Bought a house this year w/ the wife, and decided we wanted enough life insurance to have it paid off.
Currently no children, but they are likely in the near future. Both of us work, I'm currently 35 and wife is 33, and we both work at the same company, at approximately the same income level, and split the mortgage and other monthly expenses 50/50.
The company's plan is structured such that the price goes up every 5 years, and is based on age. The ratio of annual premium to insured amount is 0.00117 for my age bracket, and 0.00104 for my wife (my bracket starts at 35, so she'll be at the higher rate in 2 years).
You can get from 1x to 5x current salary, and it requires a proof of insurability. It was explained that if you went with a 5x, but didn't "pass" the insurability form, that they could drop you to 3x or 4x...this doesn't make sense to me, especially since the monthly payment is exactly the same ratio at all levels, but that's how it was explained. We'd only be looking at going 2x anyway.
The wrinkle here is I have cancer in my family history, so I'm not sure whether I'll "pass" their form.
And an obvious problem with this plan is the rates go up every 5 years, and it's not term; it's only in effect while you're working.
I was working on getting some Term comps from http://www.accuquote.com and it looks like the work offered premiums fall right between the "preferred plus" for 30 year rate, and the "preferred" rate. Speaking with the rep, I'd probably be even lower at the "standard" rate due to the family history...expect, apparently, Voya and Prudential will ignore that. Voya also offers a premium payback plan on 30 year plans.
...need to do more research there.
I'm also not sure whether we need 20 or 30 years at this point; given that the goal is house pay off, 10 might even suffice, but I THINK it's better to go longer than you think you need, rather than adding a layer down the road when you're older.
Anyway...I'm not sure I have a specific question in there. Any ideas?
Also, is there a graph that shows trends in life insurance rates, both as you age, and through history?
I could play
Life Insurance options
Re: Life Insurance options
I think in general it is a bad idea to have your life insurance through your work. Since both of you work at the same company, your risk of being layed off at the same time are multiplied. So if one or both of you is layed off, or becomes disabled, there goes your life insurance. Also, I don't think just having enough life insurance to pay off the mortage is enough. I would consider 8-10 x annual salary, but it is very dependent on the individual . Without children, you could go with less, but since they are in the future, then not so much. 20 or thirty years is a personal decision, you should run the numbers for your personal situation. You will need to run the numbers, and see if you project that you will be able to self insure at that time. Another option would be two policys, say one for 1 million at 20 years, and another for 500k at 30 years. So at the 20 year mark, you are almost self insured but not quite, so you are able to cut back. (or vice versa with the 20 and 30 year amounts, depending on your projections). I did have some extra life insurance at work, but I considered it a supplement to my main life insurance, carried it because it was relatively cheap. Also, remember that the chances of you becoming disabled are a lot higher than death, so disability insurance is very important.
There are a lot of insurance calculators out there where you can put in your salary, debts, etc and they will tell you how much you need. Here is one:
http://finance.yahoo.com/calculator/insurance/ins01/
Mike
There are a lot of insurance calculators out there where you can put in your salary, debts, etc and they will tell you how much you need. Here is one:
http://finance.yahoo.com/calculator/insurance/ins01/
Mike
Re: Life Insurance options
I think that getting life insurance outside of your work is a better way to go. If you happen to change jobs, you don't lose your coverage. I also think it's worth paying a little extra to do business with a larger insurance company. Virtually all companies have a great "financial rating", but that does not mean that your insurance company won't get bought out by a larger competitor. You won't lose your coverage or have your premium changed on you, but that kind of thing can be a hassle. It sounds like your work insurance is something like a 5-year level term, then you re-buy a new term after 5 years. There's nothing inherently wrong with that, but you should know that your premiums will increase as you get older. If you were to buy a 20 year level term policy, your premiums would be level for 20 years.
Whether a 10, 20 or 30 year term is right for you is something you'll have to decide. Many people in your situation end up getting 20 year term policies. How much coverage you need is also something for you to work out. The amount should be able to pay off all debt, including a mortgage, and top off any child's 529 plan. On top of that, you should also consider an amount that replaces your income for at least a few years. The old "10x gross income" rule is not perfect and is a little high IMO, but it is a decent ball park first guess.
