Life Insurance

[WVMomof3]

How much do you have and at what age do you lower it, if any? I had always heard 10 times salary and that is what we did for DH when we locked in about 15 years ago with 3 kids and we were in our early 30s. That is about the time that I stopped working and we purchased 250,000 for myself. I think his lock in expires with next bill. Just wondering, do we still need 10x salary? I think with raises and such, we are now slightly less than 10x, but close, as sadly income has not gone up all that much and we prob had slightly more than 10x to start. I have not looked at rates, so possible, they may not go up much, have really no idea. Our house will be paid off in next few years, we are in mid 40s and kids are now 15, 17 and 19. So, 6 years until all out of college. Just wondering what others do.

 

[Jen and Ashwin]

How much do you have and at what age do you lower it, if any? I had always heard 10 times salary and that is what we did for DH when we locked in about 15 years ago with 3 kids and we were in our early 30s. That is about the time that I stopped working and we purchased 250,000 for myself. I think his lock in expires with next bill. Just wondering, do we still need 10x salary? I think with raises and such, we are now slightly less than 10x, but close, as sadly income has not gone up all that much and we prob had slightly more than 10x to start. I have not looked at rates, so possible, they may not go up much, have really no idea. Our house will be paid off in next few years, we are in mid 40s and kids are now 15, 17 and 19. So, 6 years until all out of college. Just wondering what others do.

So with life insurance, you want to take out whatever you will need to maintain your family's standard of living if one of you passes away, for at least 10 years and possibly until you would hit retirement age. Given that, I think that the 10x salary number is usually low. The number should take other things into account, such as the value of your work benefits package too. So include the cost of health coverage, employer retirement matches and other benefits. The number you need is obviously going to be different now than it was 15 years ago. You might be able to lower your coverage if you aren't concerned with being able to pay off your mortgage, help with your children's education, etc. You just have to understand what exactly one of you would need if the other one is no longer there, either contributing earned income or household labor.

 

[disneysteve]

8-10 times income is a good rule of thumb. From there, you need to sit down and figure out what you would actually need the life insurance to pay for. Do you have a mortgage? Any other debt? Do you have college funding for the kids? Would you need to hire any household help if your spouse died, like someone to mow the lawn for example? And do you earn enough to support the family if he dies?

Term insurance is so cheap it's kind of dumb not to have it even if you have more than you really need.

 

[tvguy]

When my kids were under 18 and still in College, we had $500,000 each on DW and I. Once they got done with college, we cut that to $250,000 each, and added long term care insurance that will pay $4,800 a month each for 5 years.
We felt having that money coming if if we need long term care was more important that a cash payout after we are dead (and may have needed years of long term care).

 

[jen7233]

I've heard about 10x income in term life. Then you can take a look at for how many years you'd want to have it for. You may or may not need to sustain current level of income as years go by with kids moving on and graduating, value of investments, etc.

 

[Ciao Mickey]

How much do you have and at what age do you lower it, if any? I had always heard 10 times salary and that is what we did for DH when we locked in about 15 years ago with 3 kids and we were in our early 30s. That is about the time that I stopped working and we purchased 250,000 for myself. I think his lock in expires with next bill. Just wondering, do we still need 10x salary? I think with raises and such, we are now slightly less than 10x, but close, as sadly income has not gone up all that much and we prob had slightly more than 10x to start. I have not looked at rates, so possible, they may not go up much, have really no idea. Our house will be paid off in next few years, we are in mid 40s and kids are now 15, 17 and 19. So, 6 years until all out of college. Just wondering what others do.

Do you work and are you able to support your household if your husband died tomorrow? (I don't mean to be morbid.)

If you are in your 40's and the insurance you have is 10x his salary what are you going to do in the eleventh year to support yourself when you're in your 50's if something happens to him?

These are some of the questions you have to ask yourself and come up with a figure that will carry you through the years if something happens to the breadwinner.

I would carry insurance of at least 20x his salary if he's the only one who works.

 

[Ciao Mickey]

My husband still has a life insurance policy even though he's retired. He had multiple policies and dropped them all except one. He's in his 60's so I would think he'd keep it until it gets too expensive to carry.

I think once you hit 70 the rates really jump so I expect him to drop it then.

 

[DLgal]

Buy a term insurance plan for as much as they will underwrite on each of you. Buy the longest term plan you can.

We made the mistake of only buying 20 year term plans when we were 28. It's now 10 years later and there is NO WAY we will be okay without insurance in ten years, as both our kids ended up having autism (which was not known at the time). It is a lot more expensive to get new term plans now but we have to do it. Once my husband retires from the military in a few years, he will lose about 1/4 of his insurance (total insurance on him is around $2M).

At the time, I was a SAHM (still am). By law, the cap on insurance on a SAHM in California was $500K, so we took that.

We are looking at buying an additional term plan on my husband here shortly as his income has increased about 2X over what he was making 10 years ago and he is now currently underinsured. And if they will let me, I will also purchase another term plan. However, not sure another insurance company will insure me before my current plan expires since I don't work. There is something about how "you can't be worth more dead than alive."

Just for reference, when we took out these policies we were 28. My plan costs $19/month. Husband's costs $42.

 

[kydisneyfans]

We also just cut back after our son graduated, we also have about 5 years worth of salary in savings so that changes what we need.
We cut my wife back to 275,000. She has another 75K through work. I cut back to 325,000, 50K through work. Costs would drop if one of us died(1 vehicle vs 2, insurance etc).

