Author Topic: How do you feel about: Life Insurance?  (Read 8299 times)

GordonCopestake

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How do you feel about: Life Insurance?
« on: November 13, 2014, 12:37:51 PM »
I'm married with 2 young kids and both my wife and I are insured to the hilt. We regularly joke that we are worth more dead than alive. When I took out the policy it seemed like a good idea: if something bad happens, the mortgage is paid for and more, plus the other person can take 6 months unpaid leave to get over the shock should it be needed.

We haven't yet built up a good sized stash to fall back on instead as we are still in debt repayment mode (mortgage) but more and more i'm looking at the monthly premiums and thinking.... is it worth it?

Do you have life insurance? What are your thoughts in that area?

Freedom2016

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Re: How do you feel about: Life Insurance?
« Reply #1 on: November 13, 2014, 12:42:43 PM »
We are similar to you.  We have 2 small children and are both insured 'to the hilt.' We have decent retirement savings but not a huge amount of liquid savings. Perhaps we'll re-evaluate in a few years.

FLBiker

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Re: How do you feel about: Life Insurance?
« Reply #2 on: November 13, 2014, 12:50:14 PM »
My wife is pregnant, so we both just got life insurance.  We (each) pay ~$20 per month, for ~$200K.  I'm 38 and she's 34.  We plan to keep her life insurance until the kid is ~2, because I can afford childcare and our living expenses on my salary.  We'll keep mine until the kid is in school (~5 years).

That said, we're in a different place financially.  Our combined income is around $100K, and we have a mortgage of ~$105K.  We also have a low interest (2%) student loan of ~$15K and we have no other debt.  We've got retirement investments of ~$325K and non-retirement investments / savings of ~$85K.  We talked about not having life insurance at all, but decided to carry it for the short term, when childcare would be most expensive.

Vangogh

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Re: How do you feel about: Life Insurance?
« Reply #3 on: November 13, 2014, 01:06:33 PM »
My suggestion, and maybe it's just my general obliviousness speaking, would be to check first with your company about any life insurance policies that they have. I never wanted life insurance but found out that my company provides it as a part of the non-voluntary benefits package for salaried staff. It was never really discussed with me when I signed on, but I found out about it a few years later.

GordonCopestake

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Re: How do you feel about: Life Insurance?
« Reply #4 on: November 13, 2014, 01:15:09 PM »
My wife has "death in service" benefits, but not enough to pay off our mortgage. I have nothing unfortunately.

If it had been the other way around, it might have been a little easier to decide as I feel (rightly or wrongly) that I want to ensure my wife is taken care of should something happen to me, but should something happen to her I would suck it up and carry on.

Long term once our stash starts to grow it's less of a concern, but thats 5 years of premiums that could be working for me rather than against me.

homehandymum

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Re: How do you feel about: Life Insurance?
« Reply #5 on: November 13, 2014, 01:24:00 PM »
We have dependent children, and we homeschool.  (Meaning the death of either of us creates huge disruption in terms of lifestyle for the children, as well as the obvious emotional trauma)

We both have life insurance sufficient to give the surviving spouse a freehold house and one year's worth of expenses - this means there is time to grieve and sort out what the hell to do with the kids' education and family income going forward.

Before trimming the life insurance, you need to consider the event of you *both* dying and who will have custody of your children, what expenses they may incur as a result (would *they* need to move house to fit everyone in?!).  Our insurance money will get paid to a family trust, and the family member who is named as a testamentary guardian is nominated as a Trustee of the trust in our Wills.

We were fortunate to buy the initial policies with our first child when we were in our mid-twenties and in perfect health.  We've kept the same policy since then, just accepting the 'free' 5% increase most years since then, which has kept us more or less up with our increasing costs and house value (Not actually free, in that we have an increase in premium with it, but we don't have to resubmit health information etc to get it).  We wouldn't have taken the 5% this year, except with expecting baby number 4, we've delayed our FI dates considerably by buying a bigger house and taking on more mortgage than we've ever had.  In talking with other people approximately our age and life-stage, getting a life insurance policy *now* would be much more expensive for us.