Whether a 10, 20 or 30 year term is right for you is something you'll have to decide. Many people in your situation end up getting 20 year term policies. How much coverage you need is also something for you to work out. The amount should be able to pay off all debt, including a mortgage, and top off any child's 529 plan. On top of that, you should also consider an amount that replaces your income for at least a few years. The old "10x gross income" rule is not perfect and is a little high IMO, but it is a decent ball park first guess.
Even a stopped clock is right twice a day.
Re: Life Insurance options
Here is the history of life insurance for 40 yr olds:
http://www.term4sale.com/ratehistory.php
and by age:
https://www.jrcinsurancegroup.com/life- ... es-by-age/
Of course it goes up every year, but You can see it really jumps when you reach 50.
Mike
http://www.term4sale.com/ratehistory.php
and by age:
https://www.jrcinsurancegroup.com/life- ... es-by-age/
Of course it goes up every year, but You can see it really jumps when you reach 50.
Mike
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Re: Life Insurance options
Some companies are more competitive with family history of cancer than others.
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Re: Life Insurance options
Was in your situation before we had kids, and did it in increments.batpot wrote:Bought a house this year w/ the wife, and decided we wanted enough life insurance to have it paid off.
Currently no children, but they are likely in the near future.
The first term life we took out was for 30y, enough to pay off the mortgage. After kid #1 and #2 I took out a second term life policy about 5 years later as a 20y policy.
Way back then I used Select Quote that I see is still in business.
Since I was in the super-preferred category (or whatever that is called, as a non-smoker with normal BMI) the rate didn't change very much between age 37 30y term and age 43 20y term.
There are 'rules of thumb' but many people's circumstances are different; I ended up with a number that paid off the mortgage + gave enough total assets for the spouse and dependents to live off of indefinitely.
Re: Life Insurance options
I also have family history of cancer. I got term LI from http://www.Amica.com, and found their rates to be about 33% less than what I found on term4sale.com. Amica said they don't care about cancer as long as the relative remained alive at age 65. Also, Amica's policies increase by inflation for face values up to $1M.batpot wrote: The wrinkle here is I have cancer in my family history, so I'm not sure whether I'll "pass" their form.
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Voya also offers a premium payback plan on 30 year plans.
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I'm also not sure whether we need 20 or 30 years at this point; given that the goal is house pay off, 10 might even suffice, but I THINK it's better to go longer than you think you need, rather than adding a layer down the road when you're older.
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Premium payback is just an another version of cash value LI. It's a bad investment, and makes the insurance more expensive. Buy term and invest the rest, IMO.
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I staggered my insurance into 4 chunks, 10, 15, 20 and 25 year to reflect my plan of decreasing unfunded liabilities (eg, as the mortgage goes down you need less insurance to pay it off). Combined with Amica's inflation adjustment I think this makes for a good liability matching insurance plan.
Re: Life Insurance options
Thanks for these!mhalley wrote:Here is the history of life insurance for 40 yr olds:
http://www.term4sale.com/ratehistory.php
and by age:
https://www.jrcinsurancegroup.com/life- ... es-by-age/
Of course it goes up every year, but You can see it really jumps when you reach 50.
Mike
Thanks; I figured the premium buy back was not a good deal, but haven't run the numbers yet.Anon1234 wrote: I also have family history of cancer. I got term LI from http://www.Amica.com, and found their rates to be about 33% less than what I found on term4sale.com. Amica said they don't care about cancer as long as the relative remained alive at age 65. Also, Amica's policies increase by inflation for face values up to $1M.
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Premium payback is just an another version of cash value LI. It's a bad investment, and makes the insurance more expensive. Buy term and invest the rest, IMO.
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I staggered my insurance into 4 chunks, 10, 15, 20 and 25 year to reflect my plan of decreasing unfunded liabilities (eg, as the mortgage goes down you need less insurance to pay it off). Combined with Amica's inflation adjustment I think this makes for a good liability matching insurance plan.
For me, Amica is way higher than either Voya or Prudential. The latter have a category for 1 vs 2 family members with a history, and use the age of 60; Amica makes no distinction between 1 vs 2.
Not sure if any other companies make this distinction.
I think Layering may be the way to go, too; there is a small penalty for multiple policies, but not enough to make a large long term worth it.