We are in our mid 40's and were hit with a 50% increase in cost mid June, part of the reason we lowered the policy amounts.

 

[amcnj]

I think it is best to estimate the income and the expenses (mortgage, college, etc) you would want to replace and for how long, and then get policies to cover that amount. Don't forget to include any policies work places provide. As time goes on, you will find the mortgage is done or much smaller, kids are done with college, you have savings of your own to replace some or hopefully all income, and so you may be able to cut the total amount of insurance. You can get term policies at different times so some drop off at certain ages/stages of life. I purchased some 20 year policies when I was in my 30's and 40's figuring they would take me past college, mortgage, etc. One has expired (after college costs were done) , one has maybe three years to go (mortgage will be done by then), and the last maybe 7 years to go. I am thinking about ending some early if our own savings seem sufficient.

 

[disneysteve]

Don't forget to include any policies work places provide.

Actually, I would stress that you should exclude work policies from your calculations. Forget they exist. As a work benefit, you lose that coverage if you change jobs. You could lose that coverage if the employer just decides to stop offering that benefit for any reason. You don't want to end up underinsured. Term life is cheap. Buy the amount of insurance you need on your own. Any work policy would just be a bonus.

 

[amcnj]

Actually, I would stress that you should exclude work policies from your calculations. Forget they exist. As a work benefit, you lose that coverage if you change jobs. You could lose that coverage if the employer just decides to stop offering that benefit for any reason. You don't want to end up underinsured. Term life is cheap. Buy the amount of insurance you need on your own. Any work policy would just be a bonus.

I guess it depends on your work situation. Mine was very stable and still in effect 30 years later, but for others I can see your point. When term rates were lowered some years back, the term I could buy outside of work was cheaper than the contributory portion of my work insurance, so I dropped that (keeping only the employer paid amount) and replaced it with term.

 

[tvguy]

I think it is best to estimate the income and the expenses (mortgage, college, etc) you would want to replace and for how long, and then get policies to cover that amount. Don't forget to include any policies work places provide. As time goes on, you will find the mortgage is done or much smaller, kids are done with college, you have savings of your own to replace some or hopefully all income, and so you may be able to cut the total amount of insurance. You can get term policies at different times so some drop off at certain ages/stages of life. I purchased some 20 year policies when I was in my 30's and 40's figuring they would take me past college, mortgage, etc. One has expired (after college costs were done) , one has maybe three years to go (mortgage will be done by then), and the last maybe 7 years to go. I am thinking about ending some early if our own savings seem sufficient.

Absolutely, consider all your financial obligations. An amazing (at least to me) 30% of those over age 65 still have a mortgage, so make sure if you get term coverage it goes through the term of any major expenses like a mortgage.

 

[runwad]

We actually have term policies to age 70 but more so for an inheritance for our kids. Both of my DH's grandparents and parents all got Alzheimer's so I want to make sure there is something for the kids should everything we have get used up for care :-(.

 

[Jen and Ashwin]

We actually have term policies to age 70 but more so for an inheritance for our kids. Both of my DH's grandparents and parents all got Alzheimer's so I want to make sure there is something for the kids should everything we have get used up for care :-(.

70 is pretty young to expect to die. Unless you plan to extend your coverage (which would cost a fortune), then I wouldn't bank on an inheritance for your kids.

 

[kymom99]

70 is pretty young to expect to die. Unless you plan to extend your coverage (which would cost a fortune), then I wouldn't bank on an inheritance for your kids.

If you want to leave an inheritance, put the money in an investment account and if you don't need it they can have it.

My philosophy on leaving something for my kids is that i gave them an education to make their own money. They probably won't need mine.

 

[mjkacmom]

We actually have term policies to age 70 but more so for an inheritance for our kids. Both of my DH's grandparents and parents all got Alzheimer's so I want to make sure there is something for the kids should everything we have get used up for care :-(.

My dad was diagnosed with Alzheimer's around the age of 65. He's now 78, not capable of living alone, but physically very healthy. He had over a million in his estate a few years ago, with the cost of his care, I don't expect to see a dime.

 

[runwad]

70 is pretty young to expect to die. Unless you plan to extend your coverage (which would cost a fortune), then I wouldn't bank on an inheritance for your kids.

oops you're right, DH's policy is till 70. I just got a new one till age 80. The term premium isn't that much we can handle it. If they get something they get something, I'll take my chances . Hoping we don't go thru all we save and they make out like bandits

 

[runwad]

My dad was diagnosed with Alzheimer's around the age of 65. He's now 78, not capable of living alone, but physically very healthy. He had over a million in his estate a few years ago, with the cost of his care, I don't expect to see a dime.

Yep this is what happened with DH's grandparents and parents. I'm just hoping to leave a little something to the kids should the worst happen. Not like they can quit work or anything just a little cushion for them.

 

[WVMomof3]

If you want to leave an inheritance, put the money in an investment account and if you don't need it they can have it.

My philosophy on leaving something for my kids is that i gave them an education to make their own money. They probably won't need mine.

Mine also! It always boggles my mind when people talk about leaving their kids an inheritance. Why? Maybe I don't get it because I will never get one. My parents and inlaws are lucky to have enough money to live on, they are definitely not leaving any for us. And why should they? They earned it, so I have no problem with them spending it on themselves. It would be nice to have enough to pay funeral expenses, my inlaws did prepay for theirs, but as far as I know, my parents have not. I hope to live to a nice old age( 90s), at which time, my kids will also be older (60s), so why would they need my money then?