 What's the best type of life insurance to buy? |
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kittykat1018 | How much life insurance? |
Married, no kids, will buy a house next year, anuual income = about 80K
Options:
1x annual salary - free
2 x - $9.44/month
3 x - $18.88/moth
4 x $8.32/month
5 x $37.76/month
Also, should I bother w/spouse insurance (about $5/month?) |
 |
 
floozy_niki
|
Well, just go through this with your advisor, imagine if you were to die/become totally and permanently disabled now, how much do you think it would cost to sustain your living/lifestyle?
e.g if you think that $36k is enough to cover for a year of expenses, then take this amount and multiply by how long you think you will need it for.
How long depends on how long you want to live, the mortgage loan term and if you have children e.g. You will need this insurance payout to last you for at least 20 years(usually).
Therefore, $36k *20=$720k
That calculates the amount of coverage that you would need.
Take into considerate, if any, the assets you intend to liqidate in case of death/TPD. That could include existing investments and assets like car, house, gold.
You would be looking at the sum that you need after deducting the assets. That is the amount you ought to be insured for.
Spousal insurance is bought when the spouse has economic value, ie contributing to the household income. It's best to buy if you don't want to be burdened by heavy financial responsibilities on your own. |
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Bright Future Penguin
 |
Hi, your friendly insurance guy here again.
I use a needs based method when discussing "how much" with my clients. I think formula methods do not address an individual's specific situation clearly enough. Here's my method:
1. Do the clients want to fund a kid's education? You don't have kids, so your answer is probably no, so zero need here.
2. Cash Needs. I recommend $15,000 for funeral costs, 3-6 month's of expenses for an emergency fund, enough to fully pay off any outstanding debt like mortgages credit cards, car payments, student loans, etc. Total all that up and you arrive at the amount for immediate Cash Needs.
3. Income Replacement. Here's the breakdown I use. For each $100,000 of capital you receive, you can invest it in a moderate portfolio and probably average a 6% return. (The goal is to have a fairly safe, consistent return here). At 6%, that $100,000 generates $6,000 per year in interest, or $500 per month.
Thus, $100,000 of capital to invest = a $500 bill of interest to your survivors per month.
Now, $80,000 divided by 12 months = $6,666.66 per month, or 13 and 1/3 $500 bills. Thus, to fully replace that would require $1,333,333 of capital. Determine if you want to fully replace your income for your survivors or not. Some folks only want to replace some of it, some all of it, and some want to replace none.
So we total the Education need (zero) plus the Cash need (the total of all those items) plus the income replacement ($1,333,333 to fully replace it) and you arrive at the total face value to purchase.
To get back to your original question, since your income is $80,000 and the most you can get through your company is 5 times that ($400,000) and we know that permanently replacing your income alone would require more than three times that, I suggest maxxing out what you can get through the company and making up the difference with personally owned life insurance.
And remember: When you leave that company, you can usually convert the policy to personally owned life insurance without having to prove, all over again, that you are insurable.
Best wishes. |
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Lewis P
 |
Most employers give you life insurance as part of the benefits package since it is very inexpensive. To supplement that insurance get at least 3 times your salary and make sure it is term which will cost very little. Also insure your spouse as well. |
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Ron@InsureMe
|
In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.
However, if you want to create an inheritance or make a charitable contribution, you should buy enough life insurance to achieve those goals.
If you have dependents, you should buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur replacing services you currently provide (for example, if you do the taxes for your family, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
Many pundits recommend buying life insurance equal to a multiple of your salary. For example, one advice columnist recommends buying insurance equal to 20 times your salary before taxes. She chose 20 because, if the benefit is invested in bonds that pay 5 percent interest, it would produce an amount equal to your salary at death, so the survivors could live off the interest and wouldn’t have to “invade” the principal.
I would recommend speaking to a competent insurance agent before securing a insurance policy. To check out the various life insurance types and options go to InsureMe below. It’s a web site that will give you the information required to make a decision on which policy is right for you. It also gives you the option to call local agents to get any of your questions answered. This service is 100% free and you are not obligated to buy anything. Hundreds of companies use this service, which makes it very easy for a consumer to find the best price for a specified amount of coverage in minutes. Policies start at as little as $3 per month.
Life Quotes: http://www.insureme.com/landing.aspx?Refby=614500&Type=life
Take care,
Ron – InsureMe |
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jay j
|
10 TIMES ANNUAL INCOME |
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dana_osmundson
|
Generally recommended to be 3x salary |
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insuranceguytx
|
The best thing you can do is to go visit with a licensed financial professional.
The quotes you gave are for term insurance. Chance are this insurance will disappear when you leave that employer. What happens if you get sick and have to quit work? Then you have no job and no insurance and worse - since you are sick, you may not be able to get insurance.
Term insurance also works well if you die during the term Most people don't. Only 3% of the term policies every pay a death claim. Term has its place but it does not work if you have a permanent need.
I just met a couple. She had a brain aneurysm burst at age 57. She is now 68 and has needed personal care for 11 years. This has depleted their savings. He has a small life insurance policy on himself but if he dies, she ends in a nursing home on Medicaid within a year. Not very good planning and not what either one wants. He needs a much larger permanent policy but at 71, smoker and not in good health, getting another policy will be tough.
My point is that employer provided benefits MAY be worthwhile but you really need a full financial picture to get a sense of where you are and what you need and whether the employer-provided insurance is good and needed.
Go talk to a pro.
Good Luck. |
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silverback487
|
Here is what I did...I wanted to make sure my life insurace would cover the cost of paying off mortgage, burial, outstanding debt, and also cover my annual salary for the minimum of five years.
Was in the range of 500,000 dollars for approx $40 month...this was term life.
My wife got whole life in the value of about $250,000 and is using that as a retirement vessle (by the time she retires it will have matured in cash value --unless we up it, and it will pay for its ouwn premiums). |
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Dwight D J
 |
In reverse order: Yes, get sposal insurance--that's too cheap to say "no" to.
Financial planners say we need 7x annual salary for life insurance, because nobody is easily replacebale. There's lost work, funeral bills, unpaid medical bills, and so on. Having said that, it's a large jump from 4x to 5x, so I might stick with 4x. |
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rahnside
|
I would recommend in between 5 and 10 times your annual income to answer your question
However it sounds like you are looking at the Life insurance through your job if that is the case then only get what they pay for without you putting any in 1x your annual income.
If you think you want more coverage then get an outside policy ether term (or whole life if you want to use it as a retirement vehicle) for the amount that will pay off any debts, final death and expenses, and provide an income for your family wife and when you have kids.
It will cost a little more this way but the rates will stay the same for a certain period of time and it would not matter if you changed companies because this would move with you.
If you want me to run some quotes for you to find out how much Life Insurance you would need then please send me an IM or email and I will run those for you.
A Life Insurance Specialist with Licenses Nationwide
Rahn Sidebotham |
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glibby3
 |
The standard industry answer is 10 times annual income. My philosophy is to make sure the remaining spouse is not left hanging in a financial sense. Make sure the insurance will cover all outstanding debts, especially the mortgage, and will leave the living spouse enough to live in a manner they are accustomed to while they adjust to the loss of a spouse and change in finances. If you plan on having kids then you should also add in the potential future college costs so that can be taken care of as well. |
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JNC
|
depends on where you live, if housing prices is going to 500k or more, you may want to buy 10X for now. You should review your life insurance plans every few years, or when there is significant life changes such as having a child, buying a house, or marriage. remember it's to protect and for the ones you love should, god forbid, something happens to you and you are the breadwinner for the family. |
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