Can anyone educate me on Life Insurance? So my current employer covers me on 90k for life insurance at no cost to me. I'd like to get more coverage, but not sure what I'm looking for or what to avoid. Anyone want to give me some guidance? I've got a stay at home wife and a kid and will most likely have another in the next year or two. I want to make sure if something happens to me they aren't left in a bad spot. Any thoughts?
Get enough so that your wife and child can live comfortably the rest of their lives... ...or at least until she can find someone else. Get term life.
I would make sure to at least have enough to pay off the mortgage on your home, anything over that is icing on the cake.
Get term life at least all of your debt + living expenses for quite a while. Forget the traditional savings type life insurance. Sure you get something back at the end but you also are paying in a lot more. We bought term life till we are 55 years old if I recall. The kids will be out of the house and we will be debt free by then. No reason to spend the extra money on traditional life IMO. Lastly use the life insurance as a safety net, not as a retirement savings account.
Get term life insurance. You'll have to try to estimate expenses and factor in what she can earn and whether she would be going to school to learn job skills, etc. You should also decide who will take care of your kids if you both go together. It happens. My husband is noticeably older than I, so these are topics we have had to discuss from the beginning of our relationship. Life insurance is not an investment. It's not a retirement plan. You want term insurance. You are betting the insurance company that you will die during the policy term. The company is betting that you will live. You should also have insurance on your wife. If you should lose her, much of what she now does as a wife and mother, you will have to pay to have done.
Buy term life to cover debt and leave your family in great shape financially. Do the math, it takes A LOT! You can also buy some permanent coverage for long-term estate planning etc. if necessary. Rates are historically low. One of my companies is lowering their term rates again in November. Send me a PM if you want to know more. I would be glad to give you the straight scoop. Not to worry, I am not licensed to sell life insurance in Illinois so it will be no pressure! lol In my opinion, Long Term Care insurance is probably equally important. I have seen many estates wiped out by the cost of manged care. Over half of us will end up in managed care of some kind. Some of us for a long time. Look up the costs for care, it will shock you. If you have assets to protect, its important. If you are very wealthy or have a small amount of assets, its not that important. Unless, you want to protect the wealth to create a legacy for others.
I don't know much about it other than my $250k policy costs me $14 a month for as long as I keep paying it (automatic debit so until I cancel it). My school loans were switched from Uncle Sam charging me 7.9% to a mortgage against rental properties in my parents names at 4% flat. While it saves me literally THOUSANDS a year in interest, it also leaves the burden on them should I get runover tomorrow. Soon as I pay it off (3-4 years from now) I'll cancel the policy.
I love Fletch ...but NEVER ..I repeat ..NEVER use life insurance as an investment ...biggest rip off out there Listen to what everyone else says and get TERM ...you are young...you could get 750k relatively cheap...
Another voice for Term Insurance. whole life & Universal is BS and a total scam. Invest on your own and get your home and cars paid off. You don't want your wife to be hurting if you die but you don't need to make her a lottery winner either by paying to much money for something that will never happen, most likely. That's why insurance co are so wealthy. They scare the hell out of us with the "what if:-(".
Read it again Tony. I never once said to use it as an investment. Life insurance should not be sold as such. But, there are plenty of circumstances that call for permanent insurance. I said estate planning, not estate building. Permanent insurance is great for passing on to your church, children, college, etc, the (farm, cash, property, etc.) that you have worked your entire life to accumulate. The proceeds from life insurance will pass along tax free if set up correctly. Family farms are saved by permanent life insurance. The children can use the proceeds from the life insurance to pay the inheritance taxes so they dont have to sell off any of the ground. Term insurance does you no good if you are diagnosed with a serious illness and your term runs out before you do. At that point, you are simply uninsurable and may still have a need for insurance. Not all permanent insurance is top heavy on expenses. I have one that is several hundred thousand dollars and cost me less than $80 a month. It builds little cash value, because I dont want it to. I just want the permanent insurance so the proceeds will go to my kids to pay estate taxes etc. By the way, if I want to dump more money into it I can and right now it is earning 4% interest. Beats the heck out of my savings account. But again, that is not why I have it. There are horrible permanent insurance policies, and there are great permanent insurance policies. Same goes for term plans.
