Author Topic: Does life insurance company matter?  (Read 1725 times)

bokonon

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Does life insurance company matter?
« on: October 26, 2017, 04:54:47 AM »
I'm getting life insurance and it seems to be more mysterious than other financial products.

I want $500k term insurance for my wife and I for 15 years.  This is might be overkill if we reach FI sooner, but in that event we will cancel.

I got quotes through selectquote from AIG for me and Banner Life for my wife.  It was $45 a month total.  I also saw Northwestern Mutual listed as the best life insurance company on nerdwallet so I got a quote from them as well.  $52 a month total.  The Northwestern broker / agent guy said that you can't compare NW to AIG or Banner, and in fact he wouldn't consider placing us with those companies if we are able to get coverage through Northwestern.

In response I asked, "tell me specifically why you say that," and his reply was financial stability (NW is AAA+ or something), and that if I ever wanted to change something down the line Northwestern was a better company to work with.

Is this fear sales tactics or fact?  Should I go through 2 physicals (including blood draws and urine samples) and the whole underwriting process with both companies so I can compare at the end?

boarder42

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Re: Does life insurance company matter?
« Reply #1 on: October 26, 2017, 06:17:05 AM »
its not a financial product its a cost

You should be asking do i need life insurance at all.

1. Do you have dependents - if the answer is no you definitely dont need it
2. What is the size of your current stash
3. If you have dependents have you heard of the SSA survivor benefits - if you havent it would be worth setting up an account to see what yours are. Here is a run down of mine
If i die with 1 child my wife will get 2k per month til the child turns 16 and another 2k per month til the child is 18.  If i die with 2 kids we hit the IRS Max which today is around 4550 total per month. thats 55k per year plus my wife has a job so that covers it

I wasnt aware of this benefit til we started crawling around these forums and we decided life insurance wasnt going to be necessary.

NeonPegasus

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Re: Does life insurance company matter?
« Reply #2 on: October 26, 2017, 09:25:26 AM »
Our insurance is with Banner Life. They have an A+ rating. The rating matters to the extent that it foretells whether the company will be around to make good on the premiums you've paid. What is the practical difference between that and A++ (NW Mutal's rating)?

In short, I think your broker is full of shit.

Why would you want to change something down the line? Seriously? DH and I each got $1mm policies and they're good for 20 years. What is there to change? By the time they expire in 13 years, we'll have enough of a stash to cover the remaining cost of raising our kids.

bokonon

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Re: Does life insurance company matter?
« Reply #3 on: October 26, 2017, 06:52:02 PM »
Thanks for your viewpoints.  No dependents.  Current NW $250k excluding the house, both of us work.  I felt the same way - what would I ever want to change?  If everything goes well will be FI in 10ish years, just want to cover the gap between now and then with some wiggle room, hence the 15 year duration.  Plan to cancel once it's redundant.

Thanks for the idea to check SSA - looks like it is only a benefit for spouse if we have a kid or it also kicks in at full retirement age, but that is quite some time away.

I'm thinking I'll go with the cheaper option because I don't anticipate any special needs.  Thank you again for your thoughts!

boarder42

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Re: Does life insurance company matter?
« Reply #4 on: October 26, 2017, 07:29:04 PM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

NeonPegasus

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Re: Does life insurance company matter?
« Reply #5 on: October 27, 2017, 08:21:04 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

boarder42

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Re: Does life insurance company matter?
« Reply #6 on: October 27, 2017, 08:33:45 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

you bring up one interesting point i had not considered in the Life insurance risk world.  I always considered I die or my wife dies never if we both die what burden is put on someone outside of us.  I'd think not much since we'll be pushing 1MM networth and survivor benefits from both of us should then be paid out to the god parents/our children correct?  this is something i've not thought about. 

SHARP_00

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Re: Does life insurance company matter?
« Reply #7 on: October 27, 2017, 08:39:12 AM »
I got a term life policy because my partner, with only her income, would never reach FI. We do not have a policy for her, since I could reach FI on my own without changing the timeline much. Once the stash grows to the point that FI is inevitable, we will cancel.

NeonPegasus

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Re: Does life insurance company matter?
« Reply #8 on: October 27, 2017, 08:48:26 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

you bring up one interesting point i had not considered in the Life insurance risk world.  I always considered I die or my wife dies never if we both die what burden is put on someone outside of us.  I'd think not much since we'll be pushing 1MM networth and survivor benefits from both of us should then be paid out to the god parents/our children correct?  this is something i've not thought about.

I put survivor benefits in the same category of social security payments - a nice extra but not something I can reliably plan around. I assume they would go to the guardian you select but you'd need to check.

