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Life insurance question?
My husband and I are looking into purchasing life insurance, and I'd like to get some input. (Although I give a lot of answers in the insurance category for other types of insurance, I don't have much of a life insurance background.)
Here's our situation - both of us are in our early 30s, nonsmokers, and relatively healthy. We have 2 preschool aged children.
My goal is basically to have some security for our children through adulthood/college if something were to happen to one or both of us.
I'm thinking that a term policy would likely meet our needs, but welcome any suggestions/input. Thanks for your help!
(I did contact the agent who handles our home/auto insurance for a quote and advice, but I probably won't hear back until after the weekend. Thought it couldn't hurt to get more input here.)
To start off, there is basically two kinds of life insurance you should know about. The first type is a life insurance that builds cash value. The second type is pure life insurance that doesn't build cash value such as your car insurance or health insurance.
Here is the facts about cash value life insurance:
1) They are known as whole life, universal life, variable life, or a mixture of those words together such as Variable Universal Life.
2) They are permanent policies that provides coverage up to around the age of 100.
3) They build cash value. The cash value is sometimes mis-interpreted as "investments" or "emergency fund" or "retirement fund" or "college fund." Cash value is basically a tax-deferred savings which you can borrow against. It grows tax-deferred because the total amount of premiums you pay is greater than the value of your cash value.
4) No cash value is accumulated during the first two years of the policy. After that, it grows from 1% to 4%.
5) If you wish to take money out from the cash value, you have to borrow it and pay loan interest of 6-8%.
6) If you die, the cash value is generally kept by the insurance company. Your death benefit will be reduced by any missed premiums and/or any loans taken from the cash value.
7) Cash value life insurance is expensive to have.
Here is the fact about life insurance that doesn't build cash value:
1) It is called term insurance.
2) It is less expensive than life insurance that builds cash value.
3) Premiums remain level for certain period (either 1 year, 5 year, 10 year, 15 year, 20 year, 25 year, 30 year, or 35 year).
4) Most term policies are guaranteed renewable. That means, when the initial level term expires, you can renew it without having to provide proof of insurability.
5) Term policies are convertible into whole life, universal life, or into another term policy (you need to check with the insurance company to see what their term life policies are able to convert into).
Some tips when buying life insurance:
1) Check the financial strength of the company.
1) Find out what you want and stick with it. Its like going to the car dealership and knowing what kind of car you want to buy. Before meeting with a life insurance agent, you should stick to your plan of getting term insurance (at least a 20 year level term)
2) Buy one life policy for the whole household. Don't let the agent sell individual policies per person. That's like getting different auto insurance policies on all your cars. The agent should be able to add spouse riders and child riders to your life policy. If he/she can't, you need to find another company.
3) Find out how much coverage you need. General guidelines is 8 to 12 times your annual gross income. If you make $40k annually, then you need coverage of around $400,000.
Personally, I own a 30 year term insurance through Primerica Financial Services. I also open my Roth IRA there as well. They can cover all areas of your financial needs such as saving for retirement, setting up a college fund for the kids, eliminating debt, and saving for other goals.
Term insurance is the way to go. Insurance agents will try to talk you into an annuity or whole life at a very high price. You can do better investing on your own and insuring your lives with term policies.
Term insurance is best. You don't want to use life insurance as an investment.
Each of you separately needs a policy worth about 10 years income.
If you're a stay-at-home mom, then you need a policy to pay for day care and baby sitters.
The money from the policy needs to be invested in the stock market, so that the gains made in the market will allow you to "live off the interest".
If you're not going to put the money in the stock market (and it goes in the bank instead), then you're looking at needing a policy worth 20-25 years income.
In your situation a 20-30 year term product would meet the needs and goals that you have set. Remember to put both you and your husband on the same policy to save policy fees.
I would suggest at least 10-12 times your annual salaries in order to replace your income. If you take less than that amount and something were to happen in the next couple years, it would leave a deficit in your income and the money would be depleted too soon.
First off, most insurance agents that provide property insurance typically know very little when it comes estate planning needs such as yours. You should speak to an agent that specializes in what you need.
With that said, a mixture of insurance is most likely the solution for you and your family. At your age you need to come up with the proper amount of insurance (typically 8-12 times annual income). The mixture should be part term and part perm. A Universal lIfe policy cost more that term, but it builds a significant amount of cash value that is guaranteed, and is tax free. If anyone has another place to put my money that gains interest without taxation for my hiers or for them let me know. Anyone who tells you that you can buy term and invest the difference does not have a successful investment portfolio. The key is to do both. The insurance will protect your hiers from tax liablities. Also,the cash value will be there for you to borrow against (without having to pay it back and tax free) sould you are your spouse face a serious illness or injury which can quickly change your financial situation.
Let's say the amount of life insurance you need is $1mil. It should be split as $750k term and $250k universal. Make sure the term has conversion provison that allows you to turn it into a perm policy without going through a health exam. We never know atwhat point in our life we become uninsurable. The younger you are the more insurance you should buy. Most people try to buy insurance when the get older and end up paying through the nose.
