Can we talk life insurance?

[Bernadine]

We had our second meeting with our financial advisor last night and discussed life insurance.  He recommended a mix of term and life, which I think is good.  But he recommended $1mil in coverage for each of us.  Which just seems excessive.  We gross about $150k/year.  I owe $300,000 on my house, which is in my name only, and he owes about $70,000 on his house, which is in his name only.  We could both afford our mortgages separately if something happened to one of us, although it would be a stretch.

I have no idea what is a good amount to have.  I have a policy through work which pays out about a year's worth of my salary.

[lightbulbsun]

He should probably have more, since he has a kid, but I don't think you need that much. H and I don't have kids, and we each have $200k, which is what we owe on the mortgage.

[leeann]

If you don't have children, I think $1Mil seems excessive. H and I always just use what we get through work, which is usually 1X salary. Enough to bury the deceased and have a lump leftover, but nothing that would make either of us wealthy or anything.

[Deleted]

sure. we have kid(s), so we each have $2.5m, plus my work covers 200% of my salary.

i understand the general thinking is as follows: when younger and accumulating retirement savings you need to account not only for maintenance of daily expenses (and replacement of lost income from the decedent), but the lack of contribution to what will presumably be mutually used retirement benefits, as well as death-related expenses. for me, with a kid, the income replacement was a bfd because even if we kick it, she needs to be sheltered, fed, and clothed.

typically, you're going to get recommendations for about $1m more than you think you need. ha.

[Deleted]

xH and I are both supposed to have $500k in life insurance for DD's benefit. I have my policy in place. xH, on the other hand, does not.

[lola]

Generally speaking I think the recommendation is 5 to 6 times your annual income. We bought 5 times for my H and we bought 6 times for me. We don't have kids, or a mortgage but if I died my H would have a much bigger struggle financially than I would have if he died.

Two million is a LOT but I guess I'd look at the cost difference in $2m and what say $1m total. If it's not that much, why not have the additional.

[CurlyQ284]

I think we have $500K on DH and maybe $300K on me. He has more so I can support SDs if something happened to him. Also so we wouldn't have to worry about the mortgage or daycare or anything.

[VeryViolet]

DH and I have been looking into this too and I really need to get this nailed down ASAP. I want enough that he feels super guilty sleeping with anyone else ever again but they don't have a good estimate for that. I did an online calculator through USAA and the number that was suggested seemed really high but I guess with mortgage, lost income, college for the kid, etc. it was reasonable.

[mansplain]

I have about $1mil. and DH has around $500,000. We have one kid; we both work and could cover all expenses on 1 of our paychecks. The policy payout would cover the house and any other expenses plus leave a lot for private school/college for our son. The policies were pretty cheap, so it wasn't a big deal to get that much coverage for us.

[MixedBerryJam]

I think it sounds like a lot, by your description of your situation. We came up with a number that would keep the surviving spouse and kids in the lifestyle to which were were accustomed (granted, we generally lived far below our means). We calculated how much it would cost to hire a nanny and housekeeper while the kids were young, pay for primary education (the kids were in private schools) and pay for college in full, pay off the mortgage, and the day-to-day expenses (food, school supplies, activities, etc.) until the kids graduated from college and insured us each for that much (I have been pretty much sahm since the kids came). Oh, and funeral expenses. My husband's service could not have been simpler and it still totalled over $7K. A funeral can easily be $25 or more.

[cuddlyevil]

We don't have enough. The last time we looked into it, our insurance agent suggested about $887,000 for H (this would be in addtion to his policy through work which is worth about $100k). But H didn't go for it because back then he a) didn't think we could afford it and b) was under the "What do I need it for? I'll be dead" mindset.

We need to revisit the issue again though, but I don't know that we'd go as high as $887,000.

[mrsgoontz]

We don't have kids so we have enough to pay off the house and H's school loans and enough to comfortably live off of for a year if we don't want to go back to work right away. We also each have a policy of one years salary through work.

Once we have kids we will probably double our amount.

[Bernadine]

So, the thinking on whole life insurance is that we would draw on it if we lived long enough to spend down our retirement funds.