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Life insurance

sao123

sao123

Lifer
Next year im going to be buying a house with my wife.
I have a $25k life insurance policy my parents got for me in high school, and my wife has none. So im hoping to get a minimal of $50k coverage on us each, to cover the cost of the house in case something unfortunate should happen to either of us.


whats the difference between "term" and "whole life" life insurance?
Which is better, which cost less?
Having never bought life insurance before, I'm basically clueless about it all.
Anything else I need to know?
 
A Term policy is going to be the cheapest... if you get a 30 year term policy for 200,000, after 30 years, if you are not dead(don't use it) thats it. You don't get any of your money back. you are basically renting a policy. Most people get this to coinside with the term of their mortgage.

A permanant(whole life) policy will last you until 100(or til your choosing) years old. It is more expensive, however, you can borrow against it, take money from it, etc.

That is a VERY BASIC way to look at it.

I would at least get you and your wife the value of the house on each of you for at least 15 years.
Rates will also be determined by health, if you smoke, etc.

each policy is not better or worse than the other, they are just different.

Term will always be cheaper than whole life, but you get more with the whole life policy
 
get a whole life for both, it's better long term. And unless your bills all add up to $25,000 i highly suggest getting a MUCH higher policy. I have a $200,000 policy and im only 23 so I know your bills overcome mine
 
Originally posted by: griffis
get a whole life for both, it's better long term. And unless your bills all add up to $25,000 i highly suggest getting a MUCH higher policy. I have a $200,000 policy and im only 23 so I know your bills overcome mine
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shens
 
Originally posted by: LolaWiz
A Term policy is going to be the cheapest... if you get a 30 year term policy for 200,000, after 30 years, if you are not dead(don't use it) thats it. You don't get any of your money back. you are basically renting a policy. Most people get this to coinside with the term of their mortgage.

A permanant(whole life) policy will last you until 100(or til your choosing) years old. It is more expensive, however, you can borrow against it, take money from it, etc.

That is a VERY BASIC way to look at it.

I would at least get you and your wife the value of the house on each of you for at least 15 years.
Rates will also be determined by health, if you smoke, etc.

each policy is not better or worse than the other, they are just different.

Term will always be cheaper than whole life, but you get more with the whole life policy
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That sums it up pretty good. :thumbsup:
 
You may want to look into what, if any, options your/your wife's employer provides. Between my two jobs I get $65,000 free life insurance as long as I am employed by both jobs. Should I get killed while at work it then goes up to $90,000. Noting like being worth more dead than alive! 🙂

In addition, one of my jobs provides an additional $100,000 of life insurance for alot less than the usual premiums (I don't remember what is was since I didn't bother to consider it) with no questions asked
 
Originally posted by: Exterous
You may want to look into what, if any, options your/your wife's employer provides. Between my two jobs I get $65,000 free life insurance as long as I am employed by both jobs. Should I get killed while at work it then goes up to $90,000. Noting like being worth more dead than alive! 🙂

In addition, one of my jobs provides an additional $100,000 of life insurance for alot less than the usual premiums (I don't remember what is was since I didn't bother to consider it) with no questions asked
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don't rely on ins. from work. if you are fired, laid off, etc your insurance usually stops.
So if you have a policy from work and you left the job after 10 years from when you started the policy and your health got worse, if you went looking for your own insurance, you could not be eligable anymore.
Plus, it get more expensive with age.

Get it (if you can) away from work. EVen if you get a small policy now, after the term is up, you can transfer it to a new plan without having to worry about meeting health requirements.
 
The purpose of the insurance is to replace the lost income of someone who dies. That's why you should get a much higher policy. Term insurance is dirt cheap and a 30-year level term policy (level term = premiums are fixed for 30 years; the alternative is a policy where it starts out cheaper but goes up each year) won't cost very much if you are young and in good health.

The idea is that after 30 years, your investments and savings are big enough that you no longer need the insurance money to replace lost income.

Make sure your policy cannot be cancelled for any reason as long as you pay the premiums.

I am against whole life because it makes things complicated for no good reason. All it does is cost you more now, and they give you some back later. Just get term, and invest the savings and you'll be ahead of the game.

