How Much Term Life Insurance?

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black_knight_32
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How Much Term Life Insurance?

Post by black_knight_32 » Sat Apr 06, 2019 8:27 pm

Good evening!

Current life insurance is $200K for me and $100K for wife through work. I feel that we are under insured. We have no debt - house and vehicles are paid for. After reading through some posts, it looks like 20 year will be the best option but I’m not sure how much we actually need.

Age: 33
2 Children. 5 year old and 1 year old. Both have a little over $20K each in 529 plan.
My income : $140K
Wife income: $48K
Net worth: $1.8M

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luminous
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Re: How Much Term Life Insurance?

Post by luminous » Sat Apr 06, 2019 8:33 pm

It is a very personal decision of course. Here's what we decided:

My husband stays home with the kids, so when we were trying to get pregnant we estimated the cost of childcare over a 15 year period and ended up insuring him for $300,000 on a 15 year term policy.

I'm the breadwinner and have much higher earning power than my husband (my income over our marriage has varied from $100k to $250k+). We do not own a home, instead we live in a rent controlled apartment. Still, the cost of insuring me for full lifestyle replacement cost was too high. We insured me for $500,000 on a 20 year term plus whatever coverage I get through work (varies) which will not pay for them to stay in the VHCOL area we live in now but will let them comfortably move elsewhere and get the kids all the way through college.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.

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Stinky
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Re: How Much Term Life Insurance?

Post by Stinky » Sat Apr 06, 2019 9:23 pm

Congratulations on building net worth of almost $2 million at age 33!

I agree that you need more life insurance. I’d suggest 20 year term for both you and DW. As a starting point, consider 10x annual income for each of you. Considering current insurance, that would be $1.2 million on you and $400k on DW. I might round up to $1.5 and $500.
It's a GREAT day to be alive - Travis Tritt

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climber2020
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Re: How Much Term Life Insurance?

Post by climber2020 » Sat Apr 06, 2019 9:42 pm

How much of your net worth is your house?

Topic Author
black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sat Apr 06, 2019 10:01 pm

climber2020 wrote:
Sat Apr 06, 2019 9:42 pm
How much of your net worth is your house?
$140K of my net worth is in my house.

senex
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Re: How Much Term Life Insurance?

Post by senex » Sat Apr 06, 2019 10:28 pm

Yes, congrats on the super saving at a young age.

It depends how much you would want to spend if one spouse died. If 100k or less a year, you wouldn't technically need any insurance to meet that need -- you could just spend from net worth until the kids are grown ("self insure"), then go on with your life (admittedly, with substantially reduced savings).

If that sounds unpalatable, the cost of a 20-year term policy for a million or two should be quite cheap if you're healthy -- I haven't quoted recently, but if I recall recent threads, we're talking neighborhood of $500/year for each million if you're in the top health tier (?). Which is so cheap that if you have any hesitation at all about spending down savings (in that admittedly rare scenario), such a policy would offer very cheap peace of mind. That's probably what I would do.

Best wishes.

DonIce
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Re: How Much Term Life Insurance?

Post by DonIce » Sun Apr 07, 2019 12:42 am

What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.

mega317
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Re: How Much Term Life Insurance?

Post by mega317 » Sun Apr 07, 2019 12:51 am

DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.

DonIce
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Re: How Much Term Life Insurance?

Post by DonIce » Sun Apr 07, 2019 12:53 am

mega317 wrote:
Sun Apr 07, 2019 12:51 am
DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.
Their house and car are paid for. The house they own is worth less than 1 year's income. They accumulated $1.8M by age 33. Clearly, they don't spend much.

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Stinky
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Re: How Much Term Life Insurance?

Post by Stinky » Sun Apr 07, 2019 4:59 am

DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
I respectfully disagree. OP has a net worth of $1.8 million. If net worth were $18 million or $180 million, then self-insurance makes sense. But at $1.8 million, the surviving spouse would likely significantly deplete retirement assets by the time the children have grown, unless spending is radically cut.

Also, we don't know how much of the $1.8 million is in retirement accounts. If that money were withdrawn, there would be a tax cost.

Term insurance is just so dirt cheap at OP's age. This isn't a place where I would economize.
It's a GREAT day to be alive - Travis Tritt

White Oak
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Re: How Much Term Life Insurance?

