Help Me Choose (or Avoid) Life Insurance

[CougStache]

Up-front caveat: I hate insurance in general, and have therefore shied away from coverage and general learning on the topic. So please excuse my ignorance.

I'm needing to enroll or decline life insurance through work, forcing me to evaluate my options. To summarize my situation:

• Age 28, married, no children (likely one or two tiny humans in the next 5 years)
• HH Gross income ~$95K; rapidly decreasing student loan debt ~$30K; I earn about 2x my wife's income
• Currently renting
• Relatively good health, low-risk lifestyle

Work provides $50,000 at no cost to me (no premium)
They also offer additional supplemental term coverage in increments of $10,000 (bi-weekly premiums start at $0.37 for my age bracket, increase every five years)
I just learned parents took Whole Life policy for me when I was a baby: $25,000, $20/month premium, cash-out value of $412

From what I've read, I think my current plan is to:
1. Cash out my parent's Whole Life policy (sorry, parents, for all that money you've spent, but I'm still alive...so yay!)
2. Simply keep the "free" $50K in coverage from work, opting out of additional coverage
3. If/when kids enter the picture, explore additional term coverage until FI

Thoughts?

[Gin1984]

Also, what is your invest-able assets as of now?  As well as spending outside of the SL?

[La Bibliotecaria Feroz]

Find out what your benefits would be if you died. Mr. FP and I are preparing our wills and are worth a lot more dead than we thought. He has a teacher state retirement plan that would pay our children two thousand dollars a month till they graduate college! Plus there's a little Social Security.

[CougStache]

Also, what is your invest-able assets as of now?  As well as spending outside of the SL?

Investable assets are low right now as I'm mostly focusing on loan repayment since I also hate them with a passion. Around $17K in retirement vehicles, another $20k in slowly building savings for future babies/down payment.

Are the student loans yours?  If so, I believe they would be written off if you died.  If they are your wife's, would she be able to pay them and maintain your/her current standard of living?

We've nixed her loans, so they're all mine. Non-SL spending is about $32K/year and falling.

Could your wife afford your rental/your current standard of living if she didn't have your income?

Sadly, either of us would need to move if the other passed. We probably have "too much house" for our age/income/debt/investments, but we really value it and honestly with the Portland rental market there isn't much else to be had anyway. We'd likely just move out of the area completely (a distinct possibility when children arrive).

If the loss of you and your income would mean a dramatic loss in standard of living and/or increased level of stress for your wife, I would buy more term insurance outside your company policy now.  At your age, it should be fairly cheap.  I would also consider doing this anyway, just because kids can come along sooner than you think.  You wouldn't want to leave your wife in a situation where she is newly pregnant (perhaps unplanned) and having to face the loss of both her partner and his income.  Worst case scenario, admittedly, but shit happens sometimes.  Insurance is cheap and worth the investment, in my opinion.

Valid points on the extremely low premiums at my age. I may opt to snag up to $100k for ~$150/year over 20 years. With the wife's crazy low income, it could help her keep the job she loves for longer. Sometimes I need someone to talk me into spending, especially for insurance :)

Find out what your benefits would be if you died.

From the info brief I believe it's a flat payout, but I'll do some more digging with the HR department in the coming days...

[Gin1984]

Find out what your benefits would be if you died. Mr. FP and I are preparing our wills and are worth a lot more dead than we thought. He has a teacher state retirement plan that would pay our children two thousand dollars a month till they graduate college! Plus there's a little Social Security.

I was surprised to find out that SS would pay ME until my child's 18th birthday, not just my child.

[Gin1984]

So I would assume you are making about $60K and she is making about $30K? And your spending is about $32K without SLs?  My first goal would to be to determine how much of this is spending for you, how much you save her by being around (like neither my husband or I could keep our rental without each other, we have complementary activities so that income would disappear if either passed) and see if that number is under $30K - FICA so more like 27K.  If not, the biggest goal is to drop your cost of living now, instead of adding an expense (life insurance) and maybe needing to drop your spending later.
Not that you should not have life insurance soon, but your wife is an adult, you have no dependents which would require her not to work, if you passed, so do you really need it now?  If you can lower your spending to her income, no.

[CougStache]

My first goal would to be to determine how much of this is spending for you, how much you save her by being around.

I can definitely make the math work to have spending below her income...whether or not she makes that happen is up to her haha

It sounds like big picture I'm fine. I have default $50k without premiums and can tack on a little more if I want for a fraction of the cost of the whole life plan. Man, this whole "spending much less than you earn" business really has its perks.

