Term life insurance question

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silverskates
Posts: 243
Joined: Thu May 12, 2016 11:19 am

Term life insurance question

Post by silverskates »

My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
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cchrissyy
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Location: SF bay area

Re: Term life insurance question

Post by cchrissyy »

a $3 monthly difference is absolutely nothing.

yes, i would pay that much to have full control of the policy, and lock in the price, and be certain that covrage won't end when i change employment.
comfortable being all stock until age 40, now working towards 60-20-20 us-intl-bond
Rex66
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Joined: Tue Aug 04, 2020 5:13 pm

Re: Term life insurance question

Post by Rex66 »

The term at work continues to rise and cost isn’t likely even guaranteed

A level term would be

Get the term outside of work
joverby
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Joined: Sat Sep 18, 2021 7:14 pm

Re: Term life insurance question

Post by joverby »

silverskates wrote: Tue Oct 12, 2021 1:37 pm My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
2.5 mil net worth, wife that has a career to return to, and social security benefits that cover all annual expenses? Sounds like you don't really need life insurance. Or maybe you don't need as much.

I'm a huge fan of insurance OUTSIDE of work. I would hate to be in a situation where I'm uninsurable due to health reasons, then I loose my job-based life insurance, and then its impossible to get insurance. Also the rate increases are hard to predict. Much better to lock in your rate and then there are no worries.

I would definitely lock in a 10 year policy, and maybe re-evaluate if you need as much as you have.
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Stinky
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Location: Sweet Home Alabama

Re: Term life insurance question

Post by Stinky »

Definitely term life outside of work.

Since the youngest is 7, you might want to go for 15 years. It won’t cost all that much more than 10 year.
It's a GREAT day to be alive! - Travis Tritt
exodusNH
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Re: Term life insurance question

Post by exodusNH »

silverskates wrote: Tue Oct 12, 2021 1:37 pm My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
It will rise every time you hit a new 5-year age threshold. And while you might be able to keep it if you leave your job, my understanding based on past posts is that you usually have to convert it to whole life policy, which you absolutely don't want to do.

If your company offers a "free" amount, usually 0.5x-1.5x salary, take that. "Free" in quotes because if you don't take it, they probably won't increase your salary for the cost.

Then buy a separate, level term policy for the amount you need over the time you need it, which is probably 10-15 years. The work policy is just gravy at that point.

Remember, though, losing you might drive up household expenses since your wife might a) need to work and b) need to arrange childcare, which is very expensive. Your wife would also be filing as head of household and be subject to less favorable tax brackets.

In a similar vein, losing her would also substantially increase your expenses right now because of the childcare you'd have to obtain. You might consider a small policy on her to cover those costs.

You should also look into disability insurance. That's a bigger problem for most young-ish people than death.
informal guide
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Re: Term life insurance question

Post by informal guide »

Your out of pocket cost may actually decline. Term insurance over $50,000 (IIRC) purchased or provided through your workplace generates taxable income that is based on out of date tables. Particularly for folks older than about 50, this taxable income (which gets reported in your W-2) is significantly higher than what you pay. So if you buy term separately, in addition to gaining portability, you may actually save money.
niagara_guy
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Re: Term life insurance question

Post by niagara_guy »

With a NW of 2.5mm and social security your dependents could survive without buying life insurance. It's up to you to decide if/what you need. I don't like employer life insurance because if you leave the employer you might not be able to get insurance on your own (particularly if you have health issues). Shop for term insurance.
exodusNH
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Re: Term life insurance question

Post by exodusNH »

niagara_guy wrote: Tue Oct 12, 2021 2:26 pm With a NW of 2.5mm and social security your dependents could survive without buying life insurance. [...] Shop for term insurance.
That's not necessarily true -- if most of the worth is in his 401k/IRA and house, it's not readily accessible. 80% of my net worth is tied up like that.
Onlineid3089
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Re: Term life insurance question

Post by Onlineid3089 »

