Author Topic: Term Insurance - what to consider..  (Read 2247 times)

torsion

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Term Insurance - what to consider..
« on: March 10, 2016, 07:31:49 AM »
Hello fellow Mustachians!

It's been a while since I last posted. I am looking for some advice and opinions. I am an expat in NYC and looking to get term insurance here. What do you guys consider when applying? I have an outstanding mortgage back in the UK so that will be consider ($ amount) but do you also add items making up your net worth? Don't want to under/over do it with the calculation. I also have x2 pension schemes.

Thanks in advance!

Don
« Last Edit: March 10, 2016, 07:45:21 AM by torsion »

GrowingTheGreen

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Re: Term Insurance - what to consider..
« Reply #1 on: March 10, 2016, 08:07:12 AM »
Don,

It may be helpful if you post some more detailed info. Dependents? Want to send kids to college?

In general, some people make the mistake of getting enough "to pay off the house" and that's it. They don't consider funeral costs, healthcare costs that may predate your death, and in your case, supporting your dependents until your pension kicks in. Speaking of the pension, are there any survivor benefits? If not, then you'll likely need more insurance if your dependent doesn't have their own source of savings.

To summarize: it depends.

torsion

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Re: Term Insurance - what to consider..
« Reply #2 on: March 10, 2016, 08:39:45 AM »
Good point Will, sorry about that was quickly trying to post.

I am married with our first child on the way. Yes to sending them to college when the time comes.
Healthcare/insurance is completely covered by my firm including all dependents (whilst I work here)
Emergency fund x3 months expenses (still deciding to keep in cash or not)
UK mortgage equivalent $365K
x2 Pension schemes current equivalent $128K - in terms of survivor benefits (need to check) but assuming my dependents would receive the benefit

Hope this is enough info for now...

Cheers

ltt

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Re: Term Insurance - what to consider..
« Reply #3 on: March 10, 2016, 09:32:51 AM »
If you are married with a child on the way, please consider a 20-25 year term insurance policy.  More than likely, you will get some really good rates.  When we bought a term insurance policy when our children were young we bought 15-year term policies, and we really didn't take into account college expenses.  We just wanted enough coverage in order to pay the mortgage in case something happened.  Now we have four children from elementary age through high school.  The term insurance rates go up substantially once the term period ends, so we decided to discontinue one of our term policies and will probably discontinue the other one this coming year.  My husband carries life insurance through work, so we do have that.  Yes, and do take your net worth into consideration.  You definitely want to think about how would a mortgage be paid, how would health care be paid, how would living expenses be paid, how would funeral costs be paid, and, of course, factor in your current net worth when calculating. etc. if something were to happen. There's a lot to consider.

What I'm trying to say is that time really goes by fast, and a 15-year policy will end just as they are possibly starting to think about college.  It's much easier to get a longer-term policy now and cancel down the road if you need to versus trying to go and get another policy once the original term one has expired.
« Last Edit: March 10, 2016, 09:37:01 AM by ltt »

AZDude

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Re: Term Insurance - what to consider..
« Reply #4 on: March 10, 2016, 10:24:46 AM »
Yep, I would say a 20 year term worth something like $500K.

Prairie Stash

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Re: Term Insurance - what to consider..
« Reply #5 on: March 10, 2016, 11:47:25 AM »
In 10 years how much money will you have saved? In my case I'll be FIRE (hopefully) so a 20 year policy is redundant. That's something to consider, how much money will your future self need in 10, 15, 20 years. If the answer is $0 in 20 years then you can afford a shorter policy, its called self-insurance. That's the reason you're not getting whole life, am I correct?

Basically make a timeline of the next 30 years and estimate Net worth (roughly, don't get bogged down with details yet). Then figure out what your net worth needs to be if you die to pay for all your future and current expenses. Then at certain intervals you'll see how much insurance you should have.

You're NW is on the right track, just add in a future timeline.

 

Wow, a phone plan for fifteen bucks!