Author Topic: Life insurance + Riders  (Read 2284 times)

parkette

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Life insurance + Riders
« on: January 14, 2015, 08:58:50 AM »
We are currently shopping for term life insurance in anticipation on the arrival of our twins in the next week or so. We both have small amounts of life insurance through out work ($50k him, $110k me) but we also have a rental business (4 units) and well because... twins.

So now we're dealing with life insurance reps/brokers who of course keep inflating the price. I did a search on term4sale.ca to get an idea of what we should be looking for. We want a $500,000 benefit, 20-year term, at which point we should be more than self-insured.

Online quotes gave me about $55/mth for the both of us, most recent insurance rep quote was $80+/mth. We were advised that it would be very unlikely for us to get Class 1 or 2, despite being very healthy non-smokers so we'd likely get Class 3. Then tack on a disability rider in case we can't pay (we will definitely not be adding this) and a child rider in case one or both of our children are stillborn or have a disability that would prevent them from getting life insurance at the appropriate time.

I just want cheap term insurance that will cover us in case of an untimely death. I need some reassurance from reasonable, frugal people that these riders are unnecessary. Apparently they cost in the realm of $4-$8/mth for each rider. Alternatively, it would be great to know if they are truly and statistically worthwhile.

Thanks!

pzxc

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Re: Life insurance + Riders
« Reply #1 on: January 14, 2015, 09:05:42 AM »
Life insurance is for replacing lost income.  I.e., you are the breadwinner, if you die you don't want your family to have to deal with not having an income at the same time they're grieving for you.  So you get life insurance on yourself.  If your wife doesn't work, you don't need life insurance on her because there is no lost income to replace in the event of her death.  Same logic is why the child riders are superfluous and an unnecessary expense.

Don't let them "upsell" you something you don't need.

Capsu78

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Re: Life insurance + Riders
« Reply #2 on: January 14, 2015, 09:14:23 AM »
I always like to level set the various offers by breaking down the amount to a "cost per thousand dollar of coverage per year".  The amount of coverage is a decision you need to match up to cover your risk threshold.  This calculation allows you comparison shop easier and I find it kind of wobbles the insurance brokers presentation when you reduce his cost to one simple number I.E.  "$ 3.45 per thousand"

Frankies Girl

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Re: Life insurance + Riders
« Reply #3 on: January 14, 2015, 09:15:38 AM »
Life insurance is for replacing lost income.  I.e., you are the breadwinner, if you die you don't want your family to have to deal with not having an income at the same time they're grieving for you.  So you get life insurance on yourself.  If your wife doesn't work, you don't need life insurance on her because there is no lost income to replace in the event of her death.  Same logic is why the child riders are superfluous and an unnecessary expense.

Don't let them "upsell" you something you don't need.

I beg to differ on the bolded part. Replacing a wife in the event of her death when you still have dependent children is going to cost serious money if you don't have term life insurance. You need to insure for BOTH partners as it would be just as devastating to lose the at-home spouse as it would the income spouse...

A partner that is the breadwinner can't up and quit their job if the caretaker spouse dies, so they'll need to replace them (with a nanny, housekeeper, outside help of some kind) while they are at work - and absolutely need to insure against this if they can. I'm sure you didn't mean to imply that they aren't doing anything and the kids can just be turned loose in the backyard and raise themselves (free range) while the errands, shopping, cooking, housework and other stuff that a stay-at-home spouse takes care of are magically completed by pixies or something, right?

The child rider is superfluous, but losing EITHER spouse is going to hurt badly when you have children, so get basic term for the both of you to cover until the kids are old enough (and you have enough) to self insure.


« Last Edit: January 14, 2015, 09:18:02 AM by Frankies Girl »

Trinitysmom

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Re: Life insurance + Riders
« Reply #4 on: January 14, 2015, 09:20:05 AM »
 a stay at home parent might not earn anything but if they died you would have the cost of daycare while the children are young so a smaller term policy on that parent is something to consider and it would also give the surviving  spouse some breathing room to properly grieve without worrying about continuing bills. If you have a large emergency fund than that wouldn't be an issue. I don't think you need the added riders for the children.

parkette

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Re: Life insurance + Riders
« Reply #5 on: January 14, 2015, 01:37:06 PM »
Thank you all- it looks like we're on the same page.

We definitely want us both insured; although I am the wife as well as the (bigger) breadwinner in this scenario, if either of us chooses to be a stay at home parent there will still be significant costs associated with childcare. We currently live in Canada but my husband is Australian and we do plan to spend some years there. Depending on where we are living at any given point and who hypothetically dies, there could be significant costs to moving the family towards the best support system.

I would like us to have equal policies as we tend to wander between countries and the main breadwinner swaps as we move.

These are the full details regarding the child rider:
  • Clients can purchase $10,000 to $20,000 of term insurance on each of their children (including legally adopted children) who are age 18 and under.
  • Any other children they may have in the future are automatically insured, and the premium for this benefit does not increase.
  • Step-children can be included at the time of application. Clients can include step-children after the benefit is in effect by applying and providing evidence.
  • The coverage on each child ends when the child turns 25 or on the policy anniversary nearest the base insured personís 65th birthday, whichever is earlier.
  • With a built-in conversion option, the base insured can buy up to five times more insurance on each child between the ages of 18 and 25, regardless of their future health, occupation or lifestyle.

I really don't think this is necessary; we could absorb the cost of a funeral if need be, so we would essentially be insuring the potential that our children would be uninsurable when the time comes. They offer benefits of $10,000 ($4.05/mth) and $20,000 ($8.10/mth) that could be converted to either $50,000 or $100,000. So, it would basically cost $50-$100/yr x 20 yrs= $1-2k total for unlimited children.

Realistically, if they were only able to be provided with a $50k-$100k benefit if they are considered "uninsurable," at least in theory we should have that kind of bank to provide to their family if they need it in 20+ years.

Decision made! No riders :)