Life Insurance Policies

Term, don't do whole unless you want to waste all the extra money. I would get some good ideas on the Dave Ramsey website. They also explain why term is better than whole.

I second talking to an investment planner. Whole and Universal have their place, but term is usually a better option for young families.

L.,

We are with USAA, they have financial planners on staff. They helped us out when we had kids.

Whole life and Term life are two different policies. Whole life grows over time and you can borrow against it. Term is for a set period of time at a set rate.

Please - go to a financial advisor who will get to know YOU and your personal situation.

We sat with our financial advisor who calculated what I did for the family as a SAHM - and what it would take to keep our family going so my husband could work, etc. if I died first.

This is what you need to do - sit with a financial advisor and figure out your family's needs. If your kids are young? You can start a whole life on them now for a lot less than if you waited.

Good luck!!

I used to sell life insurance. Whole life will lock in a premium, but you will pay a larger amount than you will for term. Term will lock in a premium for the term of the policy, however at the end of the term, the premium will reset based on your current age. If you don't renew the term, you have nothing to show for it, unless you pay for an expensive option that refunds your money. You can compare it to a house. Whole life is like buying the house, term is like renting the house. Just like when your lease is up, you have nothing to show for the money spent....which is basically a term policy, unless you happen to die within the term. With whole life, you have that cash value built up, so even if you cancel the policy, you will have some money built into it.

If you are looking for something short term, like just until your kids are grown, term insurance will be a better bet. If you are wanting something permanent, you need to look at whole life as eventually the term premiums will greatly exceed the whole life premiums. Whole life also builds up cash value and you can borrow against it as you build up value in it. If you can afford it, try to get a smaller amount in whole life and a larger amount in term. The reasoning behind this is that eventually you won't need such a large life insurance amount (house will be paid off, children will be out of the house, you will have retirement savings, etc), but your family will always have your funeral expenses. Of course, unless you have bought a pre-paid policy or plan. I personally have a smaller whole life policy, but the bulk of my insurance is in term.

One thing you may want to look into is whole life insurance for your children. No one wants to think of a child passing away, but it happens every day. I took out a whole life policy on my son when he was 3 weeks old and bought a 15 pay whole life policy, which means I will only pay premiums for 15 years and then it will be completely paid off. I also purchased an option for him to buy additional insurance later without having to prove insurability. He had a heart condition when he was younger, that has thankfully resolved itself, however, that condition would have prevented him from getting insurance in the future if he still had it. The premium for children is very low and this is something that he will have in place for his family when he gets older. Even if you don't purchase separate policies for your children, look into a rider you can add to your policy to cover your children for a lesser amount, like $5,000 or $10,000. It is usually very inexpensive just to add the rider.

ETA: One thing that many financial advisors will tell you is that whole life insurance is a bad investment. Well, if you are trying to use it as an investment tool, then yes. You can get much better returns playing the stock market or in other investment vehicles. However, as a life insurance policy, whole life is definitely a good policy. You have a locked in rate, you can't be cancelled as long as you pay your premiums, it builds up cash value, you can get dividends from the policy, you can take a loan from the policy, etc. Yes, insurance companies make more money off of them because the premium is higher, but over the course of the policy, your death benefit will be less than the premiums you pay. You have to look at how you intend to use the policy to determine if it is the right policy for you.

I would start with whoever you have your home and auto insurance with and also your husband's work.

At both my work and my husbands work we are offered up to one million at 9 dollars a month per 100,000 increments. Our employer is obviously supplementing the cost. We have a mix of both employer based and private based life insurance because obviously neither of us plan on working until we die. The bulk of it is the employer based insurance because that is really what we are hedging against, loss of income. We could scale it back at this point because we are closer to retirement but it is so cheap we just leave it alone.

Term life premiums have gone down substantially. Check out what Dave Ramsey has to say about term vs whole life. Whole life is good for insurance agents and insurance companies not for consumers.

I would go term if you are dead set on insurance.

We personally don't go that route. A good financial advisor can help you figure out what you need.

My ex-step dad was an insurance salesman and he made boatloads of commissions on whole life.

Although I don't know the details with either ( We don't carry term either) I just recall how whole life was a $$$ maker.

Dear L.,

My friend's husband died last week. They have two children. It is a nightmare.

He obviously loved them - when she was pregnant with #1, he purchased a $500K 30 year term policy. She knew that he bought life insurance, but didn't know the details.

She does work but he was the bread-winner. This is the difference between them losing their home and being able to maintain for awhile.

You should each have a policy individually. You want term insurance. I don't know how old your children are....you want enough time on your term to get your children out of high school ideally.

I would suggest perhaps $150K for a 10 year term and $200K for a 20 year term (again, depends upon age of your children, do you have a mortgage, other debt, etc.). That way as your needs decrease (at the end of 10 years you no longer need daycare), your cost for insurance decreases.