The thing I really want to emphasize is don't only look at the mortgage amount when determining how much coverage to get. If something happens, you don't want your wife to have a paid-off house while not having enough money to live on. Think in terms of $500,000 so she (or you, for that matter) won't be forced into making hasty decisions. Having money in the bank gives her options.
 
And just to elaborate a little more...as far as permanent insurance is concerned, I would stay away from whole life. I would recommend universal life insurance. It's a lot more flexible than whole life.
 
you need to get term life insurance so that you can afford enough coverage to pay off your house in case either of you die
 
Most of the advice above is quite good. But I didn't see the most fundamental questions being asked!

1) If you die, can your wife support herself? That is, does she have a decent job and/or education/skill so that she can have a job when you die?

2) If you wife dies, can you support yourself? That is, do you have a decent job and/or education/skill so that you can have a job when she dies?

If both people work and have good job skills, then there is probably not even a NEED for life insurance. Heck, if you are young and have student loans you already have minimal life insurance (you get them paid off for free if you die, which could be tens of thousands of dollars or more).

Life insurance is not about paying mortgages. Life insurance is not about collecting a large payment to offset the pain of someone dying. Life insurance is about allowing your family to survive in case you die. Don't lose focus on that. And for that reason, term life insurance and prudent investing of the rest of the money (the money saved by not buying whole life insurance) is probably the best route.
 
Originally posted by: dullard
Most of the advice above is quite good. But I didn't see the most fundamental questions being asked!

1) If you die, can your wife support herself? That is, does she have a decent job and/or education/skill so that she can have a job when you die?

2) If you wife dies, can you support yourself? That is, do you have a decent job and/or education/skill so that you can have a job when she dies?

If both people work and have good job skills, then there is probably not even a NEED for life insurance. Heck, if you are young and have student loans you already have minimal life insurance (you get them paid off for free if you die, which could be tens of thousands of dollars or more).

Life insurance is not about paying mortgages. Life insurance is not about collecting a large payment to offset the pain of someone dying. Life insurance is about allowing your family to survive in case you die. Don't lose focus on that.
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Great advice/suggestion/view-point.
Let us not forget that if or when you gain ANY dependent, the whole thing changes DRAMATICALLY.
 
Originally posted by: dullard
Most of the advice above is quite good. But I didn't see the most fundamental questions being asked!

1) If you die, can your wife support herself? That is, does she have a decent job and/or education/skill so that she can have a job when you die?

2) If you wife dies, can you support yourself? That is, do you have a decent job and/or education/skill so that you can have a job when she dies?

If both people work and have good job skills, then there is probably not even a NEED for life insurance. Heck, if you are young and have student loans you already have minimal life insurance (you get them paid off for free if you die, which could be tens of thousands of dollars or more).

Life insurance is not about paying mortgages. Life insurance is not about collecting a large payment to offset the pain of someone dying. Life insurance is about allowing your family to survive in case you die. Don't lose focus on that. And for that reason, term life insurance and prudent investing of the rest of the money (the money saved by not buying whole life insurance) is probably the best route.
Click to expand...


The answer is yes...but barely.
We both have state jobs making uppers 30's to lower 40's. We pay our bills now but with little room to spare (rent + 2 car payments + bills + food + gas + etc) The idea is that if one of us dies, provided there is no remaining mortgage, the other could survive on their own income, plus they would have the penchant of the deceased.
We both have a full penchant for retirement, and right now dont have the extra room to do much investing.
It sounds like we might benefit from having a mixture of both term and whole life policies.

I am going to discuss this with my agent sometime soon.
 
Originally posted by: sao123
The answer is yes...but barely.
We both have state jobs making uppers 30's to lower 40's. We pay our bills now but with little room to spare (rent + 2 car payments + bills + food + gas + etc) The idea is that if one of us dies, provided there is no remaining mortgage, the other could survive on their own income, plus they would have the penchant of the deceased.
We both have a full penchant for retirement, and right now dont have the extra room to do much investing.
It sounds like we might benefit from having a mixture of both term and whole life policies.

I am going to discuss this with my agent sometime soon.
Click to expand...
Remember, car payments will be cut in half, food will be cut in half, many bills will be cut in half. But if one can only just barely scrape by if the other dies, then life insurance is probably something worth considering. Remember though with your plan that you still will have the yearly property tax, house insurance, and maintenance bills to pay. Having no mortgage doesn't mean you don't have to make regular payments on a house.

