Is this Term Life Insurance Good for me?

[fred2017]

Dear Bogleheads:

I have really benefited from Bogleheads - education and knowledge about those important (also basic) things.

In a recent post for a different topic, Stinky's and others' responses made me realize that I need to buy a term life insurance policy ASAP.

My situation - mid 40s with a child less than 3 years old (also one in college). Currently I am only covered by employer sponsored insurance, and also purchased additional voluntary insurance for my wife and for myself.

Want to buy a 20 years term life insurance for 1M, checked term4sale, it is about $140/month. (I assume if I purchased earlier/younger, it would have been cheaper). With 20 years, it will cover my little one to his college or just graduation.

Is this a good choice for me?
Also, how to select which insurance company to proceed, or how to check which one is better etc.?

Thank you so much !

[Rocky Mtn Man]

Don't beat yourself up, you are where you are today. If I had a time machine I would have shorted airlines, cruise lines, and Disney in February 2020 and be retired in my Miami condo driving my Turbo 911!

$1MM is a good number. I would also make sure your wife is covered to some extent ($100-200k). If she passes, the head of household (which you would file as as a single parent) taxes are higher than married filing jointly, especially at higher incomes.

I just go with any of the higher rated companies. Life insurance is a heavily regulated industry by the states, so the companies have to show they are well managed to state investigators.

[Valuethinker]

Dear Bogleheads:

I have really benefited from Bogleheads - education and knowledge about those important (also basic) things.

In a recent post for a different topic, Stinky's and others' responses made me realize that I need to buy a term life insurance policy ASAP.

My situation - mid 40s with a child less than 3 years old (also one in college). Currently I am only covered by employer sponsored insurance, and also purchased additional voluntary insurance for my wife and for myself.

Want to buy a 20 years term life insurance for 1M, checked term4sale, it is about $140/month. (I assume if I purchased earlier/younger, it would have been cheaper). With 20 years, it will cover my little one to his college or just graduation.

Is this a good choice for me?
Also, how to select which insurance company to proceed, or how to check which one is better etc.?

Thank you so much !

1. if $1m is sufficient to meet the financial needs of your family in your absence then that's a good amount. 20 years is also an appropriate time period. You are right that employment provided insurance should not be counted because it's so conditional (on continued employment)
2. if you have received a range of quotes and the insurer is financially strong, then that's likely to be a good rate.

[Stinky]

Dear Bogleheads:

I have really benefited from Bogleheads - education and knowledge about those important (also basic) things.

In a recent post for a different topic, Stinky's and others' responses made me realize that I need to buy a term life insurance policy ASAP.

My situation - mid 40s with a child less than 3 years old (also one in college). Currently I am only covered by employer sponsored insurance, and also purchased additional voluntary insurance for my wife and for myself.

Want to buy a 20 years term life insurance for 1M, checked term4sale, it is about $140/month. (I assume if I purchased earlier/younger, it would have been cheaper). With 20 years, it will cover my little one to his college or just graduation.

Is this a good choice for me?
Also, how to select which insurance company to proceed, or how to check which one is better etc.?

Thank you so much !

I’m glad that the information on this Forum has caused you to think about buying term life insurance on yourself. With a three year old, it’s likely that employer provided life insurance isn’t fully covering your insurance needs.

You haven’t given us much personal information with which to assess your needs. But 20 year term is likely a good fit for you. As others have said, think about insurance for your spouse also.

I’d personally feel comfortable buying term life from any company on term4sale.com. I’d buy based on price.

[Harmanic]

20 years is perfect. Your child will be 23 when the term matures, so it should be enough to carry through to college. At that point rates will go up substantially and then you will likely let it lapse unless you are terminally ill. Some policies can be converted to cash value insurance, but that only works if you are in bad health with a short remaining lifespan. In the meantime, you will be investing and growing your accounts to he point that you won't need insurance anymore at policy maturity.

[ThankYouJack]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.
Shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

[greg24]

I agree that specifics matter. If the OP is on track to be financially independent in 10 years, their need for term life is less. If they plan to work until 65, then 20 year/$1M is a good starting point.

