Too much life insurance or not?

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suibhne
Posts: 2
Joined: Tue Dec 05, 2017 3:40 pm

Too much life insurance or not?

Post by suibhne » Tue Dec 05, 2017 3:49 pm

I've been trying to tidy up my financial situation and provide some safety nets for my family. The first thing I wanted to address was my term life insurance which is currently only for €143,000 (just enough to cover my mortgage).

After reading 'Smart and Simple Financial Strategies for Busy People', she recommended getting life insurance at 10x my yearly wage. This would work out to be €850,000 and for 20 years as I have a 5 year old daughter.

So now I called and spoke with a provider today (Chill Insurance) who was surprised that I wanted so much insurance. He said the term was correct but that €850,000 is a lot, and would give me €3,500 per month for my wife to live on. It means I'd have to go for a medical if I wanted anything above €500,000.

So want I wanted some advice on was, should I stick with the full 10x my wage? Or could I reduce that based on my current monthly expenses of €2,500 (working out to €600,000)?

Thanks!

ccieemeritus
Posts: 440
Joined: Thu Mar 06, 2014 10:43 pm

Re: Too much life insurance or not?

Post by ccieemeritus » Wed Dec 06, 2017 1:49 am

Assume you get hit by a bus tomorrow.

How much will your wife and daughter need per year to live on? NEED
What will your wife’s income be? Include any expected survivor benefits (if any) INCOME
What investable assets do you have? CURRENT-ASSETS
Let’s assume using 3% of your savings each year so it lasts forever.

(NEED - INCOME) * 33.3 = NEEDED-ASSETS

NEEDED-ASSETS - CURRENT-ASSETS = required insurance

snowox
Posts: 132
Joined: Wed Nov 08, 2017 9:17 am

Re: Too much life insurance or not?

Post by snowox » Wed Dec 06, 2017 5:38 am

ccieemeritus wrote:
Wed Dec 06, 2017 1:49 am
Assume you get hit by a bus tomorrow.

How much will your wife and daughter need per year to live on? NEED
What will your wife’s income be? Include any expected survivor benefits (if any) INCOME
What investable assets do you have? CURRENT-ASSETS
Let’s assume using 3% of your savings each year so it lasts forever.

(NEED - INCOME) * 33.3 = NEEDED-ASSETS

NEEDED-ASSETS - CURRENT-ASSETS = required insurance

Alot more info needs to be provided before answering this question fairly as suggested here ^ Many, myself one of them dropped our Life Insurance once we accumulated a certain amount. Then what kinda of life Insurance Whole or Term? Not a fan of Whole for any reason. Why does it seem that you want to avoid a physical? are there health issues? you seemed to point that out.

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Watty
Posts: 11815
Joined: Wed Oct 10, 2007 3:55 pm

Re: Too much life insurance or not?

Post by Watty » Wed Dec 06, 2017 7:27 am

suibhne wrote:
Tue Dec 05, 2017 3:49 pm
So want I wanted some advice on was, should I stick with the full 10x my wage? Or could I reduce that based on my current monthly expenses of €2,500 (working out to €600,000)?
Part of the decision depends on how much the different amounts of insurance cost and that information is not in your post.

suibhne wrote:
Tue Dec 05, 2017 3:49 pm
It means I'd have to go for a medical if I wanted anything above €500,000
In the US is would be unusual to be able to get any term life insurance without a medical exam. I would be cautious that this company might have a lot of exclusions to be able to issue policies without medical exams. It would be good to get quotes from several companies.

suibhne
Posts: 2
Joined: Tue Dec 05, 2017 3:40 pm

Re: Too much life insurance or not?

Post by suibhne » Wed Dec 06, 2017 12:37 pm

How much will your wife and daughter need per year to live on? NEED
At about €35,000 they'd be okay to cover all expenses with a little bit left over.
What will your wife’s income be? Include any expected survivor benefits (if any) INCOME
I'd guess something around €1,000 per month social benefits and part-time work, so €12,000 per year.
What investable assets do you have? CURRENT-ASSETS
Nothing investable at the moment. We have land for horses but it's really only used for grass.
Let’s assume using 3% of your savings each year so it lasts forever.
I've only managed to save €3,000 right now, with €14,000 in a pension, and am aiming for €15,000 in the next year to get up to 6 months expenses. As an aside I've been paying down debt for the past 4 years.
(NEED - INCOME) * 33.3 = NEEDED-ASSETS
NEEDED-ASSETS - CURRENT-ASSETS = required insurance
(€35,000 - €12,000) * 33.3 = €765,900. Not a million miles off my original estimate of €850,000.
Then what kinda of life Insurance Whole or Term? Not a fan of Whole for any reason. Why does it seem that you want to avoid a physical? are there health issues? you seemed to point that out.
I've heard bad things about Whole so I'm sticking with Term. I have no problem with a physical, the sales guy at the end of the phone seemed to want to talk me out of anything which requires a physical. I guess here in Ireland they assume most people of my age who haven't smoked must be half way fit. I have to get one I won't have a problem passing it.

The company I used to get quotes from actually had quotes from 5 reputable insurance companies so I'm happy enough that what I'm getting is decent. I guess I'm just looking confirmation that the numbers I'm looking at getting aren't crazy and that it's possible I'm better informed than the sales guy :)

If there's more detail I should be sharing with you guys just let me know. Thanks again for all the advice.

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