You confused me with the rest of your post. If you don't have extra room for investing, then how do you have room for whole life insurance? Whole life = life insurance + investing combined into one expensive and inflexible product. Whole life makes sense for some people (those with money, who can't take time to invest themselves, and who want the simplicity of combining unrelated things). However, if you can't afford investing, then you can't afford whole life.
 
Term is cheaper then whole life. Whole life has an investment component as while as a life insurance component. If you want an investment component your better off getting term and investing your money in something other then an insurance product.
 
Here's how I learned it. Start from the basic fact that, every year, there is a certain probability that you will die. An insurance company takes on huge numbers of customers and does some of the fanciest statistics to calculate how much they have to charge in premiums so that they can pay out the guaranteed benefits for those that die, and still have money left over for costs and a profit margin.

Term life insurance is the basic stuff, and is subdivides into two groups quickly. For Level Term, the guaranteed benefit is fixed ("level"); so, as you get older and your risk of dieing increases, they charge you a higher yearly premium. These are always written to end at a particular time. If you are still alive when the contract ends, the insurance company owes you nothing.

For Decreasing Term, the yearly premiums are fixed and the changes in risk are covered because the benefit to pay out decreases each year. Same deal as above when the contract period runs out.

Some companies offer twists on these - a compromise deal with slowly increasing premiums and slowly decreasing benefits, for example. Or maybe a deal that, after a 25-year contract, there is a fixed small benefit to be paid out when you die, but no further premiums. Various deals possible.

Whole Life is a combination for Decreasing Term insurance and an investment fund. You never see the details - that's all done by the insurance company. Basically they collect from you a premium which is higher than the "normal" Decreasing Term insurance. They use part of that to cover the term insurance commitment, and put the extra into an investment fund they manage. As you get older the value of the Decreasing Term part goes down, but the accumulated value of the investment fund goes up, and the company always has enough money in total to pay out the guaranteed benefit when you die. Many of these have a "paid up policy" provision. After many years of operation the investment fund part completely covers the anticipated payout, and there is no more need for the term insurance part. Moroever, since the investment fund is already big enough, they don't need to collect more premiums - they can just keep managing the fund until you die, then pay out the death benefit and keep any excess.

Term insurance is definitely cheaper, because that's all you are buying - insurance. But if you make that choice, you MUST also have some discipline and commitment to invest more money yourself somehow, so that many years later you have extra money. If you can't do that or don't know how, Whole Life is one solution. Not the best, mind you - as an investment fund, those things generally pay poor interest rates, but it's better than zero.

Now, for your immediate interest, the best thing to protect a mortgage is Decreasing Term. You pay the same premium every year (or month) and the payout value of the insurance just nicely matches the decreasing remaining balance on the mortgage. You set it up so the insurance ends when the mortgage is paid off and then you pay no more. In fact, many mortgage companies sell this insurance themselves. Some make it available as a separate option; some make it mandatory in the deal. Your decisions are two: do we need insurance to protect us by paying off the mortgage when one of us suddenly dies, reducing family income? And if yes, then is the mortgage company's premium rate as good as we could get from an independent insurance company?

Don't forget, you can always buy several types of insurance at the same time if you decide it's right for you. For example, many people will have automatically some form of term insurance provided by their employer as part of the benefits package, plus Decreasing Term to cover their mortgage, and maybe some private Whole Life for a "nest egg" fund later. You have to decide what you want. And as others have said, keep reviewing it because your needs change radically with changes in family structure, health, etc.
 
Originally posted by: dullard
Originally posted by: sao123
The answer is yes...but barely.
We both have state jobs making uppers 30's to lower 40's. We pay our bills now but with little room to spare (rent + 2 car payments + bills + food + gas + etc) The idea is that if one of us dies, provided there is no remaining mortgage, the other could survive on their own income, plus they would have the penchant of the deceased.
We both have a full penchant for retirement, and right now dont have the extra room to do much investing.
It sounds like we might benefit from having a mixture of both term and whole life policies.

I am going to discuss this with my agent sometime soon.
Click to expand...
Remember, car payments will be cut in half, food will be cut in half, many bills will be cut in half. But if one can only just barely scrape by if the other dies, then life insurance is probably something worth considering. Remember though with your plan that you still will have the yearly property tax, house insurance, and maintenance bills to pay. Having no mortgage doesn't mean you don't have to make regular payments on a house.