If we didn't have children, I doubt we'd have life insurance at all - disability perhaps, but not life.
« Last Edit: November 13, 2014, 01:26:44 PM by homehandymum »

GordonCopestake

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Re: How do you feel about: Life Insurance?
« Reply #6 on: November 13, 2014, 01:28:37 PM »
HHM, thats the one "worst case scenario" that has held my hand cancelling. We do both have wills and any insurance money goes to our kids in trust should we both pop our clogs with a family member named as custodian (with agreement!). I agree if we were without children (or if I was single) we certainly wouldn't have life insurance.  Once the mortgage is paid I will definitely cancel it, but it's the intermediary unknown that haunts me!
« Last Edit: November 13, 2014, 01:30:40 PM by GordonCopestake »

catccc

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Re: How do you feel about: Life Insurance?
« Reply #7 on: November 13, 2014, 01:38:54 PM »
how much is "to the hilt?"

DH and I are 36 & 36, with two kids, ages 6 & 3.  We carry term life.  At the time, went for 30 year policies, minus a number of months for me because they offered a slightly lower premium to back date the policy in relation to my birthday.  I am insured for $500K and DH is insured for $400.  I am the breadwinner, and he is a SAHP.  My policy is $319/yr and his is $348/yr.  30 years is kinda long, but I wanted to make sure we covered the kids through undergrad.  (I finished undergrad at 23.)

minimustache1985

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Re: How do you feel about: Life Insurance?
« Reply #8 on: November 13, 2014, 01:50:00 PM »
H and I each have a 20 year term insurance for 2-3 times our individual salaries, we should have a sufficient stash to provide for the surviving spouse and child(ren) by then.  While we don't have kids yet, we wanted to secure rates while we could get term for him (H has a health condition that if he gets hospitalized for disqualifies him for term life insurance for 10 years with the few carriers that accept it at all) and got mine at the same time for peace of mind.

I think if you have kids term insurance is almost always prudent unless your stash is already built, in our case the driver was to make sure we'd have term on H when kids do enter the picture.

seattlecyclone

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Re: How do you feel about: Life Insurance?
« Reply #9 on: November 13, 2014, 02:15:10 PM »
My wife and I both have some insurance (a small multiple of our salary) provided free through our employers. Since we have no kids yet, even this is overkill. We each earn enough on our own to support our current shared lifestyle, so either of us would be just fine financially if the other died.

We'll have to do the math when we have kids. Our stash is getting big enough that investment income plus Social Security survivor's benefits would likely be enough to pay for the surviving parent (or other guardian in case we both die) to stay home with the kids if they wanted. Again, we'll have to crunch the numbers on that when the time comes.

I think it's very important to think about this issue and be adequately prepared for it, whether it's through purchase of life insurance or reliance on existing resources that you may have.

feelingroovy

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Re: How do you feel about: Life Insurance?
« Reply #10 on: November 13, 2014, 02:17:44 PM »
I just want to mention that it all seems so unlikely, but I have 3 friends/family members whose husband died before 45 suddenly and unexpectedly.  As you get older you see these thing just happen more often.

I also want to mention that especially when it's sudden, you aren't done grieving in a year (at least not from what I've seen). 

This is a situation where not having to worry about money is a really, really good situation.  There are just expenses that come up.

For example, for one of these friends, the death occurred just after she'd had foot surgery and the husband was half way through a project of rebuilding their porch.  A month after his death, while she was just off crutches, her homeowner's insurance said she had 30 days to get the porch finished and a railing put on or they'd cancel.  She had to pay someone quickly to do it and was able to b/c of the life insurance. 

It's these weird situations that you need it for (and never think of) if you don't already have the stash built up. 

FrugalSpendthrift

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Re: How do you feel about: Life Insurance?
« Reply #11 on: November 13, 2014, 02:22:53 PM »
I know that I should go get life insurance, but I keep delaying the process.