Post by White Oak » Sun Apr 07, 2019 5:38 am

OP, how much do you estimate you will have saved 10 years from now (including growth of your current assets and additional savings)? I'm guessing you might be able to comfortably self insure by then. If so, you might save some money by doing a 10 year term policy.

If you think you might need some coverage for 20 years, you might split the coverage between ten and twenty year policies.

Penguin
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Re: How Much Term Life Insurance?

Post by Penguin » Sun Apr 07, 2019 6:03 am

It may help you decide if you estimate your annual family expenses after you die. You may wish to consider the social security survivor benefits which may be $50,000 per year until your children reach age 18.
Jon

fasteddie911
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Re: How Much Term Life Insurance?

Post by fasteddie911 » Sun Apr 07, 2019 6:54 am

You have to run the numbers. Expenses, savings, etc. Everyone is different. If one or both of you were to die tomorrow, how much would would you need/want to survive. Or if death occurs in 5yrs, 10yrs, etc., taking into account savings, inflation. Would the surviving spouse still work? Don't forget to consider SS survivor benefits too.

Valuethinker
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Re: How Much Term Life Insurance?

Post by Valuethinker » Sun Apr 07, 2019 6:57 am

black_knight_32 wrote:
Sat Apr 06, 2019 8:27 pm
Good evening!

Current life insurance is $200K for me and $100K for wife through work. I feel that we are under insured. We have no debt - house and vehicles are paid for. After reading through some posts, it looks like 20 year will be the best option but I’m not sure how much we actually need.

Age: 33
2 Children. 5 year old and 1 year old. Both have a little over $20K each in 529 plan.
My income : $140K
Wife income: $48K
Net worth: $1.8M
In your 30s with good health term life 20 years is dead cheap.

10x salary is not far off the mark.

I would consider 2 policies so you can lapse one later as your net worth increases.

But in truth 10x really won't cost you much.

10x means your child could run to 18 + college without depleting your spouses retirement capital.

Nissanzx1
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Re: How Much Term Life Insurance?

Post by Nissanzx1 » Sun Apr 07, 2019 7:30 am

Great job on income and net worth. If I were you, I would want additional coverage as well. I’d probably get another $250-$500K for peace of mind.

Topic Author
black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sun Apr 07, 2019 8:20 am

mega317 wrote:
Sun Apr 07, 2019 12:51 am
DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.
We spend around $40K a year. Biggest expense right now is daycare for both kids that runs around $1,400 a month.

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black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sun Apr 07, 2019 8:23 am

White Oak wrote:
Sun Apr 07, 2019 5:38 am
OP, how much do you estimate you will have saved 10 years from now (including growth of your current assets and additional savings)? I'm guessing you might be able to comfortably self insure by then. If so, you might save some money by doing a 10 year term policy.

If you think you might need some coverage for 20 years, you might split the coverage between ten and twenty year policies.
The bulk of our net worth currently sits in a taxable account. Roughly $1M of our net worth is in this account.

We currently max out both 401K plans each year as well as max out Roth IRA (backdoor).

On top of that, we put about $2K a month into savings/brokerage account.

Allocation is 90% stocks / 10% bonds. Of the 90% stocks, 70% is US and 30% international. Using standard 3 fund portfolio.

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black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sun Apr 07, 2019 8:24 am

Penguin wrote:
Sun Apr 07, 2019 6:03 am
It may help you decide if you estimate your annual family expenses after you die. You may wish to consider the social security survivor benefits which may be $50,000 per year until your children reach age 18.
Thank you. I had not been considering social security survivor benefits in my calculation.

YttriumNitrate
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Re: How Much Term Life Insurance?

Post by YttriumNitrate » Sun Apr 07, 2019 8:36 am

black_knight_32 wrote:
Sun Apr 07, 2019 8:20 am
Age: 33
2 Children. 5 year old and 1 year old. Both have a little over $20K each in 529 plan.
My income : $140K
Wife income: $48K
Net worth: $1.8M
****
We spend around $40K a year. Biggest expense right now is daycare for both kids that runs around $1,400 a month.
Well, my opinion would be that A) you probably don't need life insurance, and B) you probably don't need to work unless you want to. That being said, if you are going to keep life insurance, I'd suggest going with a half a million to a million each. Compared to a 100k policy, a half million dollar policy will often provide 2-3 times the benefit per dollar spent in premiums.

cusetownusa
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Re: How Much Term Life Insurance?