I'm not a huge fan of workplace life insurance beyond whatever may be offered for free. For about $3/mo it isn't even a question if an individual policy is better, in my opinion.
vrr106
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Joined: Wed Feb 11, 2015 10:27 am

Re: Term life insurance question

Post by vrr106 »

silverskates wrote: Tue Oct 12, 2021 1:37 pm My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
Based on your age and net worth, assuming you plan to work for another 10 years I would say you have something like $2M or more gross earnings potential left. I look at term life as something to replace that in the event something happens to you and I personally went for a 15 year term with that amount of coverage. My employer coverage doesn't come anywhere close to that.
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SmileyFace
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Re: Term life insurance question

Post by SmileyFace »

exodusNH wrote: Tue Oct 12, 2021 2:42 pm
niagara_guy wrote: Tue Oct 12, 2021 2:26 pm With a NW of 2.5mm and social security your dependents could survive without buying life insurance. [...] Shop for term insurance.
That's not necessarily true -- if most of the worth is in his 401k/IRA and house, it's not readily accessible. 80% of my net worth is tied up like that.
+ there are FOUR kids. And they may want to go to college. :)

OP - I would go with the external term for some extra spare change.
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anon_investor
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Re: Term life insurance question

Post by anon_investor »

silverskates wrote: Tue Oct 12, 2021 1:37 pm My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
You should get a separate policy. One good reason to use a work policy is if you have a medical condition that might greatly increase the price of personally obtained term life insurance vs the group rate you may get at work.
Topic Author
silverskates
Posts: 243
Joined: Thu May 12, 2016 11:19 am

Re: Term life insurance question

Post by silverskates »

Thank you for all the great responses. I am in the process of looking into Costco's Protective Life Insurance option. I already ran quotes through term4sale and zander and Costco is still less expensive.
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Stinky
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Location: Sweet Home Alabama

Re: Term life insurance question

Post by Stinky »

silverskates wrote: Tue Oct 12, 2021 4:21 pm Thank you for all the great responses. I am in the process of looking into Costco's Protective Life Insurance option. I already ran quotes through term4sale and zander and Costco is still less expensive.
I’m not surprised that you’re finding that the Costco/Protective product has very competitive rates.

I know for a fact that the commission paid to Costco is lower than the normal commission paid to an agent on a term life sale. Protective then rolls that value back into the product to reduce the premium rate.
It's a GREAT day to be alive! - Travis Tritt
Valuethinker
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Re: Term life insurance question

Post by Valuethinker »

silverskates wrote: Tue Oct 12, 2021 1:37 pm My term life insurance premium through work is increasing in 2022 and I'm trying to decide if I should get a policy separate from my work just in case I lose my job and then something happens to me. I got quotes for a 10 year, term policy with the same amount of coverage I get at work and the cost is $33 more per year than I'm paying now. Should I go with the non-work policy to lock in the price for 10 years?

45 years old
4 kids - ages 7-15
No mortgage
No debt
2.5 million net worth
My spouse is currently a stay at home parent with plans to return to work in the next few years.
My Social Security survivor benefits if we got the family total would be more than our annual expenses.
Life insurance through work is worth very little. For all the reasons raised here. I don't count it in financial planning. I could easily see a need for $250k per child (ie $1m on your life). Enough to put each child through a 4 year private college (tuition, not living expenses?). I remember well what happened to the families of 9-11 victims-- people died in their peak earning years, and their lives were underinsured.

Given the number of children and presumed expenses (university etc) then you probably do need insurance.

I view term life as a form of diversification. In effect a fixed income investment that I never want to have a positive payout. Depending on your spouse's job, if any, there is a need to fund him/her for another 50 years + kids to end of college (likely).

I would absolutely go for the external policy at the trivial additional cost. Run don't walk because if you get a bad health diagnosis, you won't be able to do this affordably. Also there are exclusion periods and you don't want the policy not to pay out because insurer has smart lawyers.
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