Life insurance advice

[nickbits]

I make 2/3rds of our income and with the house being the single biggest expense, I have to cover it in the event I die prematurely. Of course, since it will be paid off in 10-13 years, that begs the question of whether or not I should go with a shorter term just for the sake of our house. That's what I've been debating. I'll tell my wife to cremate me and not have a funeral to save money there (funerals are an insane waste of money IMO) but I guess I would still like to have a payout to cover any medical bills that may arise.

I make 85% of our income and don't have any but I have enough in savings that she could live off for a while until she figures things out.

I just don't like the concept of life insurance. You shouldn't be getting a free ride because I died. Your life should be worse, not the same or better.

She could always take out a policy on me herself if she's really worried; that I don't have an issue with. I don't have one on her because she doesn't really add much value financially speaking.

 

[NoTine42]

is a $1million accident only insurance worth it?

https://www.accident-protection.com/default.asp

Only if its a catastrophic death and dismemberment policy.

(Some of those policies have amusing names)

Overall I'd put those specific condition insurance in the same category as buying an extended warranty on your Monster cables.

Get normal term life, health and long term disability first.

 

[kranky]

is a $1million accident only insurance worth it?

https://www.accident-protection.com/default.asp

Not worth it, because if you need life insurance, why would you limit the ability to collect based on the cause of death?

And why potentially subject your beneficiary to this scenario: you fall off a ladder and are severely injured. After being hospitalized for a month, you develop an infection and you die. The insurance company says too bad, you died from an infection, not an accident. Your beneficiary gets nothing.

 

[IndyColtsFan]

So, what about companies? The quote I received had these companies as options for the policies:

Banner
AG
Protective
Principal National Life

Still debating 20 vs 30 year too. I see pros/cons of each.

 

[kranky]

Check their A.M. Best ratings, as long as they are good I'd go with the lowest price as long as we're talking term insurance.

 

[IndyColtsFan]

Check their A.M. Best ratings, as long as they are good I'd go with the lowest price as long as we're talking term insurance.

Yeah, 3 of them (including the one I was looking at, Principal) have A+ ratings and the fourth has A.

 

[alkemyst]

With life insurance the best bang for buck is through an employer, that said; you lose your job you loss that insurance.

Life insurance outside that is a bit pricey as you grow older. With or without kids is not so critical, it's with or without dependents. If your wife is working like you say, can she afford the taxes and insurance on the home? Many forget that...

Having enough to erase all debt and a little kicker for burial and re-establishing things goes a long way.

I have two policies, one my own and my other through my company. About $500k through my company and $350k private.

Once I am married I will add her on my company plan for about $500k too since she has kids.

My ex had a very expensive plan in Japan through Sumitomo Life Insurance. She's paid on it since she was 18 (she was 52 when we divorced), the cash value was only $13k at the time...I did the math with simple savings account interest over that time frame. If she saved that money in just a savings account, she'd have almost $300k in cash value.

 

[gorb]

What kind of rates are you getting? I'm insured with USAA and I pay $39.99/mo for 30yr/$500k.

 

[IndyColtsFan]

What kind of rates are you getting? I'm insured with USAA and I pay $39.99/mo for 30yr/$500k.

That's lower than my quotes, but when I go to their site and go through the wizard, it quotes rates significantly higher than the quotes I received. I'm not former military and that might be why.

 

[IndyColtsFan]

With life insurance the best bang for buck is through an employer, that said; you lose your job you loss that insurance.

Yeah, I want one independent of employers. I had been planning to get an independent policy at some point and now is the time.

 

[IndyColtsFan]

I just don't like the concept of life insurance. You shouldn't be getting a free ride because I died. Your life should be worse, not the same or better.

I don't agree with that viewpoint. I'm not trying to make her rich, but I want to make sure she is taken care of and has no worries. That's what you're supposed to do for the ones you love IMO.

 

[Eug]

Hard to say.

I would recommend something like 0 (since you have no kids) to 20 years (since your wife doesn't make much). At your age of 43, 30 years probably isn't worth it.

You'd be retiring anyway around 65 most likely, so if you die then she can just live off your retirement plan (hopefully). Also, if you have a big house, she can sell it and downsize to capture some cash there too.

