Optional term life insurance?

[LearningMustachian72]

Hey!

Recently had my first little one and am now planning to get term life insurance through my employer. Leaning towards 3x my salary which is roughly $145 annually.

Does this seem like a good rate for the payout or should I explore options outside of my employer.

If anyone can point me towards coverage suggestions with children or has opinions, I would enjoy hearing them.

Thanks!

[secondcor521]

Employer life insurance can often be cheap.  Without knowing your age, health, and the face amount represented by 3x salary, it's impossible to say if it's a good price or not.

The main drawback is that it goes away when you switch jobs or lose your job.  The ugly scenario would be if you got fatally ill, lost your job, your life insurance coverage ends, and you die.  Rare, but it could happen.

When I had young kids, I bought cheap term life from a reputable company after going to a place like selectquote.com.  I reduced / canceled it as the kids got older and I saved up a FIRE stash and college funds.  If I died, the FIRE stash and college funds could be used to launch my kids at least through college.

If you don't like selectquote.com, there are a number of places out there that shop term insurance across multiple companies.

[katsiki]

Another good site to get prices is:

https://www.term4sale.com/

[Freedomin5]

I also think you should get term life insurance that is not tied to your employment.

In addition, life insurance should not be tied to your salary. It should be based on how much it would cost to raise your child to adulthood, should you pass away.

Finally, also consider getting term life insurance for your spouse/partner. If they were to pass away, how much would it cost for you to raise your child to adulthood (for example, if you had to pay for childcare so you could continue to work, or if you decided you wanted to stop working so that you can dedicate your time to raising your child)?

[darknight]

Ensure that the policy can be taken when/if you leave employment. Look at some online calculators that will factor things like social security, etc and see how much you (survivors) might actually need.

Personally, I feel that it's silly to NOT have a term policy once you have children. You're talking non-incidental amounts of money for some coverage that could significantly help their life in the event you're not here to provide. Look for a 20 year policy and shop around. Even if you don't go with the employer-provided coverage, it's good to get it on your radar when you are responsible for little ones.

[Gronnie]

I've never not been given an option to continue my coverage (at a higher price) when leaving an employer.

I would get as much through my employer as I can if it's at a good price but also have another decent amount outside of my employer.

[EvenSteven]

On the issue of how much should you get, what I did was:

1) How long it will take me to get to FI. Call this X years

2) How much more money do I need to get to FI? call this Y dollars.

3) How much will my wife and kids get from social security if I die? Call this Z dollars

I got a term life insurance policy for X years in the amount of (Y-Z) dollars.

Then I did the same for my wife.

[LearningMustachian72]

Thank you!

This is very helpful!

[snic]

I've always found that the "extra" term life insurance offered by my employers was more expensive than what I could get on my own. But the last time I looked was years ago and that may be different now that I'm in my 50s. Another advantage of buying your own life insurance is that you get a fixed rate for a long time (10, 20, 30 years) so you don't have to worry about what kind of life insurance you'll get, and at what cost, if/when you lose or switch your job.

[volleyballer]

Just wondering, what are the group's opinions on term life with extended option to convert to permanent policy? Basically an extra 5 or 10 bucks a month (I think) and can convert at any time. It would protect against a poor health situation late in the term which would make one uninsurable after the term expires.

[wbarnett]

Another vote for getting your own policy. I work at an insurer, and I'm fairly sure the marginal cost per dollar of 'extra' coverage through your employer is higher than it would be on the open market. Ballpark figures - I'm a healthy guy in mid-30s and got a 20-year term $500k policy at $250/yr. If you're healthy and looking for a long-ish term (15+ years), there's no advantage to waiting. Premiums increase with age.

[Freedomin5]

Just wondering, what are the group's opinions on term life with extended option to convert to permanent policy? Basically an extra 5 or 10 bucks a month (I think) and can convert at any time. It would protect against a poor health situation late in the term which would make one uninsurable after the term expires.

