How Much Term Life Insurance?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
majiaknight
Posts: 114
Joined: Tue Jan 26, 2016 2:55 pm

Re: How Much Term Life Insurance?

Post by majiaknight » Mon Apr 08, 2019 2:31 pm

black_knight_32 wrote:
Sat Apr 06, 2019 8:27 pm
Current life insurance is $200K for me and $100K for wife through work.
I'd suggest you not consider the life insurance through work. The reason is simple as insurance should provide you the safety net in the worst case scenario; however, the insurance through work typically assumes you have to be employed when you need the insurance payout (not portable after you leave the company). What if you were during the gap of a job transition or unemployed during a big recession when you need the money the most if something bad happened and you were not insured?

Spouse and I bought $1M/each 20Y term life insurance in early 30s when our kid was born a few years ago. I think it was a good deal as I paid ~$30 /M with ~$27/M for spouse. The absolute insurance amount is very personal as everyone's financial comfort level is different. Both spouse and I have high paying jobs in tech and I earn slightly more than her. So, the $1M is only intended to cover the mortgage debt (in VHCOL area) plus the kid's education till college which is not trying to make my family rich out of insurance and either of our job salaries should already provide a good living if we lost one income.

mariezzz
Posts: 847
Joined: Mon Oct 02, 2017 11:02 pm

Re: How Much Term Life Insurance?

Post by mariezzz » Mon Apr 08, 2019 5:30 pm

DonIce wrote:
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.
If they withdrew 3.5% of 2 million annually (very safe, even for 40+ years), they'd have $70K annually. Surely wouldn't starve. As stated, would move to lower cost of living area. Husband could get a job, too.

Slacker
Posts: 721
Joined: Thu May 26, 2016 8:40 am

Re: How Much Term Life Insurance?

Post by Slacker » Mon Apr 08, 2019 6:06 pm

So if I understand correctly:

Him: 140K income
Her: 48K income
Expenses: 40K
Debt: 0 (paid off house)
529 plans: $20K each child
Liquid assets: $1.6M (approx) with $1M in Taxable accounts

Lets say He passes away...and she maintains her job -> all expenses could be met without touching assets. College now becomes essentially FREE due to income based grants/scholarships. Assumption is that the current employer's health insurance coverage handles most medical costs.
Perhaps she no longer wishes to work because of the loss of the husband -> social security survivor benefits plus a modest 2-3% withdrawal (or less) from taxable accounts covers all expenses without touching the tax sheltered retirement accounts.

In the reverse scenario, his income easily covers all bills and fully funds the 529 to levels that are more than needed without breaking a sweat.

In 10 years time, given their current course, they will likely have a networth of $3M to $4M and need a 1.5% withdrawal rate to cover expenses.

I'm not very conservative, so I'd skip insurance altogether with the above numbers. Perhaps to make everyone feel a bit better I'd get a $500K 10year policy on him so long as it has accelerated benefits (at least 50%) in the unfortunate circumstance of terminal illness.

I'm not sure what income needs to be replaced for a 100% (maybe we can say 125%) financially independent couple. However, many people on bogleheads are far more wise, smart and astute than myself...so take my opinion for what it's worth.

Topic Author
black_knight_32
Posts: 98
Joined: Wed Apr 29, 2015 9:08 pm

Re: How Much Term Life Insurance?

Post by black_knight_32 » Mon Apr 08, 2019 9:27 pm

Glockenspiel wrote:
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.
The company I first joined had an ESOP program that turned out to be a very lucrative opportunity. Was making more money through the ESOP than I was salary.

Topic Author
black_knight_32
Posts: 98
Joined: Wed Apr 29, 2015 9:08 pm

Re: How Much Term Life Insurance?

Post by black_knight_32 » Mon Apr 08, 2019 9:31 pm

Gideont wrote:
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.
I currently have long term disability through work insurance plan. Good call out!

Topic Author
black_knight_32
Posts: 98
Joined: Wed Apr 29, 2015 9:08 pm

Re: How Much Term Life Insurance?

Post by black_knight_32 » Mon Apr 08, 2019 9:33 pm

ThreeBears wrote:
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.
I have not inherited any money. We saved diligently and i took advantage of an ESOP opportunity at my first job. For the first 8 years of my career we took 100% of any bonus money and saved/invested.

HawkeyePierce
Posts: 734
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

Re: How Much Term Life Insurance?

Post by HawkeyePierce » Mon Apr 08, 2019 10:44 pm

black_knight_32 wrote:
Mon Apr 08, 2019 9:31 pm
Gideont wrote:
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.
I currently have long term disability through work insurance plan. Good call out!
You might still consider purchasing a private long-term disability policy. They're pretty inexpensive considering their coverage and private policies are portable. Long-term disability is more likely than death for most working-age people and our future earning potential is arguably our most valuable asset.

I've been getting quotes for one myself (28M). My employer covers the cost of an LTD plan that covers 60% of our salary after 180 days, but of course I may not always be working with an employer as generous as that. My quotes have shown I could get a $60k/year non-cancelable own-occupation policy for under $1k/year. I'll likely purchase that within the year.

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