Getting real life insurance now that we're expecting our first child - advice from people who know life insurance?

[Anonymous]

My husband and I are expecting our first child in October, so we are looking into getting real life insurance. Up until this point we both just had the basic 1x or 2x salary coverage that our employers provide at no additional cost to us.

Based on my research so far, I am considering a Guaranteed Convertible 30 year term life insurance policy which I think, assuming the underwriting goes as expected, I can get at a preferred rate of $700 a year for $1 million of coverage should I die within the 30 year term. My husband's will likely be at a less great annual rate due to some family history and the fact that he is a male but with the same $1 million for coverage. Our only debt is our mortgage - we're on year 5 of a 30 year mortgage on a $520K house with 3% interest. These policies won't set the surviving spouse up for life by any means, but our hope is that they are enough to pay off any remaining mortgage and leave the beneficiary with some options should the worst happen.

I know so much of this is dependent on tons of different financial factors, but does this generally seem like a good plan/policy set up? Any advice or other things we should consider? Thanks in advance.

[Anonymous]

Term life insurance. Make it graduated. You may need more insurance for the early years but as you build up your assets, and cross some expensive milestones, your requirement for insurance will decrease.

My 2 cents - in early years, my DH bought huge amount of insurance so that if something happened to him (he is sole breadwinner), I would never have to go back to work. He calculated my retirement, college for kids, weddings of kids, standard of living, long term care, medical needs, therapy, even foreign vacations that I might take as a merry widow to come up with the amount.

[Anonymous]

I think they generally recommend 7 years of insurance. One thing I would think about is whether you intend to have more children. We got one policy in our early 30s when we had our first, but by the time we had our third in our late 30s, we were worried there wasn’t enough money or enough time left in the first policy. But it was a lot more expensive to add more in our late thirties.
Also try to get the exam before you are too pregnant or wait until way post partum. They came to weigh me and I was post partum after 10 weeks of bed rest, so yeah, I weighed in at an obese level. I couldn’t believe they didn’t adjust for that. I managed to talk them into giving me a second weigh in 6 months later, but the guy acted like he was doing me a major favor in erasing the first weight — he said they weren’t really allowed to do that.

[Anonymous]

7-10x your income plus enough to pay off debts less any assets already accumulated. Level premium term for 20-25 years is usually sufficient

[Anonymous]

How much would survivor's benefits be? Those were enough to set us up for life as I have great money skills. Work on those for your family's benefits and add the term life insurance. Over long run, they are far more beneficial as I have to know how to invest his inheritance.
We are no even bothering with collecting the life insurance from the company until the kid is 18.

[Anonymous]

We did term life for 20 years when first kid was born. Well when I was pregnant. For $1M for each of us. Enough to pay off the house so the surviving spouse doesn't have to worry about it. We did not up it with the second kid.

[Anonymous]

Is 1 million 7 to 10x your income?

[Anonymous]

Anonymous wrote:Term life insurance. Make it graduated. You may need more insurance for the early years but as you build up your assets, and cross some expensive milestones, your requirement for insurance will decrease.

My 2 cents - in early years, my DH bought huge amount of insurance so that if something happened to him (he is sole breadwinner), I would never have to go back to work. He calculated my retirement, college for kids, weddings of kids, standard of living, long term care, medical needs, therapy, even foreign vacations that I might take as a merry widow to come up with the amount.

That is an excellent plan. Also, even if you have two earners in the household, think about it, if one parent dies, the other might want/need to take 6-9 months off or go part time to manage the kids and grief. It would be nice to have enough insurance for that situation as well.

But everyone should have enough to cover college for all future kids and payoff the home, IMO. Plus a bit more. that would allow the surviving spouse to manage life without huge changes. The last thing you want is for a parent/spouse to die and be forced to move in order to afford life.

[Anonymous]

We did about seven times annual income and made it 20 years.

Our lawyer's advice was to always get at least a million. But that was 15 years ago, so, you know, inflation.

[Anonymous]

We did 5 million.

[Anonymous]

We did 1 million each for 20 year term. Enough to pay off mortgage plus kids college. The timeframe of 20 years was chosen because we assume kids will be independent or near independence in 20 years. Both of us work and our incomes contribute equally to hhi. If you have only one spouse working and that spouse does, the other spouse would need more I would think but that wasn’t our situation. We had to get a health check up. Cost is 27/month for me and 100/month for Dh (he is older than me plus has a health condition that dinged him)

[Anonymous]

Many insurance companies will go out of business in less than 30 years. What happens to your "investment" in the plan then?

[Anonymous]

We did 20 yr term insurance of 1 m each that would take us to ages 56 and 62.

[Anonymous]

By means of background, I'm an expert in the insurance space.

the amount. $1M is probably not enough. You need to assume what you would do if your spouse died. Do you depend on his income. If yes, you need to replace it. If he makes $100K/ year, you need to replace it at least until your child goes to college. So if that is 20 years, you need $2M minimum on him. Some people chose to also provide enough to pay off an existing mortgage. That would be on top. I don't know your income, but for many DCUMers, $1M is nowhere near enough. For some $5M is not enough.

Second, the type. Term. Do not buy anything else. Convertible is meaningless. It doesn't make sense to convert unless you should have a terminal illness with expected death in the year after it would otherwise lapse.

Third, term. 20 years. Assuming that you plan to save for college and retirement, you DC will be in college by that point and you won't have a need for insurance any longer. I don't disagree with some of the commentary that you might not need 20 years on the full amount. But, you might. I would really have to know the income and income trajectory for each of you, as well as how much you save annually.

Health. Buy what you need, not what you can afford. If you DH has inferior health, buy it anyway. But have him work on it. You can reapply next year and literally every year thereafter as his health improves and replace the existing policy with a better priced one.

From whom. Whomever has the best credit ratings and is cheapest. There are dozens of companies with the top credit rating. After that, go with the cheapest, even if you've never heard of them.

[Anonymous]

We did 800k return of premium 20 year plans with State Farm and some cheaper term options through my work to get to 1 mil almost a parent. Our thought was hopefully we croak after the 20 year term and our DC would have our retirement accounts (if we croaked after 20 years) and we’d get 20k+ in our premiums returned to help toward college or grad school or whatever. Congrats on your baby!