The best thing for you to do is sit down with a agent and get all the facts in writing.
Check the new book by Ric Edelman. One of the chapters explains all about whole life products. The two links also explain about whole life products.
That being said, it seems as tho you and your husband are pretty good setting yourselves up. You should have an agent provide you with a full and complimentary financial inventory thus far in your lives. This will provide you and your agent a clear picture as to what is going on and what you require for insurance.
Be sure that the term policy you get is a Level term policy- doesn't matter the length of the term, your premiums won't go up. Be sure both you and your husband are on one policy and that the policy is renewable without converting to perm and without a health exam. Also, since you have children.consider adding a single child rider to cover funeral expenses should the worst happen 10-15k. The amount you are looking at is approximately combined 12 month income times 10. That way the claim is put into a mutual fund earning 10% interest, the interest being enough to cover all expenses for your yearly income.
I recommend a DIMES worth of Insurance
D Death ( final expense funds)
I Income Replacement generally 5-10 years
M Mortgage Expense ( enough to pay off mortgage)
E Expenses ( Any other Debts)
S Savings 3-6 months of income so you have time to grieve.
The only permanent need is Death the other can be covered by temporary or term coverage. If you have other financial products they may cover your final expenses and you may not need permanent or whole life or UL policy. My believe that insurance is insurance and investments investments and never try to make money from insurance to cover provide finances for my future. Final expense once again can be covered by your investments if they are self sustaining. IF not you should consider at some point purchasing a final expense plan also. Good Luck and thank for the question.
You should meet with at least 2 or 3 experts in the field and make your own judgments. This is a very important decision and should be made by you directly. Meet with a least 2 people.... Get a recommendation from a friend or family member and do what feels right. Everyone has a different risk tolerance and a different expectation. Good luck!
you can get one by one answerbat the site http://wwwinsuranceplan4u.com
Maybe You should try to google it first ,nonetheless, if you prefer some direct resource ,here might be helpful.http://lifeinsurance.online-helpers.info...
You should have a mix of both term and whole life.
Avoid "one trick pony" companies that strictly offer one product type (IE: "Buy Term and invest the rest" companies or agent that strictly promote U/L policies as a one size fits all). Make sure the agent can critically analyze your situation and recomend a solid solution for each situation.
Term insurance is used for the temporary needs (IE: paying out the mortgage/debts, paying for your childrens child care and making sure they can afford post secondary education and a decent living standard). The flaw with Term is, it gets very expensive as you get older and it will exprire ussually around age 80. For this reason, term insurance is not a long term solution to insurance needs.
Whole Life is used for perminant needs that will never go away (IE: Funeral Expenses, taxes, legal fees) whether you die tomorrow or 50 years from now.
General rule of thumb...if the need for the insurance money will go away within 20 years or less, buy term. IF the need will not go away after 20 years, buy whole life.
From my experience, most people in your situation would take out roughly $500,000 of term (mortgage+cost of child care for roughly 10-12 years+cost of post secondary+a little extra to make sure they aren't starving) and $50,000-$100,000 of while life (Funeral expenses+legal fees+taxes=roughly $25,000 in today's dollars...factor in inflation over the next 40-50 year to your age 80 and you're in the ball park). If you google search "Life Insurance Needs Analysis" you should find a whole swarm of calulators that will help you roughly figure out what you will need. A good licensed agent would be best at figuring this out though.
Considering your age, a critical illness policy would be a good idea as well if it's available in your area. Odds of being diagnosed with a critical illness at younger ages are increasing so it's good to be covered if something happens.
Many people think term life is best. They argue that life insurance is useful only for a specific period in life: those twenty to thirty years when a person is married with children living at home. They assume that once the children are grown, the surviving spouse will be able to support himself or herself on a single income. These people believe term life insurance, which provides coverage for a specified number of years, provides all the protection you need.
Others are not so optimistic. What happens if the surviving spouse becomes disabled? A disabled person will not be able to support himself or herself if the breadwinner dies. Similarly, a child may become disabled and unable to move out and support himself or herself like other children. With a disabled adult child living at home, the surviving spouse might not be able to meet all the expenses on his or her own.
It is possible for an older person to buy a new term policy, of course. The problem is that insurability is not guaranteed. If a person is overweight, in poor health, or has had a serious illness, such as cancer, insurance companies can and will deny coverage. Even in ideal health, or if the person has a renewable term life policy that does not require a physical exam, a person will pay much more for term life over the age of 50 than he or she would have earlier, erasing some or all of the savings realized during the term of the first policy. Permanent life insurance—such as whole life or universal life—will not expire and the payments will not go up based on the health, weight, or age of the insured. Permanent life insurance costs more initially, but it is a practical solution for consumers who worry about coverage and insurability later in life.
Why not discuss this with an insurance broker. A broker works with several companies and can find the best coverage and price for you. It will save you tons of time in research. To find a broker in your area, log onto a website like http://www.lifeinsurancewiz.com and fill out a form requesting a free quote.