Many insurance salespeople try to get you to purchase 10-15 times salary. Honestly, you need to think about what are you trying to cover. Is it pay off a house, pay for college, pay for childcare, etc.

Your husband needs an individual policy as well. If he loses his job, the policy goes away also.

You do not need life insurance on your children. That is a major waste of money.

Please make sure you have wills set up - each of you - and designate someone to become guardian of your children if you should happen to die together. Wills are not that expensive to obtain - and can make all the difference in the world.

LMK if you have questions - message me directly, glad to help, this is my profession.

C.

Our financial advisor suggested term life for both of us. In the event of either of us passing, we will be able to pay off the mortgage so the surviving spouse can keep the house. I forget where DH found the company we went through, but we got additional insurance that is not tied to anyone's job. It is a very good idea to insure any SAH parent.

I'd go with a small 10k policy for each of the kids, and larger terms for you and your husband. Our 30 year term policies(we are 13 years in) have a cash out at the end of the term in the amount of the premiums paid... So we will get a lump $22k in 17 years and we are protected to the tune of several hundred thousand should disaster strike in the meantime.

Good advice from some very experienced folks below! I would add that if you get term, at a certain point some years into that term, the insurance company will get in touch to ask if you want to convert some or all of that term insurance to whole life insurance. Don't let them pressure you (they live to "up-sell" and make money) but do consider what might work for your family at THAT time. The key is "some or all." We just converted a portion of our term insurance (which expires soon) to whole life -- but certainly did not convert it all to whole life as that would have cost a fortune and wasn't needed So when the term ends, the term coverage is gone but we will have a much smaller portion that continues as whole life. For various reasons it was the right thing to do for us, though converting ALL of the term to whole life would have had us very over-insured, frankly. There is such a thing as being over-insured, and you can talk to a financial planner to figure out what is the right level of insurance, at the right period of time, for your family. If you have young kids now, you might want to insure yourself for more, earlier, whereas you won't need as much coverage once they're much older and out of the house, just for instance. Every family has different considerations so don't just say yes to anything without some advice from an adviser who knows your particulars!

You are right to think that you as the stay at home spouse need life insurance too. Your husband's work covers him (be sure you know how much it provides, though -- often it's "two times the annual salary" which might or might not be enough, if the other spouse isn't working and the working spouse suddenly dies, there's a mortgage, etc.). But you as stay at home mom also have literal monetary value -- if you were to die, your husband would have to find money to provide child care while he works, for instance. Hard to think about and a bit painful, but essential to consider.

You should definitely get term, not whole life. Whole life is a money maker for the insurance company.

I would talk to the agent you use for auto and home insurance. That person should be able to give you the information you need.

The advice I got from a financial advisor was this:
If you want life insurance because you need life insurance, get term life insurance.
If you want an additional way to invest money, then talk to a financial advisor and see if whole life insurance is the best option.

As for how much to get: what would your husband need if you weren't around? Eg, cost of a full-time nanny or daycare from now until your kids are out of elementary school.

For your husband, add up your monthly bills for 3 years and the cost to pay off your mortgage (if this happened, you would have to get a job, but you want to give yourself time to be able to do that, thus the cost of monthly expenses for a few years and you want the house to be paid off so that you don't ever have to worry about losing your home if the job you get is not high paying).

Then, talk to an insurance agent about the cost of a policy for those amounts for a 30 year term. I got my term life policies through my credit agency. They send out bids for the amount we wanted, our ages, and the term (30 years) to a number of companies that were AAA rated, got quotes, and then we bought the most inexpensive.

it's not an easy decision. i used to sell life insurance, and 'buy term invest the difference' is a great strategy IF (and it's a huge if) you're disciplined enough to REALLY take what you would have spent for whole life and invest it wisely. very few- and i mean very few- do it. most just take term because it's considerably cheaper but neglect the investment side of the issue until they're much older, with so much ground to make up.
whole life is more expensive, as well as being hedged about with up-sells to the salespeople and administrators, but all insurance is about the insurance companies maximizing their profits monstrously while betting against you. don't mistake it. if that really squicks you out, cut out life insurance altogether and 'insure' yourself through investing everything you'd pay for premiums. some people are really savvy enough to pull this off, but again, most of us aren't.
i talked my husband into canceling our universal life policy when we were young parents, and going term. now that we're in our 50s, it's all far, far more expensive. i wish we'd stuck with our universal hybrid, but oh well, we all do what we think best at the time.
we recently went to a financial advisor with whom we're comfortable and are plonking down a hefty sum for life insurance and retirement. i'm sure he's making out well on it, but if it protects us as we're confident it will, it'll be worth it. we're also going to look into long-term disability insurance as soon as we've settled into this new big bite out of our budget.
good for you for thinking about this now.
khairete
S.

