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Life Insurance or more Investments? - Page 2

post #21 of 36
My thoughts are similar to the OPs in many ways. We don't buy into all the "insurance" our country is so incredibly fond of these days. Both cars are paid and we keep liability (higher than legal due to our COL) and uninsured (due to our location) coverage. I've been without health insurance due to the industry and DH has been without due to unemployment. (We're both covered now, though.) DD has always been covered (by the state during unemployment and by us at all other times). DD is 9.

We have a small policy on me and a larger (but relatively small compared to others in this thread) term life policy on DH. We also have a small AD&D policy on DH (same benefit amount as term policy, but half the premium cost because it doesn't cover health-related death). The 10 year term policy ends soon and we'll be deciding how we wish to proceed. We chose to cover our mortgage and cremation costs (our preference) and a few months income, which becomes more months as the mortgage shrinks. We also choose to save through a variety of investments (highest percentage is very safe) and have a year's worth of expenses in those accounts. We have additional funds, also, and excellent credit. Without a mortgage, all those funds would last several years, especially since those expenses are based on a family of three. Without me, DH & DD would have my retirement account (over a year's worth of expenses today). Without DH, DD & I would have his retirement account (about a year's worth of expenses today). Both of those retirement funds would be DD's if both of us were to pass, which is more than double my private university tuition.

If one or both of us were to pass, life would be different for the remaining family members. Regardless of life insurance payouts, life as you know it is going to change when a family member dies. In our case, the family we've asked to care for our child would not *need* any financial help (it is there anyway in a modest amount) and they have a large enough house, etc. Plus, if my dad were still living, he'd provide financially for DD indefinitely (and/or me, temporarily). DH's family would provide for him and/or our DD, if needed. No one in either family is rich, but everyone has reached financial maturity and handles finances well.

Try to remove the emotion from the situation and evaluate *your* situation independently of others. Do you have supportive family? What is the financial health of those family members? Do you own a home? What is the general fiscal policy for your immediate family (DH & you - savers/spenders, high/low-income earners, high/medium/no debt, etc)? Do you have any large debts that would need to be covered if one spouse were to pass (different laws govern this factor, too)? Age is also a consideration, as is genetic health.

I do recommend a life insurance policy for all parents, but I differ vastly on the benefit amount and relying solely on the insurance policy in the event of death. I believe in basic term life for low amounts and focusing on living life to the fullest and preparing for the future with a diverse approach. (Putting all financial eggs into the life insurance policy basket makes zero sense to me, especially when families struggle to put food on the table.) This advice applies to most, but not all people...everyone has something unique about their circumstances and those need to be taken into account.

[FWIW: I have a degree in finance and worked in securities, but none of the above is meant to be official financial advice. I am simply sharing my perspective since the OP & I have similar viewpoints.]
post #22 of 36
Thread Starter 
Wow, I have to admit I'm a bit surprised at the general one-sidedness of the responses. I do really appreciate your perspectives though, thanks!
I'm sorry to read about those of you who have had parents or spouses die. I still do think that the probability of that happening is very low. Yes my experience is anecdotal, but in my life I have only known one person (out of a great, great many over the years) who have had a parent die while they were minors. I guess I honestly don't worry about me or DH dying- in the same way that I don't worry that a meteor will fall out of the sky and land on our home or that my child would die from one of the diseases we will choose not to vaccinate for. But that's just me. I can understand that some people would gain peace of mind from life insurance- I guess that's just not me.

Quote:
Originally Posted by SeekingJoy View Post
What type of life insurance product(s) is he trying to sell you? Term? Whole life? Carrying a reasonable level of term life insurance (or having adequate investments to support the surviving partner or guardian) shouldn't be that expensive, and I think it the only resposible thing to do once kids are involved.
Term insurance. And it's not that expensive, I just think our money might be better spent in many other ways to prepare for the future. I think that saying it is the ONLY responsible thing is going too far- there are many other ways to be financially responsible for one's children besides life insurance! And we are looking into those ways just as we looked into life insurance.

Quote:
Originally Posted by MeepyCat View Post
Where on earth are you getting $30 to $40K quoted as premiums? That seems really high for a million in coverage.
Not premiums. I said the total investment in a term police of 25 years would be $30-40k.