[Stinky]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.

But shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

Of course the specifics matter.

OP hasn’t chosen to share the information you mention, so we can’t incorporate it into our collective thoughts.

$1 million for 20 years is often a pretty good starting place. And based on what OP has told us so far, it’s a good first step.

[ThankYouJack]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.

But shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

Of course the specifics matter.

OP hasn’t chosen to share the information you mention, so we can’t incorporate it into our collective thoughts.

$1 million for 20 years is often a pretty good starting place. And based on what OP has told us so far, it’s a good first step.

Maybe the first step is for the OP to read the wiki page on it? - https://www.bogleheads.org/wiki/Life_in ... ance_needs

[exodusNH]

Want to buy a 20 years term life insurance for 1M, checked term4sale, it is about $140/month. (I assume if I purchased earlier/younger, it would have been cheaper). With 20 years, it will cover my little one to his college or just graduation.

It would have been less per month, but you would have paid it for longer. Unless your health has changed substantially since your youth (e.g. a heart attack), the total cost is probably pretty close.

[Harmanic]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.

But shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

Of course the specifics matter.

OP hasn’t chosen to share the information you mention, so we can’t incorporate it into our collective thoughts.

$1 million for 20 years is often a pretty good starting place. And based on what OP has told us so far, it’s a good first step.

We do know that the child is 3, so 20 years is a good time frame to ensure the child has the resources to pursue higher education. Whether the face amount is enough is a different question.

[fred2017]

We do know that the child is 3, so 20 years is a good time frame to ensure the child has the resources to pursue higher education. Whether the face amount is enough is a different question.

Thank you everyone.
Quick update - got Protective Life Insurance Company from Term4Sale.come (A+), and it happens to partner with Costco, so I called and moved the process to next step.

(I did not provide much other information because I haven't built much assets yet, and just started to have some free money for investment in the recent few years.)

[Stinky]

We do know that the child is 3, so 20 years is a good time frame to ensure the child has the resources to pursue higher education. Whether the face amount is enough is a different question.

Thank you everyone.
Quick update - got Protective Life Insurance Company from Term4Sale.come (A+), and it happens to partner with Costco, so I called and moved the process to next step.

(I did not provide much other information because I haven't built much assets yet, and just started to have some free money for investment in the recent few years.)

If you buy from Protective Life through Costco, you’ll be getting an absolutely excellent product.

Costco’s general policy is to hold prices low by minimizing the mark up on the goods that it sells.

I know for a fact that the same “low price” philosophy applies to the life insurance that Protective sells through Costco, and the Costco “mark up” is well less than the regular agent commission.

[fred2017]

If you buy from Protective Life through Costco, you’ll be getting an absolutely excellent product.

Costco’s general policy is to hold prices low by minimizing the mark up on the goods that it sells.

I know for a fact that the same “low price” philosophy applies to the life insurance that Protective sells through Costco, and the Costco “mark up” is well less than the regular agent commission.

Yes, they have discount (or lower premium) for the first 5 years.
I used Costco for my vehicle insurance as well (but they did not provide home insurance to me due to the fire zone rating).
Thanks again.

[Brianmcg321]

I think that would be a great policy.

[TravelforFun]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.

But shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

Of course the specifics matter.

OP hasn’t chosen to share the information you mention, so we can’t incorporate it into our collective thoughts.

$1 million for 20 years is often a pretty good starting place. And based on what OP has told us so far, it’s a good first step.

Isn't there a rule of thumb that says 10 times annual salary is what a person should have if that person and their family depend on their salary?

TravelforFun

[afan]

You should try to develop a more comprehensive model of your long term financial needs. If you have a great price on a great policy maybe you want yo get that in place right away. But it is entirely possible that $1M is not enough . Perhaps not nearly enough. Work out just how much you make, what you save how your family will fare without your income and what you expect your future expenses to be. Compare that to what you own now and the gap is the amount you need to insure.

If you have a spouse who also generates income, then your need for insurance could be less.

You could always come back after you run the numbers and buy a bigger policy if needed. Remember that $1M 20 years from now will be worth much less than $1M today but your policy will only pay that same amount. Inflation is a thing to consider.