Overall though, IMO, disability insurance is much, much more important.

EDIT:

I just saw the whole life comment. IMHO, I think they're a waste of money for most people, precisely because the amount you'll put into it is way higher than say a 20 year term. They can be helpful for some high earners though as (at least around here) they can be a way to shelter money from taxes.

BTW, I am also in my 40s, with a young kid, but my 20-year term life started 7 years ago when I was in my 30s. So that means my kid will only be a teenager when my term-life runs out.

However, I'm fine with this, because restarting a 20-year term life in my 40s would have cost way more, and my house will be paid off in 5 years. For the decade after my house is paid off, before my term life runs out, the money will go into savings. We do have a big house too, so even with 2 kids, downsizing to capture $ is a reasonable option, and there's also the fact that I will have a sizeable retirement pot 13 year from now. It would be like an early retirement level of income, and my wife already makes decent money (although significantly less than me). Yeah, "early retirement" levels of income are usually lower than retirement at age 65, and that would be true for us too, but it's still a decent amount. In the meantime I am also contributing to a tax-deferred education fund (RESP in Canada) for my kids' post-secondary education.

 

[gorb]

That's lower than my quotes, but when I go to their site and go through the wizard, it quotes rates significantly higher than the quotes I received. I'm not former military and that might be why.

Age and health matter too - I started my policy when I was 27 and I'm in reasonably good health (enough to qualify for anybody's lowest rates).

You should shop around. I was getting quotes for $33~40 from several other companies. I just stuck with USAA for convenience since I have several other accounts/policies with them.

 

[PricklyPete]

I'm 35 and just got a new policy for 20 years. The intent is that if I die, my wife will essentially have my salary until our soon to arrive twins are out of the house. We already have decent retirement savings and have more than 50% of the house paid off...which I hope to completely do in 5 years or less. I'm just trying to make sure my wife and kids can maintain the same quality of life if I am gone. If I make it for another 20 years, we will be "self insured".

 

[Eug]

One factor also to consider:

Many policies get cancelled in the first several years, for various reasons, not the least of which is cost.
So, if you get a 30-year term, that means you've paid 30-year rates for say a 5-year term.
If you get a 20-year term, that means you've paid 20-year rates for say a 5-year term.
And if you get a whole life policy, that means you've paid sky high rates for that same 5-year term.

 

[Printer Bandit]

pre-existing illnesses will make it hard to get term insurance.

and these people need it the most.

 

[PricklyPete]

One factor also to consider:

Many policies get cancelled in the first several years, for various reasons, not the least of which is cost.
So, if you get a 30-year term, that means you've paid 30-year rates for say a 5-year term.
If you get a 20-year term, that means you've paid 20-year rates for say a 5-year term.
And if you get a whole life policy, that means you've paid sky high rates for that same 5-year term.

Canceled by the insurer or by the insured?

 

[Eug]

Canceled by the insurer or by the insured?

By the insured.

I don't know what the exact percentage at say 5 years is though.

It's not that I'm suggesting that the OP is likely to cancel. I'm just saying that the OP needs to be absolutely sure what he needs it for and if the financials and term make sense. Cuz if he's unsure about a 30-year policy and then cancels in 3 years for a 20-year policy instead, he would have been paying too high a rate for the first 3 years, and then also might be paying too much for the next 20 years because he's 3 years older and the rates are higher.

IMO, 30-year doesn't really make sense here, and whole life is usually a waste of money.

 

[alkemyst]

keep in mind if you cancel a policy early they may tax you on it.

 

[TwiceOver]

Term. 10x your income for as long as they'll have you.

Unless your wife is making a boat load of cash and has no use for you when you are dead. Then, nothing.

 

[Eug]

keep in mind if you cancel a policy early they may tax you on it.

I'm not familiar with US tax law, but what is there to tax you on, unless you're talking about something like whole life?

If you take a regular 20-year term life policy, there is no "investment" component, so there is nothing to tax you on.

Term. 10x your income for as long as they'll have you.

Unless your wife is making a boat load of cash and has no use for you when you are dead. Then, nothing.

10X income? As long as they'll have him? For what reason? Everyone's situation is different, and as mentioned before, he'd be very near standard retirement age already with a 20-year term. Not sure why he would need life insurance until age 73.