Post by cusetownusa » Sun Apr 07, 2019 8:50 am

DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
I agree with this. Not sure why you would need term insurance. At most maybe 5 or 10 year term while you build your savings up even more.

deltaneutral83
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Re: How Much Term Life Insurance?

Post by deltaneutral83 » Sun Apr 07, 2019 8:53 am

luminous wrote:
Sat Apr 06, 2019 8:33 pm
Still, the cost of insuring me for full lifestyle replacement cost was too high. We insured me for $500,000 on a 20 year term plus whatever coverage I get through work (varies) which will not pay for them to stay in the VHCOL area we live in now but will let them comfortably move elsewhere and get the kids all the way through college.
I'm curious, isn't the purpose of life ins to insure the lifestyle that your dependents currently lead ? Why would the increased amount (say 10x income) be too expensive?

mega317
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Re: How Much Term Life Insurance?

Post by mega317 » Sun Apr 07, 2019 8:54 am

OP I think you're missing something. This was done super quickly but to get the ballpark:
Income 188k
- 38k 401ks
= 150k W2
- 15k federal tax
- maybe 5k state tax?
= 130k take-home
- 40k spending
- 12k roths
- 24k taxable
= 54k missing? Even more because your 1 million in taxable is producing at least 15-20k in dividends.

Topic Author
black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sun Apr 07, 2019 9:15 am

mega317 wrote:
Sun Apr 07, 2019 8:54 am
OP I think you're missing something. This was done super quickly but to get the ballpark:
Income 188k
- 38k 401ks
= 150k W2
- 15k federal tax
- maybe 5k state tax?
= 130k take-home
- 40k spending
- 12k roths
- 24k taxable
= 54k missing? Even more because your 1 million in taxable is producing at least 15-20k in dividends.
We reinvest dividends so I’m not including those in annual income. Also forgot to put down $20k in 529 contributions. $150k W2 also doesn’t have deductions in it for health insurance, vision and dental.

Other downfall is at my work I’m considered a highly compensated employee so about 90% of my 401k contributions get disbursed and recorded as income the next year.

How did you come up with 10% effective tax rate for federal?

mega317
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Re: How Much Term Life Insurance?

Post by mega317 » Sun Apr 07, 2019 9:23 am

I plugged 150 and two kids into taxcaster. As I said it was just for ballpark. You're spending 30k on health insurance and additional taxes?

khangaroo
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Re: How Much Term Life Insurance?

Post by khangaroo » Sun Apr 07, 2019 9:26 am

I used the DIME method to figure out much term life insurance to buy.
Debt = how much do we need to pay off all of our debts if one of dies

Income = what income needs to be replaced. I used 10x salary of the higher person. In this case 10x your salary.

Mortgage = what much is left on your mortgage? Pay it off.

Education = how much to fully fund both of your kids college funds? Will this include both undergrad and graduate?

The number could be big or small depending on the aversion to debt and your own variables. Also, if you’ve kept yourself healthy and don’t smoke then a few million dollar policy for 20 years would be less than $1000 bucks. Check out term life insurance brokers, I used Zander insurance who is touted by Dave Ramsey and it was quick and easy.

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black_knight_32
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Re: How Much Term Life Insurance?

Post by black_knight_32 » Sun Apr 07, 2019 9:35 am

khangaroo wrote:
Sun Apr 07, 2019 9:26 am
I used the DIME method to figure out much term life insurance to buy.
Debt = how much do we need to pay off all of our debts if one of dies

Income = what income needs to be replaced. I used 10x salary of the higher person. In this case 10x your salary.

Mortgage = what much is left on your mortgage? Pay it off.

Education = how much to fully fund both of your kids college funds? Will this include both undergrad and graduate?

The number could be big or small depending on the aversion to debt and your own variables. Also, if you’ve kept yourself healthy and don’t smoke then a few million dollar policy for 20 years would be less than $1000 bucks. Check out term life insurance brokers, I used Zander insurance who is touted by Dave Ramsey and it was quick and easy.
Thank you! I’ll go through this process and see what we come up with.

MrBeaver
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Re: How Much Term Life Insurance?