You should have wills that stipulate your estate will go into a testamentary trust (established upon your death) for your children. You should appoint a guardian of your children as well as a trustee. My lawyer advised that we make the trustee someone separate from the guardian but who gets along with the guardian. This is to provide a layer of accountability for spending as well as protect the guardian against allegations of financial misconduct by the kids later on. The trustee will take care of authorizing payments to the guardian. You also want to consider when your children will inherit any excess from your estate. My attorney recommended two disbursements at ages 25 and 30. We opted to push that back to ages 30 and 35 to force our children to do something with their lives rather than surf for a couple of years after college until they can get to the first disbursement.

I think it would be good to sit down and do some math about how much of a burden your children will be to their guardian and what sorts of expenses would be incurred. For our 3 kids, a $1mm payment plus survivorship benefits seems to be on the low side to help their selected guardians upsize everything in their lives and fund college educations for all 3.



boarder42

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Re: Does life insurance company matter?
« Reply #9 on: October 27, 2017, 09:11:48 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

you bring up one interesting point i had not considered in the Life insurance risk world.  I always considered I die or my wife dies never if we both die what burden is put on someone outside of us.  I'd think not much since we'll be pushing 1MM networth and survivor benefits from both of us should then be paid out to the god parents/our children correct?  this is something i've not thought about.

I put survivor benefits in the same category of social security payments - a nice extra but not something I can reliably plan around. I assume they would go to the guardian you select but you'd need to check.

You should have wills that stipulate your estate will go into a testamentary trust (established upon your death) for your children. You should appoint a guardian of your children as well as a trustee. My lawyer advised that we make the trustee someone separate from the guardian but who gets along with the guardian. This is to provide a layer of accountability for spending as well as protect the guardian against allegations of financial misconduct by the kids later on. The trustee will take care of authorizing payments to the guardian. You also want to consider when your children will inherit any excess from your estate. My attorney recommended two disbursements at ages 25 and 30. We opted to push that back to ages 30 and 35 to force our children to do something with their lives rather than surf for a couple of years after college until they can get to the first disbursement.

I think it would be good to sit down and do some math about how much of a burden your children will be to their guardian and what sorts of expenses would be incurred. For our 3 kids, a $1mm payment plus survivorship benefits seems to be on the low side to help their selected guardians upsize everything in their lives and fund college educations for all 3.

seriously thats giving someone 90k a year in my scenario 50k from survivor plus 40k a year from the 1MM invested.  that should be plenty of money.  we have no children yet so that trust info etc. was helpful for the future.

NeonPegasus

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Re: Does life insurance company matter?
« Reply #10 on: October 27, 2017, 09:29:59 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

you bring up one interesting point i had not considered in the Life insurance risk world.  I always considered I die or my wife dies never if we both die what burden is put on someone outside of us.  I'd think not much since we'll be pushing 1MM networth and survivor benefits from both of us should then be paid out to the god parents/our children correct?  this is something i've not thought about.

I put survivor benefits in the same category of social security payments - a nice extra but not something I can reliably plan around. I assume they would go to the guardian you select but you'd need to check.

You should have wills that stipulate your estate will go into a testamentary trust (established upon your death) for your children. You should appoint a guardian of your children as well as a trustee. My lawyer advised that we make the trustee someone separate from the guardian but who gets along with the guardian. This is to provide a layer of accountability for spending as well as protect the guardian against allegations of financial misconduct by the kids later on. The trustee will take care of authorizing payments to the guardian. You also want to consider when your children will inherit any excess from your estate. My attorney recommended two disbursements at ages 25 and 30. We opted to push that back to ages 30 and 35 to force our children to do something with their lives rather than surf for a couple of years after college until they can get to the first disbursement.

I think it would be good to sit down and do some math about how much of a burden your children will be to their guardian and what sorts of expenses would be incurred. For our 3 kids, a $1mm payment plus survivorship benefits seems to be on the low side to help their selected guardians upsize everything in their lives and fund college educations for all 3.

seriously thats giving someone 90k a year in my scenario 50k from survivor plus 40k a year from the 1MM invested.  that should be plenty of money.  we have no children yet so that trust info etc. was helpful for the future.