The life insurance calculator's seem so ridiculous.  One figured that I need $1M in coverage and the other one suggested a 30 year term.  I'm considering a 10 year term, because I could very well be FI by then.

nereo

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Re: How do you feel about: Life Insurance?
« Reply #12 on: November 13, 2014, 02:28:49 PM »
Quote
Do you have life insurance? What are your thoughts in that area?

we've made the same joke that we are worth more dead than alive.  We have term life insurance but I don't believe we'll have it after a few more years.  We already both make enough to (barely) cover our combined expenses, and our 'stache is growing.  If either of us were to die the idea is we'd be able to pay the mortgage off (thus making it easy for the survivor to make ends meet), but with our steadily shrinking mortgage any survivor benefit would greatly exceed the remaining mortgage.

IMO, without any children there's no need for us to make sure the other is "set for life no matter what" - instead we make sure that the death of one wouldn't derail/delay the FI of the other.

FarmerPete

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Re: How do you feel about: Life Insurance?
« Reply #13 on: November 13, 2014, 02:31:27 PM »
My work provides 2x your annual salary in free life insurance.  Thats ~$120-130k for me right now.  I picked up another $300k for me and $35k on my wife.   I'm 32 and my wife is 34.  She is a stay at home mom.  Our only debt is ~80k mortgage.  I've got enough assets already to pay off the house.  Our son is almost 2.  Total cost for both plans is $312 a year.  It's not a locked in price though, so as we get older, the price will go up.  My goal was to provide enough money for my wife to transition.  I don't want her to have a free ride, but it's enough money for her to go to school and learn a marketable skill while still providing for our kid.  It is very important to factor in any income your family will have.  SS is a big one.  That's ~24k a year for my wife if I remember correctly.  That really should be close to her COL if the mortgage was paid off and she had one car.  Obviously, that turns off after the little guy is 18, but if she hasn't gotten her life figured out by then, she isn't going to ever get it figured out.

I also expect that either of us would get remarried after a time.  While I'm not going to trust that some random dude is going to provide for my family after I pass away, I can trust that at some point, my wife should have some help.

hodedofome

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Re: How do you feel about: Life Insurance?
« Reply #14 on: November 13, 2014, 02:31:51 PM »
I think you just get life insurance for that time in your life that you don't have enough saved up, and drop it once you do.

Buy the cheapest term life insurance you can find, you shouldn't need to pay more than $20-50 a month for several hundred thousand in coverage for someone in their 20s-30s.

FarmerPete

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Re: How do you feel about: Life Insurance?
« Reply #15 on: November 13, 2014, 02:36:39 PM »
Oh, I forgot to mention that it's important to know that with term life, you should be able to cancel it at any time.  It's often wise to at least get quotes beyond the term you think you'll need it.  I'm planning on being FI in 10 years or so.  I'm still seriously considering switching to a 30 year term instead of my year to year plan through work.  The 30 yr term will cost a little more per month for the same coverage, but the price is locked in for 30 years.  My current plan will get more expensive as I age.  The cost for 300k for a 50 yr old is significantly higher than for a 30-35yr old.  If I lock in the price now for 30 years, I could keep it till I'm in my 60's or cancel it next year.  I would certainly recommend pricing the terms out.  If a 30yr is significantly more than you want to pay, look at a 20yr policy.  I was close to buying a policy this last Spring, but I decided to wait a year as my rates should be way lower next year.

happy

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Re: How do you feel about: Life Insurance?
« Reply #16 on: November 13, 2014, 02:37:05 PM »
It depends. When I started mustaching almost 3 years ago, I realised I no longer needed life insurance, because I had sufficient assets such that my 2 kids would be fine financially.   I'd been paying for 10 years  or more without reviewing it - a decision made when they were much younger, and I was first a single parent.  I cancelled, and later found in fact I had another policy as part of my superannuation (retirement plan), hidden away in the fine print, as a default option. Got that cancelled too.

