Posted: 2/8/2016 1:59:07 PM EDT
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Since my wife and I area getting a little older now (mid 30’s), and have a 8 month old daughter, I figure it would be a good time to start looking at life insurance.
I met with a local insurance guy last week, and in order to figure out how much coverage we “need”, he went through all of our debt, finances, how much we own on the house…stuff like that. After all of his figuring, he suggested that my wife and I both get 30yr term life insurance with coverage of $700,000 each! Keep in mind that we have no debt except the house, and we own less than $100,000 on it. OK, I understand that it would be nice if my daughter had her education covered if something happened…so let’s say another $100,000 on top of that. Let’s say a funeral costs $15,000. So I figured we need right around $215,000. Once the house is paid off, and my daughter has her education covered, and the funeral costs are covered…..why would you need to be coverer for $435,000 on top of that? If my wife or I dies……the person left living would still be working, and since there is no debt…it should be a pretty easy life. My wife and I both have some life insurance coverage through our jobs also.....think around $100,000, so that would cover any unknown expenses for a long time I would think. If I remember right they quoted us around $2,400 per year if we both wanted to have $700,000 coverage…..that’s $72,000 over the 30yr term. Wow! Is there any reason to get that much insurance vs. the $215,000 worth of coverage per person that I came up with? To me the whole thing just sounds like a scam….but maybe that’s because I’m in my 30’s, and in great health, and don’t really want to think about planning for death. To me it just seems like a good way to throw away a bunch of money over 30years. School me on life insurance. How much do I really need? |
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The salesman is going to eat steak that should be on your table.
Get more coverage than you think you need. Get online quotes. I got a great rate from select quote, and ended up buying a policy through them. Don't forget if you die your daughter will get social security survivor benifits until she is 18, factor that in. I would get a $500,000 policy. If your needs increase you can stack a second $500,000 policy. Early 30s in good health you should not be much over $500 a year in premiums. Seriously check out select quote or one of the other online places.( I don't work for them). |
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You have the obvious debts: mortgage, future college, funeral, etc.
Then come the less obvious debts: your two-person, even if not two-income, home is now a single person. You'll need help around the house OR some kind of income substitute. Might also need to factor in inflation and consider that $100k may not pay for a four-year school in 18 years :-/ You should probably talk to a financial planner instead of an insurance salesman to determine how much insurance you need; it is easier to not get hoodwinked on a purchase when you know exactly what it is you want. Is 3/4 Mil a lot? Maybe. 1/2 Mil might be fine, but will that get you an appreciably lower premium? |
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The cost of what your posting sounds like whole or universal life.
A vast majority of the funds will be in a fund towards the end, so your not truly out the money your stating. It's not a true investment per say but is similar. That said I'm not a huge fan of whole life unless your sheltering money for tax reasons (think millionaire avoiding death taxes). I am a fan of Term insurance. Which is much less per month, but only lasts a specified term. I generally look at paying off homes, college, and a grieving period, 1 year income. In your case maybe $250k is the right amount, perhaps it's closer to $500k? You and your wife each need your own separate policy. |
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I think the $400k extra was to replace your income. The question here is; if all your immediate debts were covered, would your spouse need to replace your income? Could one of you take care of your daughter and the house AND continue to make your present income? Would that single person's income continue to be sufficient? Also, I'll bet projected college costs in 18 years are more than $100k. College costs have been rising faster than inflation. One other consideration is - how fast are you accumulating money for retirement. I'm looking at dropping some of my insurance as my retirement fund accumulates. It's a sort of self insurance. |
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That amount seems excessive. I have a plan for $300k. That will allow my wife to pay off the house and both cars etc.
She would probably sell the house if I passed and would be fine with that. But if you only owe on your house, and it's just 100k, seems excessive to me. |