[MandalayVA]

PLEASE get life insurance, particularly if you are planning to have children.  You're young and in good health, which is going to make it dirt cheap.  Don't think that because you're young and in good health you don't need it.  Accidents can and do happen all the time.  Over half of the September eleventh victims didn't have life insurance--and their families were lucky that the fund was created or else a lot of them would have been up Financial Shit Creek without a paddle.  Don't do that to your family.

http://www.nytimes.com/2015/03/26/your-money/money-admonitions-from-9-11.html?_r=0

[CougStache]

PLEASE get life insurance, particularly if you are planning to have children.  You're young and in good health, which is going to make it dirt cheap.  Don't think that because you're young and in good health you don't need it.  Accidents can and do happen all the time.

Oh, I'm not trying to decide between life insurance and no life insurance, I'm torn between how much life insurance to carry. Or whether or not I should continue to carry the whole life plan or simply cash it out. I hate insurance, but I do appreciate in the rare instances when I need to use it. This isn't a "I'm dead, it's your problem, honey" situation :)

[Kitsune]

I think the plan you've got is good, though you may wish to look for term life insurance sooner if your wife wouldn't be able to maintain obligations/decent standard of living without you. If you've got dependants, you absolutely have a responsibility to provide for them.

Term life insurance, while you're young and in good health, is relatively cheap. My husband and I got 20-year terms when we were 30 (a few months prior to the birth of our first child). Combined, we pay 80$CAD/month (about 60$US at currenty exchange rates) for 1M coverage each (the quote for 1/3 of that amount was more than 2/3 the premium, so... evaluate). But there are medical exams and whatnot, so you do have to be relatively young and in good health to get a decent rate. 

And Whole Life is BS - you're paying 5$ less per month for 1/40th of the coverage I have. That's ludicrous, assuming your intent is to provide for your family should you die.

[CougStache]

And Whole Life is BS - you're paying 5$ less per month for 1/40th of the coverage I have. That's ludicrous, assuming your intent is to provide for your family should you die.

100% agree. When the rep told me when the premium was $20, I literally asked if that was yearly. I mean, shoot, this policy was acquired some 25 years ago.

Thanks for all the great advice, everyone!

[Drifterrider]

Up-front caveat: I hate insurance in general, and have therefore shied away from coverage and general learning on the topic. So please excuse my ignorance.

I'm needing to enroll or decline life insurance through work, forcing me to evaluate my options. To summarize my situation:

• Age 28, married, no children (likely one or two tiny humans in the next 5 years)
• HH Gross income ~$95K; rapidly decreasing student loan debt ~$30K; I earn about 2x my wife's income
• Currently renting
• Relatively good health, low-risk lifestyle

Work provides $50,000 at no cost to me (no premium)
They also offer additional supplemental term coverage in increments of $10,000 (bi-weekly premiums start at $0.37 for my age bracket, increase every five years)
I just learned parents took Whole Life policy for me when I was a baby: $25,000, $20/month premium, cash-out value of $412

From what I've read, I think my current plan is to:
1. Cash out my parent's Whole Life policy (sorry, parents, for all that money you've spent, but I'm still alive...so yay!)
2. Simply keep the "free" $50K in coverage from work, opting out of additional coverage
3. If/when kids enter the picture, explore additional term coverage until FI

Thoughts?

Does your wife need your income to enjoy a comfortable life?  If not, wait until you have children (a qualifying life event) to provide insurance for them.  In the meantime, save the premium.

[NextTime]

You're still young.  Get a half million dollar 20-30 year policy.

To me it's not just about covering monthly expenses for my family.  I want them to have a large cushion if I were to have a premature death. I'm not just trying to provide them with what they "need", I'm going to provide them with what I want them to have. I don't want my wife to have to worry about money.

To each their own. I waited a little too long so I'm paying more than you would. Bought a $500k 20-year policy when I was 35. I also get 3 x my salary through work. It gives me peace of mind knowing they are well taken care of if I were to pass.

[acroy]

Opinion: Insurance is a bet against yourself. Participate with prejudice!

Option 1: Decline. You are young and healthy and DW will have some assets if you OD suddenly on caffeine (or whatever). She may also qualify for SS benefits. If/when you have kids, the SS benefits are generous.

Option 2: Purchase 500k or $1M 10yr policy. Mine was $220/yr. Use those 10yrs to become FI.

I chose Option 2 (iirc) at age 29 with $100k in assets and wife, kids, etc. Approaching age 39, we stand a bit over 600k net worth, DW + kids qualify for generous SS bennies based on my income. They will be fine.