Life Insurance?

[BMG580]

What do you have and why? I am trying to make some decisions regarding policies covering my husband and myself and our two children. The agent has encouraged us to take out small $25,000 whole life policies on the kids to ensure they will be able to have life insurance in case they ever face health issues. My husband has variable term life insurance already but I am thinking of doing some whole life insurance on him as well. And then there is me. I have no idea how much of a term life policy I should take out on myself. What would it take to replace me in financial terms? DH travels a lot for his job and would probably need full time live in help like an au pair. Is $500,000 too much?

[Vancouver Mommy]

My dp and I each carry $750,000 in life insurance, plus whatever his job provides (I think it's the equivalent of 2 years salary or something). We decided that if our children were to lose a parent that it would be important for the other parent to be able to raise them and take as much time off work as required. Our premiums are about $100 per month.

Personally I think life insurance on children is nothing but a cash grab.

[Alare]

Most reputable financial advisors will tell you that whole life is usually not a good investment--it's gears more to the super wealthy who are looking for another tax-exempt investment to round out their investments. Whole life is not worth the money for the run-of-the mill average citizen.

1) insurance on kids: do you have illnessess that run in your family? Diabetes, cancer or heart disease? If the answer is no, then you probably do not need to open policies for them. If you're worried about burial expenses if they precede you in death, you can usually add a rider to your own (or husband's) policy for 5-10 thousand dollars.

2) Term insurance is enough for your husband. You only need insurance until you build up enough wealth to self insure--the difference in price between term and whole life insurance is large enough that it makes sense to buy term insurance, and invest what you would have paid into the whole life. Whole life is notorious for high fees and extremely high commissions paid to the insurance agent.

3) Term insurance for yourself will depend on the ages of your children and if you presently work outside the home.

As for us, we have term insurance on DH, but none for me since I do not work outside the home and we do not have any children.

DH was offered a job as a financial advisor . . . it was just a fancy way of saying he needed to sell VUL's and Whole life polices--They gave him the charts of how much money he would make off of each one. It was completely unreal. 50-70 percent of the first years payments would have gone directly to his commission.

[kmc]

Whole life policies are a ripoff because the returns are horrible. Get term life insurance - about 10X your annual income. DON'T get life insurance on children unless you don't have enough to cover burial costs, then just get a rider on your plan.

We have $1.25 million of term life insurance on my husband (about 10X his income). I am a SAHM and have about $500,000 of term life insurance. I figure it would cover paying off the house and paying a good nanny for a few years for our three children.

Here's an explanation from Dave Ramsey's website:

"If a 30-year-old man has $100 per month to spend on life insurance and shops the top 5 cash value (or whole life) companies, he will find he can purchase an average of $125,000 in insurance for his family. The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100.

So if he goes with the cash value option, the other $93 per month should be in savings, right? Well, not really; you see, there are expenses. All of the $93 per month disappears in commissions and expenses for the first 3 years. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger's Personal Finance, and Fortune magazines. The same mutual funds outside of the policy average 12%.

With whole life and universal life, the savings you finally build up after being ripped off for years don't go to your family upon your death. The only benefit paid to your family is the face value of the policy.

The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after 3 years you would have $3,000, and when you died your family would get your savings."

FYI: Your agent will get a hefty commission on a whole life policy. I would be careful of this person if I were you. A reputable agent wouldn't try to peddle that stuff.

[Alare]

The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after 3 years you would have $3,000, and when you died your family would get your savings.

[Norabella]

:

I have been trying to figure this out too.

[mar123]

Cheap term insurance is the best. Dh and I have inexpensive policies through work that equal 4 times our yearly salary, and we also have term insurance.

[MaddieMay]

DH and I both have policies through our employers. DH's employer only has a max amount they will cost-share, so we have an additional policy for him with another company.

[TiredX2]

We have term insurance.

We have enough on DP to:
1) pay off the house
2) pay for us to live while I go to school for a year or two
3) pay for the kids' college
We figured that if I didn't have to worry about a mortgage payment or paying for the kids college, I could get a teaching job within two years that would support us.