Post by MrBeaver » Sun Apr 07, 2019 9:38 am

black_knight_32 wrote:
Sun Apr 07, 2019 8:20 am
mega317 wrote:
Sun Apr 07, 2019 12:51 am
DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.
We spend around $40K a year. Biggest expense right now is daycare for both kids that runs around $1,400 a month.
I see two scenarios. The amount of coverage to get is determined by when you would hit your target retirement spend. Think about it this way: if you or your spouse passed away, at what level of spending sustained by insurance + investments + SS minor child benefit would the remaining spouse each choose to quit or severely scale back work and spend more time with the kids? Write that number down, subtract half of the dying SS benefit per kid and divide it by 3% (or whatever sustainable yearly spend you’re comfortable with), and then add a lump sum for college.

1) You want to continue your high savings rate and working for the foreseeable future: get enough life insurance to take you to your projected target net worth now, for a term equal to when you would hit that net worth with your current savings rate.

2) You want to scale back work & spend more time with the kids when they are home: same as above, but factor in a longer term due to longer time before hitting target net worth.

I did a similar (but more detailed by the year) analysis and came up with roughly 10x salary through college. But my net worth is only ~6x my income and ~12x my spending (compared to 10x and 45x for you), so my guess is you’d need less for a shorter period, depending on the wild card that is impossible to plan for: college.

wayfarer
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Re: How Much Term Life Insurance?

Post by wayfarer » Sun Apr 07, 2019 10:50 am

If you do decide to get term insurance I would suggest a 30 year term rather than 20 and an amount on the generous side of your calculations. That will take you close to your mid-60's. Insurance is for the unforeseeable/unpredictable and things change in life more often than one expects.Term life premiums approximately double every decade you are older. If you try to get another policy later because you either under-insured or took too short a term, then you will pay double for the same amount a decade later assuming your health has remained the same. Or you can buy two policies, one 20 year and the other 30 year and split the total amount 2/3rd in the 20 and 1/3rd in the 30 term. That will provide more coverage while the kids are still going through college and finding their feet. And then you could even cancel the 30 year one at that time if things have worked out well for you.

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luminous
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Re: How Much Term Life Insurance?

Post by luminous » Sun Apr 07, 2019 3:20 pm

deltaneutral83 wrote:
Sun Apr 07, 2019 8:53 am
luminous wrote:
Sat Apr 06, 2019 8:33 pm
Still, the cost of insuring me for full lifestyle replacement cost was too high. We insured me for $500,000 on a 20 year term plus whatever coverage I get through work (varies) which will not pay for them to stay in the VHCOL area we live in now but will let them comfortably move elsewhere and get the kids all the way through college.
I'm curious, isn't the purpose of life ins to insure the lifestyle that your dependents currently lead ? Why would the increased amount (say 10x income) be too expensive?
The quote for a $1M policy was twice the quote of a $500k policy, and who knows how much a 10x income quote would have been. My spouse was clear with me that he didn't need a policy that large to make life work if I were to pass away.

For us, the purpose of life insurance on me is to ease the transition if I pass away, not to completely replace my income for a long time. We insured for 500k which is about 5x annual expenses, plus we have a lot of savings to "self insure" some additional runway, not to mention social security survivor benefits if the kids are still young. That was a good compromise for us between the cost of the insurance and the risk we are protecting against.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.

iudiehard1
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Re: How Much Term Life Insurance?

Post by iudiehard1 » Sun Apr 07, 2019 5:49 pm

Great question. Your numbers suggest that you can clearly be self insured and leave your spouse in good hands. BUT.....the reason I have purchased a significant amount on me as a father of 3 and only being 42 is the fact it’s dirt cheap. I pay about $833 per million on an annual basis. If you are healthy, they gives the stuff away.

If we die as the head of household, I want to OVERLY cautious I have left my family in good hands and flush with cash. I spend more on pro v’s than I do on life insurance. My opinion is you make too much money to not grab a 10-20 year term for a million or so to provide a soft landing for a family that would be devasted to lose you. Life is easier with cash, leave more than you think.
Proverbs 13:20 - Walk with the wise and become wise, for a companion of fools suffers harm.

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Stinky
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Re: How Much Term Life Insurance?

Post by Stinky » Sun Apr 07, 2019 6:12 pm

iudiehard1 wrote:
Sun Apr 07, 2019 5:49 pm
Great question. Your numbers suggest that you can clearly be self insured and leave your spouse in good hands. BUT.....the reason I have purchased a significant amount on me as a father of 3 and only being 42 is the fact it’s dirt cheap. I pay about $833 per million on an annual basis. If you are healthy, they gives the stuff away.