Read the terms and conditions carefully. Will the rates increase or be adjusted based on your age at the time of conversion?

Personally, I have a smaller whole life policy and DH has a universal life policy that covers funeral expenses. The term life policy is designed to cover childrearing costs should one of us pass away.

[SavinMaven]

Definitely get your own policy. Even common issues that crop up as you age - high blood pressure, diabetes - can raise your rates and you never know when you'll be diagnosed with something that makes you completely uninsurable. You won't regret having it, but you could well regret not having it.

[Zamboni]

I'll second getting it for both you and your spouse. I got mine in my mid-30's, and as nonsmokers our 20 year term $1MM policies were insanely cheap, in my opinion.

I also have bought into every insurance option provided by my employer at the maximum amounts. If I die while I still have these policies, I hope they have a good party.

[Goldielocks]

If you are under 40 to 45, non smoker, employer group life insurance is more expensive....

....and suddenly goes away when you switch jobs.    Then you have a gap until your realize it is missing, and maybe had a new health issue pop up in the meantime, so it is now more expensive to renew.

 It is much better to get your own guaranteed annually renewable policy, for much less money.

[DireWolf]

Recently had my first little one and am now planning to get term life insurance through my employer. Leaning towards 3x my salary which is roughly $145 annually.

Honestly, four-hundred and thirty five dollars isn’t even going to cover a funeral

[Arbitrage]

If you are under 40 to 45, non smoker, employer group life insurance is more expensive....

....and suddenly goes away when you switch jobs.    Then you have a gap until your realize it is missing, and maybe had a new health issue pop up in the meantime, so it is now more expensive to renew.

 It is much better to get your own guaranteed annually renewable policy, for much less money.

Right.  Back when I needed life insurance, I checked and the rates were significantly higher through work.  I was in my early 30s in good health, and the average employee age was 49-50.  I didn't feel the need to subsizide everyone else. 

[katsiki]

If you are under 40 to 45, non smoker, employer group life insurance is more expensive....

....and suddenly goes away when you switch jobs.    Then you have a gap until your realize it is missing, and maybe had a new health issue pop up in the meantime, so it is now more expensive to renew.

 It is much better to get your own guaranteed annually renewable policy, for much less money.

Right.  Back when I needed life insurance, I checked and the rates were significantly higher through work.  I was in my early 30s in good health, and the average employee age was 49-50.  I didn't feel the need to subsizide everyone else.

+3   :)

PSA - Aflac and similar products are also a terrible 'deal' for most people.  Many don't bother to research these topics and get tricked by the often great sales pitch.  Not to derail this thread too much but I thought it worth a mention.

[Gronnie]

My work charges based on age and it's quite cheap. We also can keep the coverage even after termination (we just have to start paying the portion our employer was paying as well).

[Michael in ABQ]

$500k 15-year term life policy in my mid 30s was about $250 a year. My wife has a few health issues so a $250k policy for her was about the same annual premium.

$500k seems to be a sweet spot as far as price vs. value. However, depending on your situation you may need a lot more than that to replace your income if you suddenly died. I've got another policy through the Army for $400k. Otherwise, I probably would have looked for a policy around $750k or $1 million.

I went through Xander Insurance (Dave Ramsey advertises for them a lot) they're an independent broker so I could get quotes from a bunch of different companies and AIG had the best deal while not excluding coverage if I died on duty with the military or while deployed.


Speaking of which, when I was deployed overseas a couple of years ago one of my Soldiers dropped dead in his room. It turned out a major artery in his chest just burst. He was in his mid 20s and left behind two young kids and a young wife. Nothing anyone could have ever seen coming, it was just a ticking time bomb that went off while he was getting dressed one morning. Fortunately, he did have his $400k life insurance policy through the military (plus some other benefits) and Social Security.

Don't discount how much Social Security will provide your children and/or spouse if you die. When I was 17 my dad became permanently disabled and for the rest of that year until I turned 18, I got social security benefits of $700 or $800 per month. It helped to pay for my first year of college.