Your need for insurance should be gowing down as you accumulate assets and your child grows and has fewer years during wich they will need your support.

[Chardo]

If you buy from Protective Life through Costco, you’ll be getting an absolutely excellent product.

Costco’s general policy is to hold prices low by minimizing the mark up on the goods that it sells.

I know for a fact that the same “low price” philosophy applies to the life insurance that Protective sells through Costco, and the Costco “mark up” is well less than the regular agent commission.

Yes, they have discount (or lower premium) for the first 5 years.
I used Costco for my vehicle insurance as well (but they did not provide home insurance to me due to the fire zone rating).
Thanks again.

How is that legal? Life insurance rates are identical from every source, by law. And commissions cannot be reduced or rebated, by law. So how can Costco legally sell life insurance at a discount?

Care to weigh in, Stinky? I know you have direct knowledge...

[Stinky]

If you buy from Protective Life through Costco, you’ll be getting an absolutely excellent product.

Costco’s general policy is to hold prices low by minimizing the mark up on the goods that it sells.

I know for a fact that the same “low price” philosophy applies to the life insurance that Protective sells through Costco, and the Costco “mark up” is well less than the regular agent commission.

Yes, they have discount (or lower premium) for the first 5 years.
I used Costco for my vehicle insurance as well (but they did not provide home insurance to me due to the fire zone rating).
Thanks again.

How is that legal? Life insurance rates are identical from every source, by law. And commissions cannot be reduced or rebated, by law. So how can Costco legally sell life insurance at a discount?

Care to weigh in, Stinky? I know you have direct knowledge...

The product that Protective sells through Costco has a different premium structure than the “street” product sold elsewhere. The Costco premiums are at a guaranteed low level for the first five years, step up in year 6, and then remain guaranteed and level for the rest of the initial period. Meanwhile, the death benefit is level.

I believe that the Costco product is legally a different product than the street product. So different rates are permitted.

And because of the Costco effect, the Costco product is among the cheapest level term products available.

[Valuethinker]

Seems like the Boglehead default is almost always 20 year for $1M+ but IMO the specifics matter.

But shouldn't we know more info like the OPs assets, income, expenses, current life insurance amounts and social security survivor benefits?

Of course the specifics matter.

OP hasn’t chosen to share the information you mention, so we can’t incorporate it into our collective thoughts.

$1 million for 20 years is often a pretty good starting place. And based on what OP has told us so far, it’s a good first step.

Isn't there a rule of thumb that says 10 times annual salary is what a person should have if that person and their family depend on their salary?

TravelforFun

There is, but any of the insurance experts here have stressed that it's no substitute for a detailed working out of actual financial need.

There are various worksheets out there that can be used to get a rough guide.

It's important not to forget the additional childcare expenses that the surviving partner would incur. And also, quite likely, a diminished ability to progress in their career (depending on field). Or a need to restart a career.

Most of us have seen/ heard of cases where a colleague or acquaintance did not have enough insurance, and as a result their family really suffered. Term life is very cheap (at least for those in ordinary health, in their 30s and into early 40s).

My father died suddenly, busily planning to live forever. Death waited for him on a particular streetcorner, patiently, and when it was his appointed time, rode with him to the hospital in an ambulance, and then took him from us. Death is waiting for us all on our appointed day.

(My father left my mother very well provided for. He was careful that way).

[Harmanic]

Most of us have seen/ heard of cases where a colleague or acquaintance did not have enough insurance, and as a result their family really suffered. Term life is very cheap (at least for those in ordinary health, in their 30s and into early 40s).

Example of a family friend:
A highly paid professional in NYC, athletic and healthy, died suddenly in his early 30s leaving behind a non-professional spouse and two small children. No life insurance. Only a survivor benefit from Social Security. Any insurance would have been better than none.

[AlohaBill]

.

[Valuethinker]

Most of us have seen/ heard of cases where a colleague or acquaintance did not have enough insurance, and as a result their family really suffered. Term life is very cheap (at least for those in ordinary health, in their 30s and into early 40s).