If we die as the head of household, I want to OVERLY cautious I have left my family in good hands and flush with cash. I spend more on pro v’s than I do on life insurance. My opinion is you make too much money to not grab a 10-20 year term for a million or so to provide a soft landing for a family that would be devasted to lose you. Life is easier with cash, leave more than you think.
+1

Well said.
It's a GREAT day to be alive - Travis Tritt

ThreeBears
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Re: How Much Term Life Insurance?

Post by ThreeBears » Sun Apr 07, 2019 8:13 pm

Did you inherit money?

Feel free not to answer.

A million dollars for 20 years are nice round numbers. I did about that with a similar income but significantly less wealth. So, everyone who is saying you can do less has a point.

Grt2bOutdoors
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Re: How Much Term Life Insurance?

Post by Grt2bOutdoors » Sun Apr 07, 2019 8:22 pm

$1.5 million for husband; 20 years
$500k for spouse: 20 years
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Quickfoot
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Re: How Much Term Life Insurance?

Post by Quickfoot » Sun Apr 07, 2019 8:30 pm

You are quite under-insured, I'd also recommend 1.5M for you and 500K for your wife on the 20 year term. We are in a similar situation and I got a MetLife 1.5M 20 year term policy for about $55 a month, her 500K is less than $20 per month. Do NOT buy from your bank, insurance company, etc. as you will get severely over charged. I've bought 3 policies from ReliaQuote which lets you compare multiple different companies, coverage levels and terms before you ever talk to anyone.

Also consider making sure your policies have accelerated death benefits (not all policies do), this benefit allows you to access a portion of the policy funds prior to your death if you are diagnosed with a terminal disease. Accelerated death benefits can make life a LOT less stressful and eliminate the financial need to work and allow you to build as many memories as you can in the time that's left. Companies that offer them typically don't charge extra for this benefit.

I also have an end of life document for my wife with passwords and investing instructions. I've instructed her to invest the payout in Vanguard's Tax Managed Balanced Fund (roughly 50% muni bonds and 50% equities) and withdraw up to 5% per year on my birthday.

There is a 100% chance of dying, might as well avoid making it harder than it has to be on loved ones.

Quickfoot
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Re: How Much Term Life Insurance?

Post by Quickfoot » Sun Apr 07, 2019 8:35 pm

mega317 wrote:
Sun Apr 07, 2019 12:51 am
DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.
They aren't yet in the position to self insure. It isn't just immediate needs, in the case of his death the spouse also wont benefit from continued retirement savings. The cost of 20 year term insurance is so low at their ages there is no reason not to do it.

mw1739
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Re: How Much Term Life Insurance?

Post by mw1739 » Sun Apr 07, 2019 8:37 pm

Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.

mega317
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Re: How Much Term Life Insurance?

Post by mega317 » Sun Apr 07, 2019 8:45 pm

Quickfoot wrote:
Sun Apr 07, 2019 8:35 pm
mega317 wrote:
Sun Apr 07, 2019 12:51 am
DonIce wrote:
Sun Apr 07, 2019 12:42 am
What's the point of life insurance with a net worth of almost $2 million and no debt? That's more than enough for the surviving spouse and kids to live off very comfortably and securely already. Self-insure.
It depends how much they spend.
They aren't yet in the position to self insure.
Well that was my point when I made the comment. But that was before we learned OP has enough for a 3% initial withdrawal rate, that's including college savings. And yes it's cheap enough that this whole conversation probably doesn't matter.

johnnyc321
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Re: How Much Term Life Insurance?

Post by johnnyc321 » Sun Apr 07, 2019 9:13 pm

I would probably get $2m if I was in your shoes. Find a good agent (not always easy to do) and just apply to see what it’ll cost. If you are healthy, I think you’ll be surprised at how cheap it is.

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luminous
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Re: How Much Term Life Insurance?

Post by luminous » Mon Apr 08, 2019 12:07 am

mw1739 wrote:
Sun Apr 07, 2019 8:37 pm
Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.
I’m glad you are able to pay so little. The policies on myself and my husband are the same annual cost for a third the coverage. We are healthy and fit, not sure what the difference is.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.

ivk5
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Re: How Much Term Life Insurance?