We have enough on me to:
1) pay off the house
2) "little bit" extra (like $50K) for increased expenses
We had more on me when the kids were younger and would have needed full time care. Now, we figure that with the house paid off DP, that would more than compensate for after schoolc care costs.

On the kids we have:
$15K to cover funeral costs/ bereavement leave

Whole Life is a wast of $ as others have already gone over

[annekevdbroek]

We just bought new term insurance policies because we now have two kids and a more expensive house. We opted for 30 year term because that will take us through our working career and the kids through grad school. (I want to be able to pay for grad school for both kids).

500K on me, SAHM. Even if I return to work I make much less than DH, so this is enough to cover.

Million on DH. We may increase that again with another policy in a couple years as his income increases and/or if our expenses increase (e.g. another move to another expensive house,e tc.)

His is enough to pay off the house, fund college, and leave me enough to live on until I get back to work, and cover any gaps between my income and costs.

I do not have policies on the kids. It was possible to put riders on our's for about $80 per year I think.

[SAHDS]

Wow, I didn't know people had so much life insurance! Is there a formula for determining how much you should have?

We have $250k for DH, with another $300k if he dies on the job (leo). I thought this was plenty, but now I'm not so sure.

[MonkeyPrincess]

We have a million on each of us, and riders for the kids to cover expenses.

If something were to happen to one or the other of us, the one left would have the same situation to deal with. I couldn't figure out why he would have more coverage then me.

[woobysma]

DP and I both have term policies. I have $275K, he has $100k. We don't own a house, but if we did, I'd want more.

[grniys]

My dh has about 750,000 and then an extra 100,000 for funeral expenses. I only have 100,000. I'm considering getting a term policy though, because he would have to put two kids in child care, and that would get expensive fast.

We have 10,000 on our son, and we'll have 10,000 on all our kids. This is not so we make money off our children's deaths if, God forbid, something were to happen to one of them. It is so we can cover funeral and burial costs. We would be grieving and wouldn't need the added stress of figuring out how to pay.

Oh, and my dh has more coverage than I do because he is the breadwinner. I need to be able to support my kids and get a degree so I can earn an income if he weren't here, plus we would like to make sure I wouldn't ever have any financial worries. He wouldn't lose an income if something happened to me, but he would have the added expense of child care, so I am going to have my policy upped.

[Jilian]

Dave Ramsey says to get a 20 yr term policy for 10 times your income - I agree. It is also a very good idea to start your own savings in addition to the life insurance and it can cover things like final expenses.

[annekevdbroek]

Originally Posted by MonkeyPrincess

I couldn't figure out why he would have more coverage then me.

In our case my if something happened to me my husband could afford to hire help with his salary + a little insurance (or really, no insurance....).

I SAHM and if I went back to work my income would be less than half of what he makes. So, we have a larger policy on him because I'd need more money to get up and running again and stay in good financial shape then he would need if something were to happen to me.

[SAHDS]

Originally Posted by Jilian

Dave Ramsey says to get a 20 yr term policy for 10 times your income - I agree.

Yikes, I definitely need to up ours.

[phathui5]

We have 20 year term policies, $400k on dh and $250k on me. Like another poster said, we have more on dh than me because he has greater income potential, but I have been considering upping mine when dh gets a job again.

[Peony]

We have 1.5 million on DH, and 500,000 on me. It sounds like a ton, but really isn't. He is a business owner and it would take a while to get close everything down, housing is high in our area, etc... If I wasn't around then DH would have to hire a nanny. Everything adds up!

[cristeen]

Originally Posted by SAHDS

Wow, I didn't know people had so much life insurance! Is there a formula for determining how much you should have?

We each carry $250 right now, which is enough to pay off the house and all debt. DH also has an additional $170 through his job.

I just spoke to our insurance agent last night about doubling our coverage and whether we wanted to switch from 20-year term to universal life (DH's 40th is this week, hence the increase). He suggested we stick with the term for now and then we can sit down and discuss converting to universal, but that there comes a point where it's more cost effective to put the money into a 401(k) than it is to buy life insurance.