You confused me with the rest of your post. If you don't have extra room for investing, then how do you have room for whole life insurance? Whole life = life insurance + investing combined into one expensive and inflexible product. Whole life makes sense for some people (those with money, who can't take time to invest themselves, and who want the simplicity of combining unrelated things). However, if you can't afford investing, then you can't afford whole life.
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Over the next 30 years our salaries will peak at 60-65k ea, which will definately not keep up with inflation. I get the picture we need higher coverage which will simply cover the length of the mortgage (20 years or so), then we need a lower coverage which will last simply until we each die.
 
Originally posted by: cyclistca
Term is cheaper then whole life. Whole life has an investment component as while as a life insurance component. If you want an investment component your better off getting term and investing your money in something other then an insurance product.
Click to expand...

Umm...incorrect. As long as you are in fairly good health, a properly structured life insurance policy will outperform outside investments due to the fact the life insurance accumulates tax free, you can withdraw your money up to basis tax free, you can loan from the policy tax free, and the death benefits are tax free.

Any costs of insurance (if properly structured) should be less than the taxes you will pay on outside investments.

HOWEVER, in this case, we aren't really talking about investing, but just death benefit coverage; in which case term is the cheapest way to go.
 
Originally posted by: sao123
Next year im going to be buying a house with my wife.
I have a $25k life insurance policy my parents got for me in high school, and my wife has none. So im hoping to get a minimal of $50k coverage on us each, to cover the cost of the house in case something unfortunate should happen to either of us.
Click to expand...

Life insurance is to replace what you can no longer provide. So lets say you make $50k per year...Basically..you've replaced your income for only 1 year with $50k of coverage.

Now look at a $1,000,000 Term policy...If you died while in force at 5% your wife and kids get 50k per year EVERY year without ever touching the principal $1,000,000. This is very simplified but you get the picture.

If your under 30 and healthy...you shouldn't be looking at anything less than $500,000 if you are supporting a family.

As for whole life insurance...sure, if you can afford it...get it. It's expensive but it is permanently yours. Don't get too hung up on that though because if you die would your wife rather get $50,000 of the good whole life or the $500,000 of the cheap crappy term? My guess is she'll take $500,000 of the cheap crappy term!

Most term policies allow you to switch portions to Whole anyway so don't worry so much as the type of coverage vs. the AMOUNT of coverage.



 
Originally posted by: milehigh
Originally posted by: sao123
Next year im going to be buying a house with my wife.
I have a $25k life insurance policy my parents got for me in high school, and my wife has none. So im hoping to get a minimal of $50k coverage on us each, to cover the cost of the house in case something unfortunate should happen to either of us.
Click to expand...

Life insurance is to replace what you can no longer provide. So lets say you make $50k per year...Basically..you've replaced your income for only 1 year with $50k of coverage.

Now look at a $1,000,000 Term policy...If you died while in force at 5% your wife and kids get 50k per year EVERY year without ever touching the principal $1,000,000. This is very simplified but you get the picture.

If your under 30 and healthy...you shouldn't be looking at anything less than $500,000 if you are supporting a family.

As for whole life insurance...sure, if you can afford it...get it. It's expensive but it is permanently yours. Don't get too hung up on that though because if you die would your wife rather get $50,000 of the good whole life or the $500,000 of the cheap crappy term? My guess is she'll take $500,000 of the cheap crappy term!

Most term policies allow you to switch portions to Whole anyway so don't worry so much as the type of coverage vs. the AMOUNT of coverage.
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the problem is, im healthy now, but I have a known degenerative disease. I can be good for the next 20 or so years, but cant risk not being able to get coverage then and/or having to pay out the ass for it.
 
if you understand finance theory, you will choose term. if you are susceptible to salesmen, you will get duped into whole.
 
The have money back term now, where you pay extra and if you are still alive at the end of the term you get all your premiums (amt paid) back tax free.
 
If you're interested in term life, you can get quotes from various companies by using this site.

http://www.term4sale.com/

Internet makes comparison shopping so easy and term is so cheap that it's really no brainer for most people imo. But I suggest sticking with minimum A+ rating companies.

I got a million dollar 20 year term coverage for $460 a year. Hopefully the policy will expire worthless. 🙂
 
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