The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: hoyahoyasaxa on October 09, 2013, 03:30:20 PM
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I'm 28 and my wife is 27 and we are expecting our first baby in April of next year. We do not currently have life insurance. Our current monthly expenses amount to about $3500 per month (this is pre-baby). I earn $3500 take home per month and my wife earns $2100 take home per month. Do EACH of us need to take out life insurance policies in case something happens or do we just need one policy on the person earning the higher income?
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I would advise a policy on each of you. If you croak, the household will be arsed for income. If she croaks, you will be arsed for childcare.
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Yes, it's probably best to have life insurance for both of you.
Which country do you live in? In some countries, it's common for life insurance companies to offer Joint-First-to-Die term insurance which can be 5% than each of you buying your own coverage.
Also, if you're planning for FI within 20 years then you probably wouldn't need lifetime protection. Just ask for a 10-Year or 20-Year term product. Term life insurance is so cheap that you could request $600,000 of term insurance for a lower premium than $300,000 of whole life insurance. At your young ages, buying whole life insurance isn't *too* expensive though, but Term should still be much cheaper.
Also, ask whether you have the option to convert your term into whole life in the future. Many insurance companies allow you to buy Term insurance now and then switch to permanent insurance on request. Your permanent insurance will be cheaper if you lock in at a younger age, but since this is an Early Retirement website you may be better off just buying the Term insurance and then amassing a huge pile of cash so that life insurance is no longer needed in 20 years.
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How long have you been working? Check with Social Security - you might already be entitled to after-death benefits. For many Mustahcians, it might be enough to live off, at least until the kids are over 18.
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How long have you been working? Check with Social Security - you might already be entitled to after-death benefits. For many Mustahcians, it might be enough to live off, at least until the kids are over 18.
Yes, do this. They even have a website where you can log in and see what benefits your surviving family members would be entitled to if you died today. Even if it's not enough to meet your expected expenses, it's still good to know how much Social Security would be so that you don't buy more insurance than you need.