Quote:
Originally Posted by sunflower.mama View Post
I just suck it up and do it. Perhaps once your LO arrives you will realize how scary the thought of leaving him or her to be cared for by someone else is, not to mention how scary that would be if you left the child without resources to provide for said care. It's a component of your responsibility as a parent.
I don't just suck anything up and do it. I like to think things through and find the best alternatives for me and my family. Lots of things I could imagine are "scary", and I never said I would leave my child without resources to provide for his or her care. I find your comment offensive and I think I can judge what my responsibilities as a parent are. Thanks.

Quote:
Originally Posted by iowaorganic View Post
Why would you NOT provide the security of life insurance for both your partner and you dc? We have term policies with return of premium riders. So it is like a 0% interest savings account at the end of the 30 years. Not everybody thinks these are good ideas- but it works well for us.
Again, life insurance is not the only way to provide security for my partner and child. Sheesh. I'm glad you found what works for you, I'm going to try to find what works for US!

Quote:
Originally Posted by rainbowmoon View Post
Don't forget if you or your spouse dies you and your minor children will receive social security death benefits until your child graduates from HS or is 18 and 9months.
I'm sorry to hear about your spouse dying. DH and I have worked outside our country (Canada) since leaving university so we have never really contributed to any governmental security/persion plan, and therefore are not eligible. We have investments and savings because of this.

Quote:
Originally Posted by mnnice View Post
Just because you buy 25 year level term insurance doesn't mean you need/should pay the premium the entire 25 years.

We have term life insurance and I suspect that we will pay the premiums for a few more years, but not the entire term. We are becoming increasingly self-insured.
True about not having to pay the entire 25 years. That's a good point. We are solidly on our way to becoming "self-insured" as well (if I understand your meaning of that).

Quote:
Originally Posted by sunnysandiegan View Post
My thoughts are similar to the OPs in many ways. We don't buy into all the "insurance" our country is so incredibly fond of these days. Both cars are paid and we keep liability (higher than legal due to our COL) and uninsured (due to our location) coverage. I've been without health insurance due to the industry and DH has been without due to unemployment. (We're both covered now, though.) DD has always been covered (by the state during unemployment and by us at all other times). DD is 9.

We have a small policy on me and a larger (but relatively small compared to others in this thread) term life policy on DH. We also have a small AD&D policy on DH (same benefit amount as term policy, but half the premium cost because it doesn't cover health-related death). The 10 year term policy ends soon and we'll be deciding how we wish to proceed. We chose to cover our mortgage and cremation costs (our preference) and a few months income, which becomes more months as the mortgage shrinks. We also choose to save through a variety of investments (highest percentage is very safe) and have a year's worth of expenses in those accounts. We have additional funds, also, and excellent credit. Without a mortgage, all those funds would last several years, especially since those expenses are based on a family of three. Without me, DH & DD would have my retirement account (over a year's worth of expenses today). Without DH, DD & I would have his retirement account (about a year's worth of expenses today). Both of those retirement funds would be DD's if both of us were to pass, which is more than double my private university tuition.

If one or both of us were to pass, life would be different for the remaining family members. Regardless of life insurance payouts, life as you know it is going to change when a family member dies. In our case, the family we've asked to care for our child would not *need* any financial help (it is there anyway in a modest amount) and they have a large enough house, etc. Plus, if my dad were still living, he'd provide financially for DD indefinitely (and/or me, temporarily). DH's family would provide for him and/or our DD, if needed. No one in either family is rich, but everyone has reached financial maturity and handles finances well.

Try to remove the emotion from the situation and evaluate *your* situation independently of others. Do you have supportive family? What is the financial health of those family members? Do you own a home? What is the general fiscal policy for your immediate family (DH & you - savers/spenders, high/low-income earners, high/medium/no debt, etc)? Do you have any large debts that would need to be covered if one spouse were to pass (different laws govern this factor, too)? Age is also a consideration, as is genetic health.

