Had a term life policy expire and looking for something new. Generally my questions are,
Any tips or recent homework you care to share is appreciated. Feel free to PM if more personal details would be helpful.
I never understood the point of insuring children. Life insurance is to cover your family in the envt one or both of the parents dies. Why would you need financial help if one of your children dies?
Take care of funeral costs?
Our kids are insured through my work…it is stupid cheap…$0.50 a month for all three.
Matt
I think the first thing to consider is what is the purpose of the life insurance for you and your family? Typically, is it not to replace lost income in the case of death? In my case, I had a 20 year (IIRC) term policy that I started when we had our first daughter. That was to cover some lost income were I to die (news flash: I did not!). It has since expired, and there is no need to renew it since my youngest is now 21, I have a lot of money in my retirement account, and I’m retired (my two little pensions are set up to reduce my current payout and maximize the payout to my wife after I die).
We actually should insure my wife, whose untimely death would result in the loss of her current income, her entire pension, and her Social Security payout in the future. But she’s 58 (actually born the same day as Dikembe Mutumbo, we found out yesterday!), and between my retirement savings and her retirement savings, I would be fine financially in the worst case.
No money can replace the death of a child, but it can replace their income, if any. Never saw the point in life insurance for a child.
You want to go with a reputable, solid financial institution for life insurance. They gotta be around for a couple of decades, right?
I am never buying insurance for me or my wife.
Insuring a child is nuts.
Can you put two spouses on the same policy or would that require two separate policies?
Ideally the wife and I would have equal coverage with minimal additional expense to cover children as well (funeral, long term care in the event of catastrophic illness etc.) A 15 year term would carry me through retirement but build no equity. So I’m not really sure which kind of policy makes the most sense.
Reminds me of when I was a pretty young kid…me and this other trouble maker were playing on the roof of a shed…fairly steep metal roof. I said I was scared of falling off, so this the other kid asked whether my parents had life insurance on me. I didn’t know, but we figured they probably did, so if I fell off the roof it should be okay. Took me a few years to realize life insurance doesn’t give you another life.
One person per policy.
Using whole life insurance to build equity doesn’t seem like a good investment, but you’d have to check on the rates (sort of like a fixed annuity?). If you stop payments, all your equity goes away?
One reason to buy whole life policies for children is that they may themselves become uninsurable as they age. This would provide future protection for their own family.
I am not a fan of life insurance in general. Your return is likely far lower than a mutual fund (which should have very low expenses and isn’t making a profit). I recall reading that one of the biggest financial problems for certain demographics is that they buy life insurance rather than invest in stocks (or housing).
There are some situations where life insurance can make sense.
Risk mitigation where one spouse’s income would be hard to replace. If that is your situation then maybe buy term life for whichever spouse’s income is vital. It would not make sense to buy life insurance on both of your lives, under this rationale. You can’t both be financially irreplaceable. And, it would make sense to buy term life, to get you through the end of your income-earning years. Once you’re into your retirement years, why buy life insurance? What scenario would you be insuring against? You’re done working and your death would reduce expenses. (Don’t mean to sound cold.)
Inside information — if you have good reason to think your (or your spouse’s) risk of dying young is much greater than what the life insurer would calculate.
For healthy people, the bigger financial concern is the reverse of life insurance. Your financial concern should be living old, not dying young. To address that, you would want an annuity (which is what Social Security provides), which is the opposite of life insurance.
I dropped life insurance in my early 50s. Enough money is set aside for kids education and enough money present for retirement. I have long term disability but should think about dropping that basically just procrastinating I think as I am still working. Insuring kids occasionally pts tell me they are doing that a few times I have had to fill out forms. I always wonder why people do that.
Annuity is my wind down prior to retirement. I will put in enough annuity to last until I die and invest the rest.
Could you expand?
My wife and I make the approximately the same income. Years ago when we bought our house, we probably would have been challenged if one parent died. So both of our incomes were irreplaceable.
In general, the death of a spouse saves all the expenses associated with that spouse, and moves the surviving spouse into a lower marginal tax bracket. But, I can see your point that there could be situations, especially with children still at home, where the spouse’s death would cost you half the income but not reduce expenses by half. So, life insurance could avoid the need to downsize the house.