So if you have not many assets/and children, you should have life insurance, but keep reviewing it as the stache grows - at some point you won't need it.

homehandymum

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Re: How do you feel about: Life Insurance?
« Reply #17 on: November 13, 2014, 03:23:02 PM »
I just want to mention that it all seems so unlikely, but I have 3 friends/family members whose husband died before 45 suddenly and unexpectedly.  As you get older you see these thing just happen more often.

I also want to mention that especially when it's sudden, you aren't done grieving in a year (at least not from what I've seen). 

Oh for sure.  I wasn't meaning to imply that either of us would be 'done' with grieving by then.  Heck, my mother died 7 years ago and I just spent a day in bed this week bawling my eyes out on the anniversary.  But we're figuring that a year gives enough time for the initial numbing shock to wear off, and for the first decision-making steps to be taken.

We also have a not awful benefit system in NZ (not great, but it is an ok safety net for the short term), so wouldn't be relying 100% on the insurance for all expenses.

I agree, too, about how although the chances of it happening are slim, they're not *that* slim that you can just avoid planning for it.  I'm 37 and in the last 2 years, 3 of my friends have been left widowed with small children - one suddenly (he just dropped dead at work with a viral infection in his heart), and the other two with cancer (one over a year after diagnosis, one less than a year).

The one whose husband suddenly died was thankfully insured enough to sell the 'fixer-upper' house they were in and buy a suitable no-work-needed house, and also to invest in a (legitimate) work-from home business, selling educational supplies, so was able to continue homeschooling.

The ones with cancer obviously had more of a heads-up so were also well prepared financially.

Catbert

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Re: How do you feel about: Life Insurance?
« Reply #18 on: November 13, 2014, 04:12:36 PM »

We don't have life insurance.  We each had a low cost, low-ish payout (2X salary) insurance through work, but each of us dropped it as we retired.  But we're retired and don't have kids.  When my first DH died I got about 2 years salary from his insurance.  While not necessary in my case, it sure was nice to have.

With children I definitely think you each need insurance.  Term insurance for the young and healthy is pretty cheap.  How much?  Ask yourself things like:  Could she support the family on her salary?  Could she if the mortgage was paid off?  What about you?  Consider what extra costs might be encounter if there was only one of you (e.g. less DIY house maintenance, more babysitters, higher food costs or whatever).     

Paul der Krake

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Re: How do you feel about: Life Insurance?
« Reply #19 on: November 13, 2014, 04:29:40 PM »
I plan to have more money in the bank than the typical insurance policy payout by the time dependents start popping up.

BlueMR2

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Re: How do you feel about: Life Insurance?
« Reply #20 on: November 13, 2014, 04:47:57 PM »
Do you have life insurance? What are your thoughts in that area?

Just the "here's enough to bury you" that work carries for me.  No extra.  The cost just doesn't make it worthwhile.  The chance of needing it is really low, and even then, there are options.  Such as getting a job...  :-)  If they can't afford the house, then they'd better sell it and downsize...

Milizard

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Re: How do you feel about: Life Insurance?
« Reply #21 on: November 13, 2014, 04:58:00 PM »
You need it to cover dependents and you don't have enough of a stash yet.  DH and I both agreed that it shouldn't be like winning the lottery.  SS pays some benefits for this, I think, if your income is low enough.  We figured that would be plenty of help for us, along with the stash. DH gets 1x salary through work as a benefit.  (I will revisit the specifics more when I get my head together a little better.  Stash is almost 1/2 M$, so not too worried.)

homehandymum

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Re: How do you feel about: Life Insurance?
« Reply #22 on: November 13, 2014, 05:25:12 PM »
If they can't afford the house, then they'd better sell it and downsize...