I believe in basic term life for low amounts and focusing on living life to the fullest and preparing for the future with a diverse approach. (Putting all financial eggs into the life insurance policy basket makes zero sense to me, especially when families struggle to put food on the table.) This advice applies to most, but not all people...everyone has something unique about their circumstances and those need to be taken into account.
Thanks for this. It's nice to hear an expression of a different viewpoint. And hey from a finance grad, too!
I really appreciate your comment about removing the emotion from the situation and evaluating my situation independently.
Do you have supportive family? More or less. If anything happened to me, dh, or baby-to-come our families would do ANYTHING to help us. We don't lean on them for any support and haven't in the past, though.What is the financial health of those family members? Pretty good. Do you own a home? No, we live abroad and our employers pay for housing. We don't plan on owning a home until we retire.What is the general fiscal policy for your immediate family (DH & you - savers/spenders, high/low-income earners, high/medium/no debt, etc)? Savers. Med-high income earners. No debt.Do you have any large debts that would need to be covered if one spouse were to pass (different laws govern this factor, too)? No.Age is also a consideration, as is genetic health. We're young (29 and 30) and we are very fit and healthy. Genetic health is probably average- people in our families get pretty old and die, with very few health bumps along the way.

I think a lot of people have a hard time removing the emotion from this issue (very understandably!) and it's something that dh and I have attempted to do. I think it's really easy to have a knee-jerk reaction when it comes to things like life insurance- and people saying things like "why wouldn't you want to be sure that your LO isn't provided for? etc." But I think the above questions are things that we have considered and are the main reasons WHY we have chosen not to buy into any big life insurance plan. I started this post thinking that there would be more people who might see things along the same lines and offer some insight and support (also fully expecting to hear the other side of it too of course...not expecting to feel so attacked, though).

I think dh and I are on our way to doing things similarly to what you and a PP have done- very minimal life insurance (we already have a free term policy through one of our banks for 100k...didn't mention it because we don't have to contribute to it), no debt, lots of savings and investments. After paying off our hefty student loans, we already have started retirement funds for both dh and I, an education fund for our future kid as well as investments, and solid enough careers should one of us have to go it alone. I think we have a good start for providing for ourselves and our kid even taking into account the unlikely possibility of a tragedy. Maybe I should have added all this as a preamble to my first post.
post #23 of 36
I think you already decided you don't want to spend the money on it so I don't know what you are looking for here.
post #24 of 36
oh no SSA could not be counted on for private schools or college! no way! the family and DH coworkers did establish trust funds for the kids so they do have a little nest egg. Anyway my whole point was if you receive enough to live off of while your kids are minors, that is possible. most people don't but if your spouse was in a higher earning bracket it could be. that was my only point. I wasn't advocating NOT buying insurance exactly. just another option that is available to those paying alot into SSA. if you're eligible for it you might as well collect it (and at the very least the kids will get it automatically anyhow!)

Quote:
Originally Posted by sunflower.mama View Post
Also consider what you want to do for your kids. When my mom died, we did get 1.5 years of SS benefits for me, and longer for my sister. They were a drop in the bucket of private school tuition, college and grad school which were down the road for both of us. We chose a 25 year policy when we changed life insurance last year because we wanted the policies to see our youngest (yet to be born) through college and possibly some grad school. Clearly that's not everyone's objective. But it's one of ours, as we plan for one parent's income to go straight to college and grad school for many many years. So counting on SS benefits, which end at age 18, wouldn't do a thing for that objective. As I said though, everyone has different plans. Just sharing our thinking.
post #25 of 36
Quote:
Originally Posted by expat-mama View Post
Yes my experience is anecdotal, but in my life I have only known one person (out of a great, great many over the years) who have had a parent die while they were minors. I guess I honestly don't worry about me or DH dying- in the same way that I don't worry that a meteor will fall out of the sky and land on our home or that my child would die from one of the diseases we will choose not to vaccinate for. But that's just me. I can understand that some people would gain peace of mind from life insurance- I guess that's just not me.
Anecdotal experience isn't really an adequate foundation for evaluating whether you need some financial plan -- life insurance or otherwise -- for a surviving spouse and children. It isn't a matter of opinion. There is a statistical chance you or your spouse will die while you have a minor child.

Quote:
Originally Posted by SeekingJoy View Post
What type of life insurance product(s) is he trying to sell you? Term? Whole life? Carrying a reasonable level of term life insurance (or having adequate investments to support the surviving partner or guardian) shouldn't be that expensive, and I think it the only responsible thing to do once kids are involved.
Quote:
Originally Posted by expat-mama View Post
Term insurance. And it's not that expensive, I just think our money might be better spent in many other ways to prepare for the future. I think that saying it is the ONLY responsible thing is going too far- there are many other ways to be financially responsible for one's children besides life insurance! And we are looking into those ways just as we looked into life insurance.
I am not sure you fully read my post. There are other ways to be financially responsible for surviving dependents; I agree, and I posted as much. However, deciding to not do anything to prepare, to leave a guardian without adequate financial resources, etc isn't responsible.

