Life Insurance Advice?

[Shaman]

So.
I'm getting to the 35yo marker.
Second child was born 3 months ago.
Mom passed last year somewhat unexpectedly.
I guess I am feeling the urge to get some 'family benefit' in case something happens to me.

Sell me...
what should I get for Life Insurance.

[TonyT607]

shaman, one conservative estimate on how much you should get assumes that you do NOT want your spouse to have to go back to work (I don't - my wife quit corporate America 5 years ago a year after we moved back from the UK).

BTW we don't have little kids, our daughter is about to turn 17 (and of course college in a year and a half).

So, basically (depending on your ages) you need to plan so that your current income/salary (or a significant portion thereof) is covered by the interest/income ONLY on the policy payout. I say interest because this assumes zero investment acumen or advice. Basically the $$ goes into a CD, savings, or other safe, conservative instrument. For example, a 1 yr CD right now is about 4.82%. So, for every $1M, your family can expect $48K/year income. This assumes she will not invest it in something more aggressive (and less safe).

Again, this is a conservative position, I want my family well taken care of with zero financial worries, and to not have to touch the principal. I want the money to last well past my wife's lifetime and well into my daughter's.

My wife knows she will pay off the mortgage right away and get that out of the way. The kid's college is taken care of. Done.

If you're a $100k/yr earner, then it would be about $2M coverage; if you pull in $200k, double that. And so forth.

I've got several policies out there, a free one through my employer (pays 8x my salary), another one (discounted rates) through my employer's group plan, and another one I took out with SBLI.

Do a little homework and decide what kind of financial position you want your family to be in should you meet your demise.

Also, consider hiring a pro to do your will(s) and also a Living Will. We did. No Terry Schiavo for us. If you have complex (i.e. large) finances, talk to your lawyer about a trust. It will cost a few grand to set up. This is useful if you have young kids and if you and your spouse both go bye bye.

Lastly, I have a folder at home with red tape around it (think nuclear launch codes). It has copies of my will, living will, policies, Insurance companies' phone numbers, lawyer's contact info, our financial planner, bank info, etc. If I croak, my wife (or another family member on her behalf) will open that folder and 'activate'. You even put your funeral plans/wishes in there.

Two more things: designate an executor for your estate and make sure you document who/how you want your kids raised should you both go. This should go into your will.

Have a nice day!

[rdsmith3]

Once you decide how much coverage you want/need, just do comparison shopping for basic term insurance with a level premium for X years. X years might be until your kids are out of college, for example.

Do not get any sort of cash value or whole life type policies. It is a waste of money.

Go with an insurer that has a good credit rating from AM Best.

[yjleesvrr]

Find ye an insurance agent and cross reference with another to make sure you're getting accurate information.

[Shaman]

Wife works P/T by choice, she can not be a homemaker.

I make a moderate income for my chosen place of residence.
It is not even half of 100k, though I 'could' make more if I wanted to... standing job offers in other States.

We have no debt other than 80k on the house and 10 years left on the mortgage, and probably adding a 15k loan on a used car with 3 year loan.

Just off the top of my head.
Approximate Current Monthly Bills:
$1000: Mortgage
$ 800: Daycare(s)
$ 400: Utilities (electric, heat, internet, phone, cell, etc.)
$ 300: Food/Dining
$ 350: Car Loan (pending)

Known Incomes on death:
* Pension @ 30% of earnings for another 5 years then I pass another milestone and the rate goes up
* 30k death benefit

I do like the thought of turning the cash payout into sustainable income via dividends. Good thought, we're starting to cycle our savings into CDs.

Based on your formulary and knowing my wife would not move out of state so her SES would not change much... looks like $750 - $1M would be on the safe side. Would also provide some educational funds for kids as well.

So..

Term Life?
X years at Flat Rate?

[JCsman]

Term Life?
X years at Flat Rate?

Amen. I got a whole life policy when (even) young(er) and (even) stupid(er). A sucker play. I've got term now. Investing the difference would have generated a bunch more value over the long haul.

And the good news is term is getting cheaper all the time (folks living longer, I guess).

FWIW, I'd consider my first cut of what "X" should be to about when your little ones are out of school. So if they're pretty "new" like yours, I'd go at least 20 years.

And don't forget inflation when you figure the $ amount, although using Tony's figures with your 30% you should be good. Is your "pension" indexed? Over the long haul it makes a big difference.

I don't think anyone noted this, but a lot of folk don't consider disability insurance (no, not that danged Aflack duck stuff). Statistically you're more likely to be disabled while "young" than die. And few employers offer it as a benefit.

[rdsmith3]

One other thought --a young motorcyclist like you is more likely to die in an accident than by natural causes. So load up on the Accidental Death and Dismemberment coverage now. It is much cheaper than even term life, especially if you can get it through your job somehow. It not only pays a death benefit, but it also pays for loss of limbs.

[wncbmw]

Lots of good advice here that I agree with. As a young man, your needs are different than those of us approaching the empty nest and few debts.

I made the same mistake as Bill and also corrected it like him also. +1 on the term insurance. Keep it simple and from a good company. I now get term coverage through work for cheap.

Of course, I could give the smart a$$ answer, don't get too much insurance and make yourself more valuable dead than alive!

[Shaman]

Of course, I could give the smart a$$ answer, don't get too much insurance and make yourself more valuable dead than alive!