Author Topic: Life insurance replacement policy  (Read 4069 times)

FlorenceMcGillicutty

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Life insurance replacement policy
« on: May 14, 2013, 07:34:19 PM »
I could use some mustache advice. Imdid a review of our expenses and realized our life ins policy is ridiculously high. We are 33 and 37 and paying $65/mo and $85/mo for a $500k policy, respectively. Hubs has a minor pre- ex condition which raises his price a bit. We signed up for this pre-baby and realized latkes that 1) we need more coverage, and 2) we are paying too much for what we have.

I got the lowest quote I could find on a 30 yr $1.5 million replacement policy just so I could get the high end quote of what we would get. I came in at $93/mo and hubs came in at $130/mo. We have a toddler and will have another kiddo if all goes as planned. Our retirement funds are in good shape but we have a $3800 mortgage (soon to be lowered due to refi).

Before MMM I would have just gone for $1.5 mil, 30 yr policy without thinking. Now, I'm wondering if we will need this. I have a $500 k policy through work and hubs has $250k. We are cutting back expenses now but currently spend about $11k/mo (I know it's really high!).

Any thoughts on this or general rules of thumb from the MMM peanut gallery? I'm tired of hearing the 7x income rule. That's not what we need. Many many thanks for your thoughts and suggestions.

brewer12345

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Re: Life insurance replacement policy
« Reply #1 on: May 14, 2013, 07:55:27 PM »
I bought enough life insurance on me a decade ago such that when combined with our existing stash at that time DW would be able to live on a 4% withdrawal of what we had after the life insurance proceeds.  This turnd out to be $1MM face.  The insurer would not sell us that much on DW so I bought as much as they would sell us ($500K).  I ignored social security survivor benefits (which are pretty generous).  I would suggest that you buy a combined face amount that would leave your spouse in good shape should you take the dirt nap.

However, I would not buy 30 year policies.  Most term policies get surrendered long before they expire and that is especially true of 30 year policies.  Instead I would get 20 year policies and make sure they have a conversion option which allows you to swap the term policy for a permanent policy without going through underwriting again.  The 20 year policies will be substantially cheaper than 30 year.

Pick your insurer carefully.  I would strongly suggest that you buy these policies from an insurer rated at least Aa3/AA- and preferably a mutual company.

FlorenceMcGillicutty

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Re: Life insurance replacement policy
« Reply #2 on: May 14, 2013, 07:59:11 PM »
Super helpful, thank you! We are getting a quote through American General right now. Our current policy is with USAA. Normally they're great but these prices are just too high.

brewer12345

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Re: Life insurance replacement policy
« Reply #3 on: May 14, 2013, 09:29:01 PM »
American General is an AIG company.

FlorenceMcGillicutty

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Re: Life insurance replacement policy
« Reply #4 on: May 15, 2013, 07:30:36 AM »
So AIG is one to stay away from right? I saw their rating is BBB. I think I'm going to talk to USAA and see if they'll negotiate with me. It can't hurt. Hopefully they won't make us go through another underwriting.

I just reread my original post and the typos are crazy. That's what I get for trying to do a long post on my phone.

brewer12345

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Re: Life insurance replacement policy
« Reply #5 on: May 15, 2013, 08:24:13 AM »
For professional reasons, I cannot say positive or negative things about any specific company.  I mentioned that AG is an AIG entity solely as factual information.

And as I mentioned, I would only buy this type pf policy from a large, highly rated mutual.  Ours are with TIAA CREF.

FlorenceMcGillicutty

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Re: Life insurance replacement policy
« Reply #6 on: May 15, 2013, 09:04:48 AM »
GRRR!! I just talked to USAA and American General. AG has us as preferred plus, which is the highest health class. That's fishy because I think we should be preferred. That's where USAA has us. Now I think we're going to have to switch companies and go through all the underwriting again. The USAA guy kept asking questions about our quote, underwriting, and the riders. He was def suspicious.

What a PITA. But, thank you, Brewer. I had a bad feeling about signing the dotted line--I actually had the envelope ready to mail and then I stopped. I'm going to check out TIAA CREF because their computer quote for preferred still came in way lower than USAA. This life insurance business is no joke! I wish there were an easier way to get a stellar, best priced product.

brewer12345

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Re: Life insurance replacement policy
« Reply #7 on: May 15, 2013, 09:15:09 AM »
GRRR!! I just talked to USAA and American General. AG has us as preferred plus, which is the highest health class. That's fishy because I think we should be preferred. That's where USAA has us. Now I think we're going to have to switch companies and go through all the underwriting again. The USAA guy kept asking questions about our quote, underwriting, and the riders. He was def suspicious.

What a PITA. But, thank you, Brewer. I had a bad feeling about signing the dotted line--I actually had the envelope ready to mail and then I stopped. I'm going to check out TIAA CREF because their computer quote for preferred still came in way lower than USAA. This life insurance business is no joke! I wish there were an easier way to get a stellar, best priced product.

The only way I know of that is different from what you are doing is to go through an independent brokerage.  The problem is that many of the most desirable compnies don't sell policies through that channel.