Author Topic: term life insurance due to end or roll over  (Read 1349 times)

Double Yu

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term life insurance due to end or roll over
« on: July 07, 2017, 11:52:32 AM »
DH and I are low earners (currently, though it'd be nice if that changed) and while frugal, haven't much in the way of wealth-generating stash.

Way back in the stone ages we bought term life insurance for the both of us and now the term is approaching (20 yr) and I have the option to make them permanent without a health exam (which kind of doesn't matter since we're both currently healthy) ... but I don't even know how to go about evaluating what we have vs. what we should have vs. what we'd want.

We have 2 teen/young adult kids (details of our ridiculous situation here https://forum.mrmoneymustache.com/case-studies/income-challenged-tri-continental-family-e-is-out-of-the-question-but-r/msg1611316/#msg1611316) - and little enough as things currently stand that if DH, the main income earner, checks out first, I'm up a creek due to caregiving for my kids and dad having taken me out of the workforce.

Anyway, I need to "get educated" about what we're doing with life insurance and quick. Decision time is mid next month.

Thanks for your help!
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SwordGuy

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Re: term life insurance due to end or roll over
« Reply #1 on: July 07, 2017, 04:35:53 PM »
How much will you need to live on, for how long, before you can make changes in your life and earn more?
Subtract from that half of what you have saved (value of items you won't sell is $0) and that would be my answer. 

Double Yu

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Re: term life insurance due to end or roll over
« Reply #2 on: July 07, 2017, 04:39:22 PM »
Thanks SwordGuy,

I guess my question is more along the lines of - how do we evaluate whether rolling it over is good or if we should do something else altogether. Also, wondering how to evaluate if the cost of rolling them over is worth it...
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ChpBstrd

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Re: term life insurance due to end or roll over
« Reply #3 on: July 10, 2017, 12:36:35 PM »
First, shop for term life insurance. With today's low interest rates, it would not be unusual to find a deal for twice the coverage, half the premium, or both!

Second, once you have a price identified, ask yourself if you need to spend money this way. MMM for example, focused on saving as much as possible rather than buying too much insurance.

Drifterrider

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Re: term life insurance due to end or roll over
« Reply #4 on: July 11, 2017, 05:40:14 AM »
If you are in the US, find out how much your children would get from social security.  This will help you in determining how much of the income difference you have to make up (or not) with insurance.

RelaxedGal

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Re: term life insurance due to end or roll over
« Reply #5 on: July 11, 2017, 08:34:41 AM »
It comes down to moral hazard.  People healthy enough to get life insurance elsewhere usually do, so the rates for keeping the insurance with no health exam are appropriately higher.

If you are healthy, just 20 years older, shop around a bit.  The rates will be higher than they were for 20 years younger you, but should be lower than keeping your policy.

How much insurance do you need?  Depends on how long your mortgage is, how your spouse would fare without you, etc.  There are quite a few calculators online, some are higher and some are lower, e.g. BankRate has one.

I have enough insurance on me to pay off the mortgage and pay for 4 years of college.  My daughter is 6 and I have 16 years left on the policy.  After that I plan to be FI.  My husband has that plus enough to pay for childcare because he's the bigger breadwinner; without him things would be tight.

SimplyFinanciallyFree

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Re: term life insurance due to end or roll over
« Reply #6 on: July 11, 2017, 09:16:29 AM »
Sounds like you do need some insurance coverage still.  If you are healthy you are likely best off to get new term policies as they are generally the least expensive route to go.  I would suggest contacting your current insurance carrier and finding out your conversion options (converting the term to permanent) before the term actually ends.  Make sure you find out when this option terminates do give you a deadline.  Then go get some term quotes, which will depend on your current health, and see which route makes the most sense.  If possible, apply for term policies and try to get those in force before your deadline on the conversions terminate just to make sure you have coverage. 

I just quickly looked at the link to your other post and if you are US Citizens living aboard then getting a US based insurance policy might be tough.  So start researching this now before your term expires.

Double Yu

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Re: term life insurance due to end or roll over
« Reply #7 on: July 11, 2017, 10:34:57 AM »
Oh these are really helpful responses - thank you for giving me some tools to work with. I'll go get numbers from my current company and do a little investigating of other companies too.