Below echos my thoughts... Cash value life insurance is one of the worst financial products available. Sadly, over 70% of the life insurance policies sold today are cash value policies. A cash value policy is an insurance product that packages insurance and savings together. Do not invest money in life insurance; the returns are horrible. Your insurance person will show you wonderful projections, but none of these policies perform as projected. [h=2]Example of Cash Value[/h]If a 30-year-old man has $100 per month to spend on life insurance and shops the top five cash value companies, he will find he can purchase an average of $125,000 in insurance for his family. The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100. WOW! If he goes with the cash value option, the other $93 per month should be in savings, right? Well, not really; you see, there are expenses. Expenses? How much? All of the $93 per month disappears in commissions and expenses for the first three years. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger's Personal Finance andFortune magazines. The same mutual funds outside of the policy average 12%. [h=2]The Hidden Catch[/h]Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years don't go to your family upon your death. The only benefit paid to your family is the face value of the policy, the $125,000 in our example. The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after three years you would have $3,000, and when you died your family would get your savings. [h=2]A Better Plan[/h]If you get debt free, you will begin investing well. Then, when you are 57 years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds, you'll become self-insured. That means when your 20-year term is up, you shouldn't need life insurance at all—because with no kids to feed, no house payment and $700,000, your spouse will just have to suffer through if you die without insurance. Don't do cash value insurance! Buy term and invest the difference.
Tony, you are lumping all permanent life insurance into one "cash value" style. You, like many, dont understand that there are many types of permanent life insurance. They dont have to build cash value and they serve a very important purpose when needed. There are permanent plans that build no cash value and are funded much like a term policy, but you can keep it until the day you die. For some, it is a good option. Many times, permanent insurance is needed to fund buy/sell agreements, estates, and the list goes on. Term is the perfect option for debt and for getting kids to adult age. But to lump all permanent life insurance into one category is ignorance. Many of the investment guru's that preach "buy term and invest the difference", have permanent life insurance. Those that build enough wealth to exceed the estate tax inheritance limit, buy permanent insurance. Often, the life policy is owned by a trust. Believe me, there is a good reason why the wealthy purchase permanent life insurance. Its not for an investment. I bought each of my sons $100,000 of permanent life insurance. It cost very little and will be paid up when I hand it over to them. Nobody can ever take that away. If one of them gets diabetes or any other illness that may make it impossible or cost prohibitive to ever get life insurance, they still have an option of increasing the face amount of this policy without being underwritten. Lets say a 25 year old man that just started a family, goes out and buys $250K of 15 year term......, what does his family do if he is diagnosed with a terminal illness at age 40?? It happens. Now, he has zero life insurance and will leave his family in a pretty crappy spot considering the child has not even made it through highschool, not to mention college. Believe me, I have seen first hand, people that wish they had never listened to some of the investment gurus advice on life insurance. Again, permanent life insurance will do things that term never can. By the way, I probably sell at least 10 term policies to every permanent plan. My motives are in no way greed induced. I simply use the proper instrument to fill the need. Also, that 70% figure you quoted is total bs. Not even close. The guru (Dave Ramsey) that wrote that is full of crap. Term far and away outsells the rest. It is a more common need to cover mortgages, etc. Keep in mind that Dave Ramsey is paid a lot of money by a company (Zander) that sells term life insurance.
Bingo, you will want term life insurance at 10x your income. Next, what term? Well there are only a few to choose from. The key to this is investment. You are only doing term so that you can get out of debt and invest greatly. Maybe after 15 years your investments will be so that you do not need life insurance. Then you can take that money and put it investing. This guy knows his stuff and has a lot of info on insurance: Dave Ramsey Homepage - daveramsey.com
There are HUNDREDS of term policies to choose from. I can write for over 30 companies myself. Each of them has several different term policy designs. Is that just a few to choose from? Dave Ramsey is motivated by the almighty dollar and his ties to Zander insurance. He gives terrible advice on life insurance. I would be very surprised of Dave Ramsey does not have an estate plan set up with a trust that holds some permanent life isurance.
For the Ramsey followers.....please Google, "Ten things Dave Ramsey got wrong". You will quickly see that there are a LOT of things that he knows little about, but acts as if he does. Suze Orman is just as bad, actually worse. These people mix in a lot of misguided information with their good advice. Do not trust them to know everything that they profess. They are radio personalities that make money from their show and ancillary products. That does not make them any smarter than you or I when it comes to investing or finance. Do your own research and think for yourself. By the way, I listen to the Dave Ramsey show and he does give some good advice. But, he also makes some serious mistakes. That's why he has a disclaimer that says no warranty on ANY information in his show or on his website.