Post by ivk5 » Mon Apr 08, 2019 12:56 am

luminous wrote:
Mon Apr 08, 2019 12:07 am
mw1739 wrote:
Sun Apr 07, 2019 8:37 pm
Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.
I’m glad you are able to pay so little. The policies on myself and my husband are the same annual cost for a third the coverage. We are healthy and fit, not sure what the difference is.
In addition to death benefit, other variables also include age, duration of level premium, and rating class at time of underwriting. (State of residence may make a small difference, not positive.)

You haven’t provided enough info to determine why your policy is more expensive.

Of course you may want to put your info into a quote engine like term4sale and see if you are simply overpaying for your policy parameters.

Valuethinker
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Re: How Much Term Life Insurance?

Post by Valuethinker » Mon Apr 08, 2019 5:05 am

black_knight_32 wrote:
Sat Apr 06, 2019 8:27 pm
Good evening!

Current life insurance is $200K for me and $100K for wife through work. I feel that we are under insured. We have no debt - house and vehicles are paid for. After reading through some posts, it looks like 20 year will be the best option but I’m not sure how much we actually need.

Age: 33
2 Children. 5 year old and 1 year old. Both have a little over $20K each in 529 plan.
My income : $140K
Wife income: $48K
Net worth: $1.8M
The question of "laddering" occurs.

You could have 1 x 30 year policy + 1 x 20 year. Age in 30s and good health & habits, term life is dirt cheap.

By splitting your coverage between the 2 policies, you can lapse one of the policies as your financial risk declines.

The scenario you are trying to head off is that you die at 40, your family both has to spend its savings to live, but also does not hit retirement goals.

Thus numbers of $1.4m to $2.0m are not out of line, for you, and $500k for your wife (consider the cost of childcare, someone to pick them up from school etc. if you were widowed).

Then, when you have another $1m of savings, say, you can lapse one of the policies.

Remember the mantra "goal is to put the surviving spouse in the same financial position as if you were still alive". That's not unrealistic, although for the very well paid you get eye-watering amounts of money.

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Stinky
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Re: How Much Term Life Insurance?

Post by Stinky » Mon Apr 08, 2019 6:09 am

luminous wrote:
Mon Apr 08, 2019 12:07 am
mw1739 wrote:
Sun Apr 07, 2019 8:37 pm
Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.
I’m glad you are able to pay so little. The policies on myself and my husband are the same annual cost for a third the coverage. We are healthy and fit, not sure what the difference is.
Is your coverage provided by one of the companies shown on term4sale or Zander? If not, you may be paying too much. Especially if the life insurance is provided by the same company that has your auto or homeowners policy.
It's a GREAT day to be alive - Travis Tritt

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luminous
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Re: How Much Term Life Insurance?

Post by luminous » Mon Apr 08, 2019 7:15 am

Stinky wrote:
Mon Apr 08, 2019 6:09 am
luminous wrote:
Mon Apr 08, 2019 12:07 am
mw1739 wrote:
Sun Apr 07, 2019 8:37 pm
Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.
I’m glad you are able to pay so little. The policies on myself and my husband are the same annual cost for a third the coverage. We are healthy and fit, not sure what the difference is.
Is your coverage provided by one of the companies shown on term4sale or Zander? If not, you may be paying too much. Especially if the life insurance is provided by the same company that has your auto or homeowners policy.
We use Brighthouse (formerly MetLife) and State Farm, so yeah maybe that’s it. I definitely didn’t want to get insurance from a company I didn’t feel confident would actually pay out, but I do see some names i recognize in those lists. Thanks.
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.

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Stinky
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Location: Sweet Home Alabama

Re: How Much Term Life Insurance?

Post by Stinky » Mon Apr 08, 2019 7:36 am

luminous wrote:
Mon Apr 08, 2019 7:15 am
Stinky wrote:
Mon Apr 08, 2019 6:09 am
luminous wrote:
Mon Apr 08, 2019 12:07 am
mw1739 wrote:
Sun Apr 07, 2019 8:37 pm
Similar position here and just paid our annual premiums.
Both 25 yr policies
$2MM - $1100
$750M - $400 - spouse

Feel slightly over insured- wish I had laddered my policy, but oh well. As someone else pointed out, I spend more on beer than life insurance.
I’m glad you are able to pay so little. The policies on myself and my husband are the same annual cost for a third the coverage. We are healthy and fit, not sure what the difference is.
Is your coverage provided by one of the companies shown on term4sale or Zander? If not, you may be paying too much. Especially if the life insurance is provided by the same company that has your auto or homeowners policy.
We use Brighthouse (formerly MetLife) and State Farm, so yeah maybe that’s it. I definitely didn’t want to get insurance from a company I didn’t feel confident would actually pay out, but I do see some names i recognize in those lists. Thanks.
State Farm term insurance is expensive.