Example of a family friend:
A highly paid professional in NYC, athletic and healthy, died suddenly in his early 30s leaving behind a non-professional spouse and two small children. No life insurance. Only a survivor benefit from Social Security. Any insurance would have been better than none.

There is a mindset that sees any and all insurance as "a waste". The salience of events like where an insurer refused to pay are then recalled. Also incidences of clear "ambulance chasing" by plaintiff lawyers.

When in fact what insurance is is protection against catastrophe. The thing that you really could not afford to happen. That's why disability insurance is both crucial, and so expensive and hard to get right.

You self insure for the low cost eventualities (ie have a high deductible) but buy a very high level of protection for the catastrophes. If you are in a car accident that leads to a crippled child - and thus potentially decades of healthcare and lifestyle aid - you want to be covered. And have a big insurer fighting for you.

Term life, guaranteed level premium, happens to be an incredibly cheap product. Buying a good level of protection is just not that expensive for a middle class person in their late 20s-30s (usually the period when insurable need peaks) if they are in good health. To cover that critical period sort of age 30-55 when family need for protection is high, and personal assets have not built up.

[Valuethinker]

Most of us have seen/ heard of cases where a colleague or acquaintance did not have enough insurance, and as a result their family really suffered. Term life is very cheap (at least for those in ordinary health, in their 30s and into early 40s).

Example of a family friend:
A highly paid professional in NYC, athletic and healthy, died suddenly in his early 30s leaving behind a non-professional spouse and two small children. No life insurance. Only a survivor benefit from Social Security. Any insurance would have been better than none.

There is a mindset that sees any and all insurance as "a waste". The salience of events like where an insurer refused to pay are then recalled. Also incidences of clear "ambulance chasing" by plaintiff lawyers.

When in fact what insurance is is protection against catastrophe. The thing that you really could not afford to happen. That's why disability insurance is both crucial, and so expensive and hard to get right.

You self insure for the low cost eventualities (ie have a high deductible) but buy a very high level of protection for the catastrophes. If you are in a car accident that leads to a crippled child - and thus potentially decades of healthcare and lifestyle aid - you want to be covered. And have a big insurer fighting for you.

Term life, guaranteed level premium, happens to be an incredibly cheap product. Buying a good level of protection is just not that expensive for a middle class person in their late 20s-30s (usually the period when insurable need peaks) if they are in good health. To cover that critical period sort of age 30-55 when family need for protection is high, and personal assets have not built up.

Mind remembers my own anecdote.

After the 9-11 catastrophe, US government stepped in to settle all the Twin Towers claims. Made an offer of something like $1m to every family so affected (it was $250k to $1m range, I think, depending on circumstances).

Some of the wives of the Cantor Fitzgerald traders said no. Their husbands had been on $500k pa+. Although to an uninformed person they would sound greedy (some of the wives had JDs or MBAs), posters here would better understand the situation.

But what did strike me was "what amount of personal life insurance did these guys have"? (It was, entirely, men, I believe). Because a Boglehead approach would suggest $2.5m-5m each, say.

I imagine they had employer provided cover of 1-2x basic salary. But basic salary would have been maybe $100k?

Had they been consultant doctors (specialists) I would imagine they might well have had that kind of cover ie millions. But for Wall Street people? Maybe not.

[majiaknight]

If you buy from Protective Life through Costco, you’ll be getting an absolutely excellent product.

Costco’s general policy is to hold prices low by minimizing the mark up on the goods that it sells.

I know for a fact that the same “low price” philosophy applies to the life insurance that Protective sells through Costco, and the Costco “mark up” is well less than the regular agent commission.

Yes, they have discount (or lower premium) for the first 5 years.
I used Costco for my vehicle insurance as well (but they did not provide home insurance to me due to the fire zone rating).
Thanks again.

+1 DP. Bought $1M 20y term from Protective Life through Costco in 2016 and it costs me $36/month after 5 years since 2021. IMO $1M should be good enough to cover one child and spouse expenses in VHCOL area. Also, you're eligible for social security after 20 years since you're mid-40s now.