images/smiley/tongue.png) Seriously though, if your wife depends on your income, PLEASE go get life insurance ASAP. Think of how your family's life would change if something were to happen to you. GET ON IT!!
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