Being self-insured is of course a perfectly valid option. There isn't much reason for a multi-millionaire -- as an extreme example -- buy term life insurance without other extenuating circumstances.
post #26 of 36
Quote:
Originally Posted by SeekingJoy View Post
Being self-insured is of course a perfectly valid option. There isn't much reason for a multi-millionaire -- as an extreme example -- buy term life insurance without other extenuating circumstances.



We have actually lowered *my* coverage as the kids aged. We are closer to paying off the house AND they would not need as much expensive care (they are 8 & 11). When they were younger they would have needed a nanny or something, now they could just go to afterschool care until DP picked them up. DP's life insurance, though, we have continued to increase with his income because if he died I would need to return to school (which becomes every more expensive) to support myself & the kids.

When the children are both out of the house we will probably drop coverage on me to a very minimal level (enough to pay for funeral, counseling and time off for DP to recover) because we wouldn't need to *financially* support him. If you, OP, are already at a point where the money from life insurance would be unnecessary then you don't need it. If your family relies on you financially, though, I would get whatever coverage would provide that.


Edited by TiredX2 - 2/18/13 at 7:35pm
post #27 of 36
I, for one, am sorry you felt offended by my post. It's hard to come on here and ask for advice without getting people's 100% honest advice, and sometimes it comes across harshly. That being said, I have a hard time imagining that someone balking at $100 a month or so for life insurance has the resources to support a child through adulthood sitting around but I have NO IDEA of your resources, obviously. It's a logical assumption nonetheless. Of course our family would do "anything" for our kids, including raising them if we couldn't. But I'd want to take the financial stress out of that picture. That is why I "suck up" life insurance premuims even though I don't believe I/we will ever die and need the policies.

BTW my point about your perspective changing after you became a parent was not meant to be condescending or anything. It was my own experience that my financial goals changed, slowly, after becoming a parent. I was suggesting that you remain open to that possibility as well.
post #28 of 36
It's kind of funny, my new partner DOES NOT believe in life insurance whatsoever (he is morally opposed). Thankfully we (my kids and I) don't depend on his income. But since we are having a new babe it is coming up a bit as we must plan for the future somehow. My main concern is retirement but I plan to have a new career by time I go off social security (I have many other skills too, so I have lots of options unlike some folks who find themselves in my situation) I consider myself extremely lucky to have the options I have been given. We also have many Quaker friends who also don't believe in life insurance as well. I don't think it's bad per say but you MUST have another plan (or at the least some savings) if there are kids involved.
post #29 of 36
I would get more quotes before you make up your mind. We have almost $300k on DH and $150k on myself for less than $100 a month. His policy was started when he was in the military and deploying to Iraq, so i think anybody could get a better rate.

Also, our policies include child riders so that if something happened to our children, it would pay for funeral costs.

If you are comfortable with the policy through your bank, then that may be enough for your family, but I would not go through life with $0 life insurance.
post #30 of 36
Quote:
. Yes my experience is anecdotal, but in my life I have only known one person (out of a great, great many over the years) who have had a parent die while they were minors

I find this very surprising. I can easily think of at least 8 familes I know where at least one child was still a minor when a parent died. (in 6 of those cases it was the dad, and 2 involved the mom). In at least 5 of those cases, death was VERY unexpected and sudden. Three of those families had children under 3 years of age when the death occurred.

Say parents have their youngest child at age 35. At age 56, that child graduates from college. I don't think the risk of dying before age 56 is *very low*

OP...it looks like your partner is 31 and you just had your first baby. CONGRATULAIONS!! If you're thinking you might have more kids, then he could easily be mid-50's by the time the youngest is completely our on their own.

