Author Topic: Term life insurance - How much do I need?  (Read 2592 times)

EXLIer

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Term life insurance - How much do I need?
« on: July 19, 2016, 07:24:53 AM »
Been considering it for a while now.  I usually told my wife that if something happened to me, to liquidate some of the paid for properties if needed, but always told her that the income, no matter the debt obligations on some, would more than carry her.  I have two young children and we live 1000's miles away from all family, so she'd be on her own should god forbid something happen to me. 

Now I'm thinking differently.

How much would I need?    Enough to pay off all properties, and carry them for 6-12 months while they're liquidated + personal living expenses for 1yr? 

Any advice is greatly appreciated

Kaikou

  • Pencil Stache
  • ****
  • Posts: 503
  • Location: United States
  • Kermit is like a box of chocolates
Re: Term life insurance - How much do I need?
« Reply #1 on: July 19, 2016, 08:02:43 AM »
Dave Ramsey recommends 10x your income. Not sure the mmm mode of this topic.

SimplyMarvie

  • Stubble
  • **
  • Posts: 217
Re: Term life insurance - How much do I need?
« Reply #2 on: July 19, 2016, 10:13:26 AM »
Would the 4% SWR apply to life insurance proceeds? That is, if I left a pile of money when I died, and it was invested in a diverse portfolio, would Mr. Marvie technically be able to withdraw 4% per year over the same 30 years horizon? I'm pondering this myself, as I'm about to hit the point where FEGLI through work is no longer a good idea financially and I should switch providers, but I'm trying to figure out how much insurance we actually NEED. We're in a different situation, since we don't have real estate or debts, but I'm the sole wage earner. So I'm most concerned with income replacement.


v8rx7guy

  • Handlebar Stache
  • *****
  • Posts: 1724
  • Location: Bellingham, WA
Re: Term life insurance - How much do I need?
« Reply #3 on: July 19, 2016, 10:30:52 AM »
I got $500,000 ... which is about 10 years of spending on our current budget.  I am 30 years old, it is a 25 year policy and only costs $22.00 a month or so with TransAmerica.  I only got $500,000 because I didn't want it to be tempting to make an "accident" if she ever got mad at me ;)
« Last Edit: July 19, 2016, 10:46:16 AM by v8rx7guy »

dcozad999

  • Pencil Stache
  • ****
  • Posts: 711
Re: Term life insurance - How much do I need?
« Reply #4 on: July 19, 2016, 10:38:09 AM »
I also have a $500k outside policy with another $250k through work.

My wife is pretty frugal and I don't want my family to ever worry about money again if I were to die before my children are grown.


I know some mustachians forego life insurance because minor children will receive your social security until they reach adulthood.

RedBaron3

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: Term life insurance - How much do I need?
« Reply #5 on: July 19, 2016, 10:56:31 AM »
There's no right answer as it's really a personal comfort/risk tolerance question.

I have $1,000,000 which will reach the end of term when I'm 59.  My wife is currently a SAHM and I wanted her to be able to pay off the house and get things figured out without stressing about money.  We have $200,000 on her as I would have childcare expenses without her.  It's a monthly budgeted expense that is minor compared to my peace of mind. 

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 2516
Re: Term life insurance - How much do I need?
« Reply #6 on: July 19, 2016, 11:07:59 AM »
We each have a 500K policy. My husband is the much higher earner, so 500K on him (plus 100K through work) would pay off mortgage and more than hit our target for FI, which would allow me to continue to earn moderate money and still partly support my mother.

500K on me would give him maybe 300K to get him very close to FI, and he could use the rest to help support our mothers, if he were to feel so generously inclined.

We set these policies to expire right around the point where he would be at full retirement age. It's possible we would cancel his policy a few years before that, depending on how the stash looks. Likely we will carry mine the full term.

Catbert

  • Handlebar Stache
  • *****
  • Posts: 1832
  • Location: Southern California
Re: Term life insurance - How much do I need?
« Reply #7 on: July 19, 2016, 11:10:38 AM »
There's no right answer as it's really a personal comfort/risk tolerance question.



Think about what you would want your family to have as a life style if you die.  If the income from rental properties would be enough for your family then you may not need any insurance.  But also consider things like:

*Do you do maintenance or management for the rentals that your widow would contract out?
*Were you planning to pay for college?
* Would you widow want to take extra time off work (assuming she's employed)?
*If she sold the properties and invested in stock/bond/REITs would a 4% withdrawal be enough?

Doing something like one years expenses would be a good way for her to have time to sort things out.  Assuming, of course, that there is otherwise "enough".