Voluntary life insurance - how much?

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2m2037
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Voluntary life insurance - how much?

Post by 2m2037 »

It's open enrollment period at work and we have the option of purchasing voluntary life insurance at $0.79/month for $10K coverage all the way up to $59.25/month for $750K coverage.

How much would you choose and why? What factors would you consider when making your decision?
N10sive
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Re: Voluntary life insurance - how much?

Post by N10sive »

Factors should include if you have dependents relying on your salary, how financially secure you are, what your current salary is, etc.

BTW I think most people would advise to purchase life insurance through an independent company and not through your work. Unless in this case since you are paying some of it, (and possibly being subsidized by your company) it may or may not follow you if you leave your company. If it does the rates could go up. Something to look into.
texas lawdog
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Re: Voluntary life insurance - how much?

Post by texas lawdog »

I considered purchase of life insurance many years ago thru my employer, but decided against it because if I ever left the company there would be a question of renewability and rates. You are probably pushing against a time deadline, since most employers only give you a couple weeks to lock in benefits for next year, but think you should shop a 3rd party and get a straight term policy that lets you lock in rates.
Radd
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Re: Voluntary life insurance - how much?

Post by Radd »

Many different factors to consider. Do you have life insurance outside of work? Are you married, do you have kids, carry debt etc. Are you healthy enough to go to a carrier and get a policy?
Typically I tell most people to carry the majority of your life insurance outside of your employer unless you have adverse health conditions. In the event you separate from service the life insurance may not be portable and if it is may be very expensive. Radd
random_walker_77
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Re: Voluntary life insurance - how much?

Post by random_walker_77 »

I think there's three parts:

Part 1, Do I need life insurance?
a) Do I have obligations should I die early? Spouse, kids, debts that I actually care to repay. An example of the latter could be student loans cosigned by your parents -- with private student loans, cosigners can be liable if you die.
b) If not, might I need it in the near future? If so, it might be worth going through underwriting now, while you're in good health, as insurance against a health surprise that makes you ineligible for the best rates. This applies more for private life insurance, but even w/ employer insurance, sometimes they'll ask for some tests before accepting you.

Part 2, Is it worth getting it from my employer?
a) If you're healthy, or young, it's almost certainly going to be cheaper to get it on the open market. The employer insurance is primarily for those who can't get a good market rate, hence it's going to be cheaper for most to not go through the employer. Check term4sale.com
b) Lack of portability. If you change employers, you can't take the policy with you. If you stop working (for example, you're terminally ill and don't want to work until the bitter end), you also probably lose your insurance right when you're about to make a claim on it. :( In reality, you'll possibly be able to continue the policy for a period of time, paying a higher rate, but you'd want to check the specific language in the policy.
c) Related to lack of portability, if you switch employers, your health might have gotten worse, making you ineligible for a new policy at reasonable rates.

Check term4sale.com, and if it's cheaper there, you should buy term life insurance on your own. Even if it's a little more expensive, the portability probably makes it worth buying on your own. If it's a lot more expensive, then go w/ employer insurance.

Part 3, If I need it, how much do I buy?
see part 1. Does your spouse work? How much is left on the mortgage?
How many kids do you have, and how old are they? Do they have special needs? What are the plans for paying for their care and education? How is your spouse going to manage taking care of the family after you pass? Do you need to support anyone else, such as aging parents?
deikel
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Re: Voluntary life insurance - how much?

Post by deikel »

Quite frankly, I would not buy any extra insurance through my workplace because the insurance will go away if I were to leave or be terminated, whereas a privately paid insurance stays in place until I don't pay or it runs out.

Your rate also does not sound THAT attractive compared to private term insurance.

As to the amount of the insurance, it is usually a surprise to people to learn that the non-higher earner (which tends to stay with the kids at home if those are around) should be insured higher (!) than the actual bread winner. Why ? Because its a lot more expensive to replace 24/7 care for kids than it is to replace a bread winners income....just food for thought.

Personally we went through the mental exercise to guess the needed money over 15 yrs after each respective death (quite interesting exercise actually) and come up with a rough number needed to cover. Than added an amount to cover some more, but it was less than a lottery win or a ticket to never work again for the rest of the remaining life...this ended to be 500/750k, which was to be had cheaply and without medical exam.

As we are aging, this amount is actually higher than would be needed right this second, even considering inflation and will eventually become obsolete once some form of financial independence is reached...at which point the insurance becomes an expensive lottery ticket and would be dropped.
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letsgobobby
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Re: Voluntary life insurance - how much?

Post by letsgobobby »

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random_walker_77
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Re: Voluntary life insurance - how much?

Post by random_walker_77 »

letsgobobby wrote: Sat Nov 18, 2017 12:39 am
2m2037 wrote: Fri Nov 17, 2017 5:38 pm It's open enrollment period at work and we have the option of purchasing voluntary life insurance at $0.79/month for $10K coverage all the way up to $59.25/month for $750K coverage.

How much would you choose and why? What factors would you consider when making your decision?
Unless you are old, sick, or both, that is very expensive insurance so I would not buy any.

You can probably buy $1,000,000 of 15 year term insurance for half as much, if you are around 40 years old.
As a point of reference, I've got about 8 years left on my 15 yr term life insurance, and my rate was/is $280 per year for $1M. My wife's policy was about $180/yr for 500K
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White Coat Investor
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Re: Voluntary life insurance - how much?

Post by White Coat Investor »

2m2037 wrote: Fri Nov 17, 2017 5:38 pm It's open enrollment period at work and we have the option of purchasing voluntary life insurance at $0.79/month for $10K coverage all the way up to $59.25/month for $750K coverage.

How much would you choose and why? What factors would you consider when making your decision?
None. Because I already have adequate term life insurance. Why would your insurance plan change because your employer starts offering some coverage? It doesn't change when the credit union sends a letter offering $1000 of free coverage.

If you're in good health with no dangerous hobbies, it's hard to believe your employer's plan is the best priced one for you.
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wabbott
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Re: Voluntary life insurance - how much?

Post by wabbott »

IMO, the term "life insurance" is a misnomer. Your life is not worth insuring. But what is worth insuring is your ability to earn income. What the insurance replaces is that earned income stream if/when you die. If you have no dependents, or someone who depends upon you to bring in money, or you have no heirs that you want to leave money to, then there's no need for it.

It really should be called "income replacement insurance." Think along those terms when you figure out how much is needed, or if its needed at all.
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2m2037
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Re: Voluntary life insurance - how much?

Post by 2m2037 »

Thanks for your thoughts, everyone!
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