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Term Insurance Questions

Posted: Sun Mar 27, 2016 7:26 pm
by Cras108er
I have a $700k 20 Year level Term policy I bought about ten years ago (at age 45). I am a male in good shape, with no known medical conditions (family history of heart disease, cancer, and diabetes). I pay $1200 per year for it. I also have $200k insurance through work. I have two questions:

Does this price seem reasonable. It was SOLD to me by a previous FA. In light of other tungsten I have found out about my portfolio, I wonder who is really benefiting from the policy. He seems very vested in me keeping it - even though I have moved everything else to Vanguard.

Is it worth keeping? We recently payed our house off. Both myself and my wife make good salaries (about $200k per year combined. We have no other debt, and live comfortably on about 40% of our salary. Realistically, if something were to happen to me, my wife could probably live on less.

We're 55/51 respectively and are looking at retirement in < 5 years. Would you keep the policy for the next ten years? Thanks!

Re: Term Insurance Questions

Posted: Sun Mar 27, 2016 7:42 pm
by clydewolf
Are there any children at home or in college or special needs?
How strong is your retirement savings?
Any one of those may be a good reason for the term policy. But you may be able to get that for less, you can google "Term Life Insurance Quotes" and receive many many hits.

Do you need $700,000 of insurance? Probably not.

Tell your FA you can not afford that policy and see what is recommended.

Re: Term Insurance Questions

Posted: Sun Mar 27, 2016 7:46 pm
by neuro84
I ran your numbers in the calculator here - http://www.terminsurancebrokers.com/ins ... ance-quote

A 10-year level term policy for a healthy male born in 1960 (roughly equivalent to the one you have now, since it has about 10 years left) runs around $1200/yr. So that price is about right.

Refer to above post regarding whether or not you actually need life insurance.

Re: Term Insurance Questions

Posted: Sun Mar 27, 2016 7:58 pm
by Cras108er
clydewolf wrote:Are there any children at home or in college or special needs?
How strong is your retirement savings?
Any one of those may be a good reason for the term policy. But you may be able to get that for less, you can google "Term Life Insurance Quotes" and receive many many hits.

Do you need $700,000 of insurance? Probably not.

Tell your FA you can not afford that policy and see what is recommended.
No kids at home and good retirement savings. Realistically, my wife would be fine without it, although she certainly wouldn't turn it down. Just thinking about necessary and unnecessary expenses.

Re: Term Insurance Questions

Posted: Sun Mar 27, 2016 9:23 pm
by AllenSmith
neuro84 wrote:I ran your numbers in the calculator here - http://www.terminsurancebrokers.com/ins ... ance-quote

A 10-year level term policy for a healthy male born in 1960 (roughly equivalent to the one you have now, since it has about 10 years left) runs around $1200/yr. So that price is about right.

Refer to above post regarding whether or not you actually need life insurance.
Which means you overpaid for your policy (a 20 year policy that covers this next 10 years + the past 10 years which presumably had a lower mortality rate). I know there are other variables too, but you probably overpaid slightly bc of your FA. I made this mistake as well.

I have a ~$2mm 30-year term policy for a "super preferred" health rating on a 30-35 year old male. I pay slightly under $1400 (which includes a yearly cut for my former FA)

Re: Term Insurance Questions

Posted: Mon Mar 28, 2016 12:02 am
by mephistophles
Suggest you and your wife sit down and discuss this. After that, wait awhile then discuss it again. It should be a mutual decision you are both
comfortable with.
ole meph

Re: Term Insurance Questions

Posted: Mon Mar 28, 2016 6:33 am
by lhl12
AllenSmith wrote:
neuro84 wrote:I ran your numbers in the calculator here - http://www.terminsurancebrokers.com/ins ... ance-quote

A 10-year level term policy for a healthy male born in 1960 (roughly equivalent to the one you have now, since it has about 10 years left) runs around $1200/yr. So that price is about right.

Refer to above post regarding whether or not you actually need life insurance.
Which means you overpaid for your policy (a 20 year policy that covers this next 10 years + the past 10 years which presumably had a lower mortality rate). I know there are other variables too, but you probably overpaid slightly bc of your FA.
Exactly. If you had bought the cheapest available 20 year term policy ten years ago then your current policy should be cheaper today than any 10 year policy you could buy today. The fact that a current ten year policy costs the same as the second half of your 20 year policy implies that your FA got a higher commission than he "should" have.

Ordinarily, the second half of a 20 year policy should be attractively priced such that it's worth keeping economically. Since yours provides no such benefit, it it equivalent to buying a brand new 10 year policy today. If that is correct (you should check the premium numbers for yourself) then I would get rid of the policy if you have no further need for it.