More life insurance questions...

[Jilian]

OK, the thread in TAO has inspired me to get life insurance this week. No more procrastinating! DH has a policy on himself through work but neither of us know anything about it (how much, etc). I am a SAHM, we sold our house and we rent, and my second son has a heart defect so putting him into daycare would NOT be an option to me. My questions:

How much insurance should we get? Our monthly expenses are about $3,000/mo (including everything). I'd like to be able to stay home for at least 2 years and to pay off our car ($18,000)

I'm thinking of getting a policy with first to die benefits. That way we'd have one policy and it would be payable to the remaining survivor in the even of death. Is there any reason I should not get this kind of policy? Is there another type of policy that would work better?

Anything else I need to know? Both DH and I are healthy so qualifying isn't a problem.

Thanks in advance!

ETA: I've read in another thread that you should insure for 10x the breadwinner's annual salary. DH is the only earner and he makes somewhere around $50,000 before taxes so would it be right that we'd need $500,000 in life insurance? Is there any reason we should not overinsure and go up to $750,000?

[mightymoo]

We have 20x DH's salary on each of us. I posted that in the other thread too, so you probably read my response there.

Why wouldn't you overinsure? The cost of it mainly. There is a pretty good chance neither of you is going to die, so you don't want to spend too much money insuring for way more than you need. It's a balance, and I think you have to figure out where in your priorities that level of insurance lies. For example, I wouldn't put it above food, but I might put it above say premium cable. So you might consider it almost being like two different policies (but you would only get one policy really) - one for $500K (whatever that costs) as being higher priority in your budget and the extra $250K+ as being lower priority (for whatever the difference in policy costs). Then look at your budget and see if both fit in? Just another way of looking at it.

Honestly, for me having a good solid level of insurance is huge piece of mind. I know I would have a very hard time dealing with DH's death and knowing I don't have to worry about anything else just means its one less thing ot stress about.

[Sarah8Jane]

I'd be careful about using the term "overinsure" for life insurance. Insurance is supposed to get you back to where you were before, not make you rich. If you truly believe that you or your spouse is worth $750k then you aren't overinsuring. Given the fact that your child has a heart defect, more insurance might be a good idea in case he needs special care if either of you passed away.

I agree with the pp that the main reason for not going above 10x salary is cost.

[Jilian]

Ok. I read somewhere else that if you overinsure the insurance company may deny your claim because you've overinsured when it is time to pay. I'm not sure if this is true or not. But we'd be screwed if that ever happened. I'm leaning more towards term insurance now, for 10-20 years because I know we'll be in a better financial situation then and I'll more than likely be working.

[mightymoo]

Originally Posted by Jilian

Ok. I read somewhere else that if you overinsure the insurance company may deny your claim because you've overinsured when it is time to pay. I'm not sure if this is true or not. But we'd be screwed if that ever happened. I'm leaning more towards term insurance now, for 10-20 years because I know we'll be in a better financial situation then and I'll more than likely be working.

Sarah8Jane has a great point, we had to prove why the level of insurance we requested was necessary, and that included showing the insurance company the financial plan to prove why my husband needed that much insurance on a non-working wife.

We have term insurance.