It's obviously not a worry for you now but take a moment to imagine what it'd be like for someone to drop 3 kids in your lap tomorrow. You'd probably have a large chunk of up front costs (moving furniture, larger accommodations, larger car), you'd have some ongoing monthly costs (more food, health insurance, daycare, clothing, activities), and then large costs later (if my daughters went to my college and got no scholarships, it'd be $210k each for 4 years at today's cost). The money would go more quickly than you'd think and the last thing I'd want is for my passing to adversely impact my brother's financial well being.


boarder42

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Re: Does life insurance company matter?
« Reply #11 on: October 27, 2017, 11:10:20 AM »
Why do you need any life insurance then if you both work insurance is an unnecessary waste of your little green soldiers. It's not an investment it's a cost of over 600 per year depending on who you go with.

+1

We got life insurance when we had kids, solely because we have (3) kids. The proceeds of our life insurance policies would be needed in the event our dual demise to help my brother and sister in law raise our kids, including the cost of finding a bigger place to live (they have a 1 bedroom condo), the cost of a bigger RV with our blessing, and the cost to feed, clothe and educate our rug rats through college.

If DH and I did not have kids, we would have minimal life insurance. Because we run a business together, the loss of one would mean the loss of the business, so we'd want to have enough money to allow the other to be FI (which we're almost already at) but if we both had separate jobs, that wouldn't be necessary.

you bring up one interesting point i had not considered in the Life insurance risk world.  I always considered I die or my wife dies never if we both die what burden is put on someone outside of us.  I'd think not much since we'll be pushing 1MM networth and survivor benefits from both of us should then be paid out to the god parents/our children correct?  this is something i've not thought about.

I put survivor benefits in the same category of social security payments - a nice extra but not something I can reliably plan around. I assume they would go to the guardian you select but you'd need to check.

You should have wills that stipulate your estate will go into a testamentary trust (established upon your death) for your children. You should appoint a guardian of your children as well as a trustee. My lawyer advised that we make the trustee someone separate from the guardian but who gets along with the guardian. This is to provide a layer of accountability for spending as well as protect the guardian against allegations of financial misconduct by the kids later on. The trustee will take care of authorizing payments to the guardian. You also want to consider when your children will inherit any excess from your estate. My attorney recommended two disbursements at ages 25 and 30. We opted to push that back to ages 30 and 35 to force our children to do something with their lives rather than surf for a couple of years after college until they can get to the first disbursement.

I think it would be good to sit down and do some math about how much of a burden your children will be to their guardian and what sorts of expenses would be incurred. For our 3 kids, a $1mm payment plus survivorship benefits seems to be on the low side to help their selected guardians upsize everything in their lives and fund college educations for all 3.

seriously thats giving someone 90k a year in my scenario 50k from survivor plus 40k a year from the 1MM invested.  that should be plenty of money.  we have no children yet so that trust info etc. was helpful for the future.

It's obviously not a worry for you now but take a moment to imagine what it'd be like for someone to drop 3 kids in your lap tomorrow. You'd probably have a large chunk of up front costs (moving furniture, larger accommodations, larger car), you'd have some ongoing monthly costs (more food, health insurance, daycare, clothing, activities), and then large costs later (if my daughters went to my college and got no scholarships, it'd be $210k each for 4 years at today's cost). The money would go more quickly than you'd think and the last thing I'd want is for my passing to adversely impact my brother's financial well being.

my brother could move into my house - its more than large enough. - i mean where are we here - we're on MMM 90k its a year. - thats enought to easily support a family of 5 muhc less a few extra children.  your college costs are way overblown as well but you have to find what works for you...

with your logic you'll likely never be able to drop insurance even after FIRE

bokonon

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Re: Does life insurance company matter?
« Reply #12 on: October 28, 2017, 05:59:14 AM »
Interesting conversation with some excellent points.  We want insurance because we want to have kids and we are relatively young (36 and 31) and healthy but as we age health issues are become more likely.  I read on other forum posts that it can be good to sign up for term life insurance before health conditions develop and jack up your rates. 

I feel confident we will reach FI in 10-15 years assuming the world doesn't end and one of us doesn't die from whatever freak event.  Until we reach FI, death of one of us is a financial risk.  I can't insure against the world ending but it costs $507 per year through selectquote to insure against death - primarily to protect the future of any kids we would have.  Also we can cancel the policies if we end up not having kids or reach FI sooner.

One new thought for me from this thread is insuring my SO less as I am the (much) more mustachian and would have an easier time with finances solo.  This could make the cost even less, maybe as low as $365 per year (if cutting her coverage in half cuts her premium in half).

Thanks again for the responses - the will info will be helpful in the event of kiddos which we are hoping for.  I see no votes that Northwestern Mutual is magically worth the extra money, which was my inclination, so I am going to go with lower price.

boarder42

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Re: Does life insurance company matter?
« Reply #13 on: October 28, 2017, 06:09:21 AM »
I think this is a poor use of money but it's your choice.