Yep, always an option, depending on individual circumstances.  Best to have a periodic look at the local property market, though, an assess whether

a) downsizing to a smaller house would actually be cheaper (for us it would be, but many on this board are already minimizing their housing costs)

b) your current house would sell in a timely manner for as much as you'd like.  (for us, probably not - we just bought it ourselves, and it had sat on the market for quite some time before we offered for it.  So, although the surviving spouse could theoretically liquidate it, in practice, not so much).

also c) How much of a psychological burden is shifting house for you?  Some people manage it with very little stress.  Personally, I could not imagine many worse things than having to pack and shift the entire house and children in the aftermath of a sudden loss. 

(For the record, we're already planning to take in a boarder/flatmate in the next month or so, once the Christmas guests have left, so if it were me left after a bereavement, I'd look into acquiring a second boarder to maximise the income from the house, rather than downsizing the house).

jzb11

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Re: How do you feel about: Life Insurance?
« Reply #23 on: November 14, 2014, 04:29:27 AM »
Single man, no dependents. Picked up a term policy in my twenties @ 30 years/750k.

Why did I buy life insurance without dependents?

1.) To lock in a policy and avoid a scenario where I can't buy insurance in the future due to a health issue (i.e. an unexpected heart problem). Family history of heart issues with a brother who required a heart transplant in his early 30s.

2.) Insurance was inexpensive as a young and healthy person.

3.) In the event of my death without dependents, I can at least hook up my siblings financially and allow them to pay off their homes or work toward FIRE/whatever their financial goals are.

FIPurpose

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Re: How do you feel about: Life Insurance?
« Reply #24 on: November 14, 2014, 07:19:25 AM »
I took out a 10 year term insurance. Only dependent is wife, but she recently got a job that she could support herself with. I plan on having far more than the policy is worth in 10 years, so I'll probably just ride it out and not renew.

nottoolatetostart

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Re: How do you feel about: Life Insurance?
« Reply #25 on: November 15, 2014, 04:09:52 AM »
Yes, we have term insurance and bought the policy a few years ago when we were in our early 30s. It only costs us $55/month for the 2 policies combined. Plan to cut it in the next year or two. It's not even in our FI budget. It's just a cushion until we are FI. 

Rural

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Re: How do you feel about: Life Insurance?
« Reply #26 on: November 15, 2014, 05:59:49 AM »
We each carry a multiple of salary through work, plus just enough on the spouse for a "typical" burial. It's part of the FU money strategy, in part - if one of us were to need/want to walk away from a job, that still leaves the breadwinner insured for a safety net. Also, we're not FI yet, but at our cost of living, the insurance payout would get either one of us there.


The big policies are each under $20 a month, and the spouse ones are $2-$3 a month. It does add up, but to little enough that, to me, it's worth insuring for the big things we can't pay for.


This is, by the way, with no children and an already paid-off house we plan to live in for the rest of our lives. In bereavement, either of us could choose to continue working, but it would be a choice.

Davids

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Re: How do you feel about: Life Insurance?
« Reply #27 on: November 15, 2014, 06:08:29 AM »
At the beginning of this year my wife and I each purchased a 30 year term $300K life insurance policy. We did because she was pregnant. I do not know if we plan on going the full 30 year term but the rate was really cheap for both of us. I also get life insurance benefit through my work at 3x base salary. When my wife was full time her company had life insurance benefit at 1x base salary but she is part time now since we have a baby so no life insurance benefit.

The main thing I will say is do not waste money on a whole life insurance policy. "Buy term and invest the difference"

JoshFire

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Re: How do you feel about: Life Insurance?
« Reply #28 on: November 15, 2014, 07:29:10 AM »
Despite my father-in-law's epic wisdom on the subject ("I don't need life insurance because I'll be dead, and I won't care what happens"), I chose to get life insurance on myself for my family. We are still in the accumulation phase without enough to be self-insured, and Mrs. Fire is a stay-at-home mom - I could not imagine being in her shoes if I passed away with no life insurance, no job, and bills coming due.

That being said, I did find that in my situation (overweight), life insurance through work was significantly cheaper than insurance through other companies. For $700k, I was paying $120 per month on 10-year term life through Prudential, and I am switching to work insurance at $40 per month for $667k.