Closing on my first house in about 2 months and I'm thinking it's time to get serious about my financial future in a few areas.

The only thing I really know is term>whole life.

So how to calculate how much coverage I really need? I'm thinking that if I got hit by a bus my wife should be able to wipe the debt slate clean and put me in the ground. So add up all debts and final expenses and pick the closest coverage number?

Also, where does one begin shopping for insurance? Looks like there are is no shortage of companies selling it, so how do you pick one?

I got my term life insurance through my employer.  My employer covers 1x my salary and I can elect to buy an additional 5x my salary giving me a total of 6x my salary.  My insurance is through Lincoln but you shouldn't have any problems getting quotes from other places.

Here was my thought process going into it:
Wife and I are 31 yrs old.  We have two kids, one toddler, one infant with no plans of having more.  We owe $220k on the home and have no other debts.  The kids are setup with UTMA accounts for college, or getting started in life, already.  College costs are a none issue for my kids so it didn't factor into how much coverage was needed.  I make substantially more than my wife so the primary concern is covering my lost income rather than her lost income.

I elected to carry enough insurance to allow my wife to fully pay off the house.  However, my wife couldn't afford to put the kids in daycare without financial support even after paying off the house.  In response, I calculated how much daycare would cost until no longer necessary if I were to immediately die.  Also, my employer offers a generous health insurance plan but my wife's is mediocre.  If I were to die my wife would have to switch to her employer's health plan.  Due to those factors I added in a 1x salary buffer to cover daycare and health insurance deductibles.  I then added another 1x salary buffer for potential needs like a modest car, property taxes, home/auto insurance, etc.  All those needs wouldn't hit at once so the idea was she'd be able to invest the residual and let that grow then pull from it when needed.

My plan for coverage amount was not to make my wife or her future husband rich.  The plan was to have a good chance of providing enough coverage that her salary would sustain the household day-to-day at the current comfort level after paying off the house and the kids were out of daycare but leave room for emergencies.

I elected to exclude existing household investment and savings money from the equation.

Also, my employer offers $50k of insurance for the spouse but you can't buy additional coverage.  My wife doesn't have life insurance beyond that $50k because my income alone is enough to sustain the household.

Thank you very much for your response.

My thinking is to take out a policy that is equal to the mortgage, car loans, credit card balances, etc. Let's call that $300k. I'm about to sign a 30 year mortgage so I will buy a 30 year term policy.

That way, if anything ever happens to me the wife and kids will have a paid for roof over their heads and (probably) no other debt. She can then not worry about money on her modest income while raising the kids after putting me in the ground. If 20 years into the mortgage something happens to me, she can go on a nice vacation and buy a new Mercedes after paying off the house.

That is not enough. Generally speaking you want ten to fifteen times your income.

Approaching it from the pay off your debts standpoint is good but what you really want to do is replace your income.

If you place a lump sum in investments you should be able to draw 1/10 to 1/15 of it per year and not destroy the nest egg.

Do you want your wife to be struggling to work and care for your kids should you die? Paying off the house and debts doesn't feed and clothe and educate your kids.

My wife does not work outside the home. She is a full time mom raising our kids. If I croak I want her to be able to continue to do the same thing and not have to take some bullshit job to keep the kids from starving.

Term insurance is cheap. Go toZander You can get a basic quote in minutes.

25 year old non smoker in good health can get a 30 year term 1 million dollar policy for  $54 a month.

I think you can get up to 20x your salary.  Get all you can

Do you have kids or what?  Even if you don't, if you are pretty sure you will, may as well get all that you can while you are younger/healtheir.  It is always easy to diminish your premium/benefit later or get a smaller policy later, not the other way.  Also, in the first 2 yrs ins companies have more room to weasle out of paying a benefit, so the sooner you get those behind you the better.  

as to whole v term, pls undersand that whole policies, there are various types, but they are really more of a weird complex financial vehicle that does these things:
-give you a way to pass $$ to your heirs tax free at your demise
-gives you a rate of return, some are actually not to bad if they are indexed to he markets w/ a floor/cap, but are usually shit.
-gives you a pool of money, the "cash value," that you can take "loans" against which you don't have to pay till your death if you don't want too, w/o the type of tax penalties you get if you withdraw cash from your IRAs before your 60s.

The life insurance part of it is really just tertiary and is there b/c it gives you and your heirs certain tax benefits, particularly if you are a multimillionaire.

The problems w/ using it to insure you life is:
-its expensive
-its complicated
-its expensive


The problem w/ its high montly premiums is that it is a very very impoant bill to pay alway onetime b/c one the policy lapse, its gone and you have to start from scratch w/ a brand new poilcy at a higher rate now that you are older, have newly diagnosed health conditions, history etc.  Suppose you go unemployed for a spell, you want you life policy to be easy to maintain when times are tough.  

Just keep it simple, get a term policy, for as much benefit as possible for till you are like 65 as soon as possible so your montly premium going forward is as low as possible.   The doctrine is that if you "invest the difference" b/t a whole and a term policy in your IRA you will be much better off.


also, the thing is not just about zeroing out debts, its about replacing your income stream.  your wife woudl already have to be doubling down as a parent if you die, don't make it to where she has to take some shitty job too.

Also think about getting a disability policy.  you are ore likely to be disabled than killed

IMO, you need more, of course, make you make like $150k.  Also daycare   Also does your wife have insurance?  What if she dies?  If you put your kids in dayare, that only like 6hr/day usually.  Who is going to clean house etc?  You will have to spend more time parenting your hurt children if your wife dies in addition to your job...  You should probably get a little something on your wife.   Also, is your life insurance policy portable or does it end w/ your employment?    I would not want my life policy, my main one anyway, to be dependent on my job....

Pertaining to my coverage:  I am a high income earner and we live a modest lifestyle.  I pay more in federal withholding than my wife makes gross.  She doesn't have to work, she just chooses to.  It's still net positive after daycare but it's around 45% of her net pay would go to daycare.  I view life insurance as about replacing lost money that is needed, not about replacing lifetime earning potential.  I wouldn't need my wife's money, she however would need mine.  What she should need of mine is enough to pay off the house and get the kids through daycare then leave a safety net.  My intent for insurance coverage is not to allow my wife to retire but to get her through a tough time then allow her to be self sufficient with a cushion.

The policy is portable and I'd still be able to get 6x my salary, just my employer wouldn't be kicking in that 1x.  Not a big deal, company contribution is less than a McDonalds breakfast a month.

I don't think a 10-20x multiplier is what works for everyone.  I can afford paying for a 20x policy but the likelihood of needing it is low and 20x is beyond what my family truly needs to maintain their comfort.  As a result, I favor paying for less than 10x coverage but feel confident all the family's needs would be met if I were gone.

Pertaining to my wife's coverage:  If my wife were to die, stuff like house cleaning or time to mow the lawn care is a none issue.  I could just hire people to do that while the kids are young.  As the kids get older they get chores, this is happening whether my wife is alive or not.  I drive a desk so working from home for a few hours is completely possible.  I already work  from home when I have a video-conference at 6:00 AM with colleagues in Europe or Asia.  I can simply do the same video-conference with colleagues in my local office if I needed to.  I fully acknowledge I'm facing challenges if my wife were to die.  The crux of the issue for me is that getting $50k or $500k doesn't make those challenges go away.  I don't see the advantage to buying more insurance on my wife (that I probably won't utilize) if all it does is provide money I don't truly need and the money I could get wouldn't eliminate the challenges.