Check with your car insurance or home owner insurance company and see if they offer life insurance. It's a good place to start. I know with our insurance we get a discount on our car insurance for having life insurance with them. Also, I know from experience that State Farm agents are trained in the various life insurance offers, so I'm assuming Nationwide and Allstate, and other multi-line insurance companies are trained as well. They should be able to go over the various policies offered and what is best for you. I also know from experience that State Farm can be higher than other companies, so shop around. You may have good luck going through an insurance broker.

Don't discount term insurance since you are all young. It's a lot less expensive. I recommend Met Life. They don't screw people.

Level term. 10-15x his annual income.

Whole life is more of an investment strategy. It costs more, but isn't usually the best way to invest if you are saving for the future.

Term life is just that. You pay a set premium, for a set number of years, and receive a set sum upon death of the insured. If the insured doesn't die, the policy ends and that's it. No return of money, you bought the coverage for the length of term of the policy. Doing that, and taking what you would have spent towards a whole life policy, and say, investing that difference in a different investment vehicle (a Roth IRA maybe), leaves you with your investment, at whatever point you want access to it (subject to penalties, depending on the investment vehicle you chose). If you get whole life, it's all tied up together.

You should both have life insurance coverage. Even if you don't have income. Yes, life insurance is to protect the risk of losing the income of the wage earner in the event of their death. However, in the case of a SAHM, even though you aren't earning wages, you are saving the household child care expenses (so it's in essence a wage). What would it cost your husband to PAY for the care of your children, if you died tomorrow? That's what you have to consider, when you are looking at coverage for you. There are other variables to consider for the actual wage earner.

Dave Ramsey has some good information for beginners. It's be a decent enough place to do some research to get you started understanding what you are buying and what risks you are ensuring against.

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We actually have several. Term on me. Term on husband. Universal (?) on husband with a rider for the kids (this policy was a rolled over investment that bought outright - no ongoing premiums- a policy with a set payout, that earns income which is reinvested into the policy and grows over time.. it pays for the premiums itself from the initial investment and the continual earnings.. eventually, if husband lives long enough, it will have a very high value. If he doesn't, it has a set payout, plus whatever remaining original investment was paid into it.
And then there's his basic work insurance.

All of these were decided upon based upon other retirement investment choices we have made. If I die first, husband retains ALL of his retirement income. So, once the kids are grown and gone, there really is no need for me to even have any policy, except to cover burial expenses. On the other hand, if husband goes first, the survivor benefits of his work retirement are less for me than he would receive if he were living. So, we have additional insurance on him for my benefit, should he go first and I only receive the reduced survivor retirement benefits. Then we have other retirement investments as well.

You have to look at a much bigger picture than *just* insurance. Which is why I suggest doing some reading to familiarize yourself with what you *need* vs what would make life wonderful, vs happy retirement with you both living into a ripe old age.

No, you don't want whole life. What you're doing there is basically buying term life insurance, and then paying extra so someone else can invest your money at a much lower return than you'd get investing it yourself. It's a waste of money. Get a term life policy. Your kids will be grown and out of the house by the time the 20 year term is over (or if they'll be grown and gone in 10 years, get that instead - it will be cheaper).

The MOST important thing you can do is make sure the company you buy from is rated highly, and is financially stable. In other words, don't buy from some fly-by-night place you've never heard of. If you have your homeowner's insurance through a company like State Farm, Allstate, or similar, ask your broker about life insurance. These companies are reputable and will pay out in the event that you need them to. My husband is insured through Lincoln Benefit (we bought the policy through our Allstate agent), and I'm insured through Met Life. Check around amongst the reputable companies, because depending upon age and policy amount, you might be able to find a better deal insuring yourselves through different companies. Here's an article with a little more information: http://www.nerdwallet.com/blog/insurance/2015/03/31/life-...

You should ask for a policy that is renewable and convertible. Renewable means that at the end of the term, you can renew the policy - say, if you pick a 10 year policy now, at the end of that term, you can renew for another 10 years, if it is necessary at that time that you do so. Convertible means that if you want to change it to a whole-life policy at that time, you may do so. So, those are two things to ask about when you call to get the policy.

As far as the amount, it depends upon your cost of living (what it would likely cost to replace the duties you now perform for your family - nanny, cleaning lady, etc), and how long it will be until your kids are grown and out of the house. If your youngest child is 10, assume that in 10 years, your duties as a SAHM will be effectively over, and so if something were to happen to you in 11 years, your husband wouldn't go through any financial hardship trying to maintain your duties. You get the idea. Your husband will need a much bigger policy, being that he is the primary breadwinner. Figure out how much you'd need to live on until the kids are grown, and that's the amount of money you need to insure him for.

If I can suggest one book to you, it would be The Wealthy Barber. http://www.amazon.com/The-Wealthy-Barber-Successful-Finan... It's a quick read and makes it really easy to understand all of this.

One thing I wanted to mention was that on your husband's work policy, do make sure that YOU are the primary benificiary of the policy. There are employers out there who offer the insurance, but they are the beneficiary of the policy, which wouldn't help you at all if something were to happen. Just be sure to read the paperwork.