The other thing about life insurance, is you really want to get into it while you are young and healthy, since as soon as you develop any kind of health condition, it become way, way more expensive.
post #31 of 36
Well first, you can always shop around for life insurance. Kinda sounds like the guy was trying to sell you whole life, and not term life. We have term life insurance on me and hubby, and we'd have to be paying on our policy for 55+ years to even come close to us shelling out $30K total. We're only really planning on keeping it for 20, maybe 25 years until we're able to self-insure better and the kids are grown and [mostly] on their own. Oh, and I have asthma, so my policy actually costs a little more than hubby's. If you plan to get any kind of life insurance, get it while you're young and should be healthier.

Just like we have car insurance for that 'just in case' scenario of a car accident, we have life insurance for just in case. We don't want anything to happen, but if it does, me nor hubby (or our child's guardian) will be totally screwed finance-wise. Because I can guarantee you, feeding/clothing 4 teenagers? Ain't going to be cheap, even hitting grocery sales and consignment sales.
But we're also a one-income family of six people - we're not exactly rolling in dough right now, and have to plan things out fairly carefully. Some people don't have that stressor, we do. Plus if something were to happen, hubby could take some time off to spend with the kids before going back to work (while paying through the nose for childcare/a nanny!), or I could stay home until they're grown and out of the house if I were able to live frugally enough.
post #32 of 36
Good advice here. I think the OP is confusing the issue for the average person. Sure some people can self-insure. But the typical profile of a term life insurance owner is someone who is a family breadwinner and has minimal savings.  That is most people.

For one, life insurance is really inexpensive. Use it for covering specific needs that will disappear with time, such as:
- Income replacement
- Financial security for dependents
- Mortgage protection
- College funding
- Final/burial expenses

To save the most money, shop around using one of the many internet sites that offer free quotes. There's a one at Quality Term Life that let's you compare rates from hundreds of top rated companies. Life insurance is essential for sound financial planning for most people. If you're not independently set, protect your loved one's future, ASAP. 
post #33 of 36

No one gets on the road with the expectation of being killed by a drunk driver, but it happens.  Youth and good genes will not protect you against random tragedy.

 

If you have selected a guardian for your child, have you discussed your economics with them?  How do they feel about you not having life insurance?

 

While we certainly don't expect our guardians to benefit economically raising our children, we also don't think its fair to impose an economic burden on them through our lack of planning.  They should be able to send their kids to college, retire, have vacations and not make economic sacrifices for our kids.  I note you say that your family would do ANYTHING for you and your kids.  So would mine.  My 75 year old father would go out and get whatever job he could if it was necessary to help support my children.  But is it fair?

post #34 of 36

I wanted to commend you for thinking this through - I found financial and estate planning decisions to be some of the most stressful parts of having a baby, and it was tempting to just ignore it and hope for the best.

 

While I'm always cautious about products that claim to be able to insulate you from life in general, life insurance has been a huge part of our safety net. The way I think of it is having barriers against events that can devastate a family financially. If one or all breadwinners in your family were to die, it's reasonable to expect that investments may not be able to take care of your children at that particular point. If we had done that in my family, for instance, and my husband had died in 2008 when the financial crash happened, my children and I would have had zero money with which to live on while I pulled it back together. We also carry high-deductible health insurance (we're self-employed), even though most of our preventative health care is not covered by our health insurance - it's just a barrier against anything that could devastate you financially, such as an operation or accident.

 

Having said that, we're also really conservative about how long a term we buy our insurance for. Our policy only goes until our kids are 15 or so, when it would be reasonable for them to be able to help look after themselves if the remaining parent had to go back to work.

 

Good luck with this decision. I've helped plan Birth2Baby fairs in my community, and always push for us having a financial-planner type person to talk with parents about these issues, because they are so important, yet confusing.
 

post #35 of 36

I truly believe that every young family should have life insurance.  But, it really is/should be quite inexpensive.  So if you are getting outrageous quotes, shop around.  Unless you are in horrible health or smoke or something. I pay $22 a month for $250000, although I bought it about 13 years ago when I had my first.  And I was in my late 30s.  even if the price doubled in the last 13 years, it would still be a good deal.  However, I think disability insurance is probably more critical than life insurance even. Unfortunatley, it is also more expensive. 
 

post #36 of 36

Shanna, Only until age 15? Seeing your kids through college is one of the primary reasons that parents buy life insurance. It's not a trivial expense. With the primary income earner gone, it would be as much a detriment to your children's future as anything.

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