Not sure how competitive Metlife/Brighthouse is.
It's a GREAT day to be alive - Travis Tritt

Strayshot
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Location: New Mexico

Re: How Much Term Life Insurance?

Post by Strayshot » Mon Apr 08, 2019 7:48 am

State Farm has absurd term life rates.

I’m glad to see a balance in this post between those who recommend term at a 10x-ish salary level and those who recommend self insuring. Makes a solid point that insurance is all about risk posture and different people take different risks.

OP I am in the camp with those who are still recommending purchase of term insurance. Think of the myriad of things that can come with the death of a spouse in a young family. Depression, loss of work and job, medical bills, counseling costs for kids that became unexpected private school tuition, etc etc etc. I have seen all of this happen and it is brutal. I don’t think you are at a self-insured level yet, even with your phenomenal investing/saving wealth accumulation.

My recommendation would be laddering 2 policies for each of you and spouse. Each of you can get a 10 year term for say $1M and a 20 year term for a similar amount. Assuming you both stay alive, continue to work and save, etc then in 10 years as kids approach college you can reevaluate the self insurance every year and possibly drop the remainder of the 20year policy. In your situation once both kids are legal adults I can’t see a need for life insurance at your future level of assets.

Valuethinker
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Re: How Much Term Life Insurance?

Post by Valuethinker » Mon Apr 08, 2019 8:38 am

Strayshot wrote:
Mon Apr 08, 2019 7:48 am

My recommendation would be laddering 2 policies for each of you and spouse. Each of you can get a 10 year term for say $1M and a 20 year term for a similar amount. Assuming you both stay alive, continue to work and save, etc then in 10 years as kids approach college you can reevaluate the self insurance every year and possibly drop the remainder of the 20year policy. In your situation once both kids are legal adults I can’t see a need for life insurance at your future level of assets.
I agree with most of your points.

However I think 10 years is too short a term for someone with 2 young children.

There's a lot that can go wrong in 10 years. Term life at that age, assuming good health, should be dirt cheap and OP is on a high income. 10 years only takes the kids to mid teens.

20 years sees everyone free and clear through undergrad with room for the "surprise" 3rd child, child who turns out to need special support, etc. 15 years would work, although I don't imagine the price difference is much v. 20 years?

I think OP should be something like 1m 20 years and 500k 30 years. And 500k for lower paid spouse (20 years).

markcoop
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Re: How Much Term Life Insurance?

Post by markcoop » Mon Apr 08, 2019 9:32 am

I have always thought that people do a good job coming up with an initial amount, but don't do a good job of thinking about lowering the amount as time goes on. Laddering a couple of policies sounds like an attempt to do this. I'm surprised there's no policy that decreases coverage every year. Wouldn't that be ideal? I personally have life insurance offered through my work. It is a multiple of my salary. I was at around 10X my salary. I plan to reduce the amount by 1X my salary every year going forward (I have that option) as I am 53 years old.
Mark

Glockenspiel
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Re: How Much Term Life Insurance?

Post by Glockenspiel » Mon Apr 08, 2019 10:49 am

My initial thoughts are that I'd probably do a $1 million policy for you and a $500k policy for your wife, with 20-year terms each. However, you have a large net worth for your age, so if you wanted to so with $750k for you and $250-$400k for your wife, you could get away with it.

Glockenspiel
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Re: How Much Term Life Insurance?

Post by Glockenspiel » Mon Apr 08, 2019 10:53 am

Also, how did you compile $1.8 M in net worth by age 33, with less than $200k of income? Daamn. Congratulations. There is some case to be made that within 10 years, you'll be self-insured and will no longer need life insurance, so it might be worth taking a look at the price difference for 10- and 20-year policies.

Gideont
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Re: How Much Term Life Insurance?

Post by Gideont » Mon Apr 08, 2019 11:01 am

OP, I know you asked about life insurance, but I also want to recommend looking into getting disability insurance too, if you don’t already have that.

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