Much appreciated!
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JohnWC

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Re: term life insurance due to end or roll over
« Reply #8 on: July 11, 2017, 08:20:01 PM »
I deal with situations like this on a weekly basis and do claim some experience with it. It sounds like you have your original documents so first, who is the carrier for your current policies? It is necessary to know the face amount of the policies (what it pays) as well. Are there any riders on the current policy that you like or would like to have? Some examples are a lifetime income benefit rider (LIBR), waiver of premium (WP) accelerated benefit rider (ABR). What rate did you qualify for? Typically it looks like "Standard Smoker" or "Preferred Non-Smoker." May be abbreviated.

Your current life insurance carrier will only quote you their own proprietary products so we don't want to just go with them reflexively without first checking elsewhere. A broker that works with multiple carriers can do this easily.

I don't have time tonight but I'll look at your family situation and income and run some numbers to see what seems appropriate.

JohnWC

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Re: term life insurance due to end or roll over
« Reply #9 on: July 12, 2017, 10:10:33 AM »
Based on incomplete info about you I had to make some assumptions:

$250k face value - Standard non-smoker (which is an average health status) female age 46. A bare bones 15 year term policy is in the $480-550 annual premium range depending on carrier. A 15 year term policy w/ all the bells in whistles (waiver of premium rider, Accelerated benefit rider allowing you to take money from the face value in case of illness or injury) is in the $625-665 annual premium range depending on carrier.

A whole life policy may or may not make sense for you - not enough info available here to say for sure. Depends on what you're trying to accomplish with it besides just death protection. If death protection is the only thing that matters to you, go for the bare bones term policy. The extra riders on a bells and whistles term policy can help you protect your lifestyle as well since the face value can be accessed while you're still alive if certain conditions are met. A whole life product offers the same benefits as above but can build a cash position that you can borrow against or use as collateral for a lower than market interest rate loan. An IUL is another type of permanent life product that is best for providing guaranteed income in retirement with a high likelihood of staying ahead of inflation, along with the obvious death protection. $100,000 of whole life protection you're looking at paying about $1500/yr. Hope this helps.

Double Yu

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Re: term life insurance due to end or roll over
« Reply #10 on: July 13, 2017, 09:13:38 AM »
Thank you, JohnWC, for your added help. This week my dad was admitted into the hospital after much waffling on the part of various ER doctors, so I'm frankly a bit distracted. As things even out with him and I catch up on some other work, I'll revisit this thread and keep working to figure out what'll best meet our needs.

So far, I'm leaning toward just continuing term coverage - ideally we get ourselves out of our current low-income slump and are then able to provide for ourselves in the upcoming years.

Will be back to this thread...
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Double Yu

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Re: term life insurance due to end or roll over
« Reply #11 on: July 16, 2017, 10:42:03 AM »
where things stand at this point and the direction I think I'm heading:

I'm currently paying about $250/year for a $250,000 policy that ends in 3 years (deadline to convert is this year). ~$21/month

If I qualify at the same level as I did previously (assuming I do unless there's a hidden health problem I don't know about) - and given that I'm now 17 years older than when I bought the first policy, I was quoted ~$32/month (~384/year).

DH, due to his being overseas, won't likely be underwritten for a new policy now so we'll just keep his current one until it expires and then when he's back in the US, have him apply for a new term policy.

I didn't think to ask what the rate would be for me in one, two, or three years - not sure if it's smart for me to wait to buy a new policy though...
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JohnWC

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Re: term life insurance due to end or roll over
« Reply #12 on: July 17, 2017, 11:48:58 AM »
The quote you received is within the normal price range for a 10 year no frills term. I do think term is probably best for your situation as described in the link you provided. You should think about if you want to simply have protection until your children are done with all schooling and on their own, or if you also want protection on behalf of your husband (just a matter of your own personal preference). That would be the difference between selecting 10, 15, and 20 year terms.

If we could see the future we would know if it was better to wait three years or not. We don't know what your health status will be at that time. Do know that if you decide to replace the current term policy with another term policy your monthly payments will go up simply due to age.