Do you have term life insurance?

[MiriamF]

I am 27 and my husband is 30. We have a 2 year old, and are looking into getting term life insurance. I talked to an insurance agent today, and he gave me the whole talk about how nobody our age would buy 10 or 15 year life insurance, how it would be so much wiser to get 30 year life insurance and get ourselves as close to retirement as possible - blah blah blah.

When discussing this with my husband, he is adamantly against this. He wants the cheapest possible policy for the shortest term - 10 years. His reasoning: at the current or average rate of inflation, in 30 years a 300,000 policy will be worth VERY little. So we'd be better off just renewing in 10 or 15 years?

What do you think? What have you done yourselves? Thanks!

[phathui5]

Dh and I each have a 20 year term policy. The idea being that in 20 years, we won't be financially responsible for the children, but if one of us dies in the next 20 years, that leaves us needing money to pay bills and stay home with the kids.

[Belleweather]

Originally Posted by phathui5

Dh and I each have a 20 year term policy. The idea being that in 20 years, we won't be financially responsible for the children, but if one of us dies in the next 20 years, that leaves us needing money to pay bills and stay home with the kids.

We have done this as well, although it might be just as wise to do a 10 year term and then have the option of changing the amount of insurance to reflect your mortgage at that point in time and any college plans or obligations you'd have.

I wouldn't pay the extra for a 30 year term, though.

[dogmom327]

DH has a 10 year policy and I have a 30 year. Unfortunately I have an interesting family history which puts me at increased risk for developing conditions an insurance company won't be happy about. DH on the other hand has a much lower chance but had two DUI's 10 years ago. Even though he doesn't drink now (hasn't in 10 years) between that and just being a man, his rates are higher.

[milletpuff]

What is the price difference between a 10 and 30 year policy? I think for me it was like $10 a year. I opted for a longer policy and if I want to cancel after 10 years I can. But, if I had gotten a 10 year policy and then want to renew at the end, the premium will go WAY up because you will go through underwriting at ten years older and there's even a possibility that you are no longer insurable due to illness, etc.

[aircantu1]

But if you are diagnosed with anything in the next 10 or 15 years you won't qualify to renew it -- or your rates could just go through the roof.

When we first got life insurance (before we were married or had kids) we did get a 10 year term because we were young and poor and it was the cheapest option. After the kids were born we increased the amount of coverage and switched to a 20 year for this same reason:

The idea being that in 20 years, we won't be financially responsible for the children, but if one of us dies in the next 20 years, that leaves us needing money to pay bills and stay home with the kids.

I'd like to have a 30 year now that we have a new baby but my husband is a student pilot right now so our options are very limited.

[grahamsmom98]

Both dh and I have whole life, as does ds (age 10). Term was never something we wanted.

The idea being that in 20 years, we won't be financially responsible for the children, but if one of us dies in the next 20 years, that leaves us needing money to pay bills and stay home with the kids.

But, if one of your dies after those 20 years, will that leave the survivor in financial debt?

[Sonnenwende]

I did a ten year term in December because basically what we need the insurance really for is to cover childcare expenses so that the surviving spouse can work unburdened. By the time the term ends, my daughter will be 13 and will not need expensive childcare anymore.

I would have rather bought 20 year, but since I am the only one working, it took more out of my budget than I felt comfortable with right now. Later, we will re-evaluate it.

[mightymoo]

We have 20 years on myself and my husband. As someone else said, the point being that we are guaranteed that insurance for the next 20 years.

Remember, the point of life insurance is to replace the loss of income of the spouse that died. As time goes on, yes inflation makes that worth less, but you should also need less as there would be less working lifetime remaining.

So, my husband is 35. We need to replace his income from 35 to 65 (where we have saved and planned for retirement). That's 30 years of income. In 20 years, it will only be 10 years of income.

Our plan is to consider getting a new 20 year policy in 5-10 years while we are still healthy to extend the 20 years.

[Natsuki]

Originally Posted by grahamsmom98

Both dh and I have whole life, as does ds (age 10). Term was never something we wanted.

But, if one of your dies after those 20 years, will that leave the survivor in financial debt?

Whole life is typically a scam - you pay SO much more into it than you'll ever get out of it - you'd be better off putting those premiums into high yield savings/CD's and would make more in the long run. I have never, ever seen it recommended by a reputable financial advisor.

In terms of a survivor not having financial security after the term is up - you always have the option to buy another short-term policy. Though ideally by the time a policy would expire and you're in your 50's or 60's you would be financially secure and this wouldn't be a concern.

Like others have said, it's ideal to get a 20 year policy b/c that covers you (at generally low cost) through the most expensive childcare years. If you do only a 10 year policy and hope to get another one, your premiums will be higher b/c you'll be older (and therefore more at risk of health issues which drives up your premium price - even weighing more drives up your premium and people generally get heavier with age).

I personally would go with a 20-30 year term policy (depending on how many children you think you'll have and the type of financial support you'd need. If you were planning to have a large family, meaning pregnancy/birth/infancy would span longer than 10 years, then I'd lean more toward a 30 year policy). If you're doing the more typical 2-3 kids in 5 years time - then a 20 year policy should take care of you.

In terms of concerns about inflation, your policy should be 10x your annual salary (at the time of purchase) - this accounts for inflation. So my DH makes $50,000/year. His policy is for $750,000. I work only part-time and mostly SAH with our children - my policy is for $500,000.

The reason for such high amounts is to that the money will last for years and replace the deceased spouses' salary (or contributions to the household in my case the cooking/cleaning/childcare in addition to my small salary). Also, you wouldn't take that money in a lump sum - you would withdraw a small portion at a time so that it could continue earning interest and be a self-generating fund for many years to come.

[Emmeline II]

We went through MetLife.

People with children typically are recommended policies that will help support a partner with minor children until the children are 18 or through college. After 20 years policies get more expensive and their are probably better ways and people are better able to save for themselves. An advantage to a longer policy is that the rates are locked in while you are young and healthy; a lot can happen in 10 years.

We each have a 20yr term.

[basilslamomma]

I also have a 20y policy for the kiddos. I believe that if I choose, I can decrease coverage as my children grow. As they age, there is less number of years the lost income would have to be covered.

[AuntNi]

Originally Posted by Emmeline II

People with children typically are recommended policies that will help support a partner with minor children until the children are 18 or through college. After 20 years policies get more expensive and their are probably better ways and people are better able to save for themselves. An advantage to a longer policy is that the rates are locked in while you are young and healthy; a lot can happen in 10 years.

: We have 20-year term policies. That puts our DD at age 24. Our thinking was that would see her through college and the lean couple years post-college. We don't have huge coverage - I'm overweight, and DH has high cholesterol, so our rates would have been prohibitive for a $1 million policy.

[rhiandmoi]

You have to decide what the insurance is for, how much you need, and what your ability and commitment to saving is. If you could replace your term life insurance with some kind of stable savings vehicle in 10 years or flat out eliminate the need for insurance in that time then it makes sense to get the shorter policy.

Say you have a $100K mortgage for 30 years, and that is why you need the life insurance. If that is your primary concern then every year you need the insurance less and less. Say you are paying extra and you can probably pay off your mortgage in 10 years. Then you get the 10 year policy and once your mortgage is paid off you don't need insurance and you save not only the mortgage payment but the insurance payment towards funding your retirement, kids college etc. I personally would get a 15 year policy just to be safe, and probably cancel it once I felt cushioned with my savings.

I did a quick search and if the rates for a 10 year policy for a 30 year old and a 10 year policy for a 40 year old is a little bit cheaper than a 20 year policy for a 30 year old. But doing that is gambling that the economy is going to stay down and that life insurance is going to stay cheap, and that you are going to stay insurable. For me that is too much gambling to save a few bucks a year, and I think is the difference between being frugal and cheap.

What we did is buy a 30 year policy and every 5 years we will check the rates to see if it makes sense to stay in our policy or to get a new policy. If prices go down and we're still insurable we won't have lost much, but if rates go up or something happens to our health we will still be protected.

[ZippyGirl]

We have 20-year term for 10X my husband's salary. We went with Clark Howard's advice to avoid whole life policies.

[cristeen]

We each have 2 20-year policies. The first set we got shortly after we were married. Those are enough to pay off the mortgage and have a little left over. The second set we just signed the papers for last week - the same amount as the first set, which will cover daycare/private school/etc. All the costs of raising children until they're old enough to contribute to the household. With the term insurance, we have the option at any time of converting the policies to whole-life. But, our insurance agent has advised that that would probably only be a good idea in certain instances - like disability or diagnosis of a chronic or terminal disease. Either of which would make us un-insurable.

I will point out that between our signing the papers a few years ago and now, my premium went up by about $15/month. In that time frame they started "flagging" policies for people whose parents died before 60, regardless of cause.

[mum4boys]

Originally Posted by milletpuff

What is the price difference between a 10 and 30 year policy? I think for me it was like $10 a year. I opted for a longer policy and if I want to cancel after 10 years I can. But, if I had gotten a 10 year policy and then want to renew at the end, the premium will go WAY up because you will go through underwriting at ten years older and there's even a possibility that you are no longer insurable due to illness, etc.

exactly it was pennys for us to get a longer policy.

[rsps]

here's some advice form "The Simple Dollar" one of my favorite financial blogs:

http://www.thesimpledollar.com/2007/...ife-insurance/

[lmonter]

Originally Posted by phathui5

Dh and I each have a 20 year term policy. The idea being that in 20 years, we won't be financially responsible for the children, but if one of us dies in the next 20 years, that leaves us needing money to pay bills and stay home with the kids.

Yup, this.

And keep in mind when you renew at 10 years, there may be changes in the contract and such. Especially if one of you ends up with a chronic condition of some sort so the insurance company can refuse to renew or increase your rates. It costs about the same for me as it does for hubby's life ins. for less coverage because I have asthma and couldn't make myself lie on the forms (i.e. what if something happened to me during those first two years of the policy that rendered it null and void?). If someone developed skin cancer or something in the meantime, well, that sucks all around, but I doubt finding affordable life ins. would be very possible.

Supposedly according to our paper work, we can extend our term life another ten years after our current policy is up for the same amount of money we're paying right now. So we'll see what things are like in 17 years.

Whole life is a bit of a joke as my mom's finding out - my dad made payments for almost 40 years, and to show for it? Maybe $60K if they decide to pay out since my dad died last month. Or something like that. It's just a mess.

[Drummer's Wife]

we have 10 yr term policies, but there is only 5 yrs left so we will be shopping around for a longer time period of coverage. I'm still trying to figure it all out, thanks for the above link!