I saw this being discussed on another board and figured I'd ask whether you all use the standard 10x salary rule, or if it differs if you're a relatively high earner?
DH and I both have policies that seem like high dollar amounts, but each is only about 3x our annual salary. Then we each have some coverage through work, but that still puts us under 5x salary.
I wish we'd gotten more coverage 5 years ago when it was probably cheaper, but getting more coverage now would still be cheaper than if we did it in 5 or 10 years. This is colored by the fact that our youngest just turned 2 and we may end up having another kid - we have many years of small child costs ahead of us, and I wouldn't want one of us to have to worry about money at all if we were suddenly a single parent of 3-4 young kids.
So how do you think about life insurance coverage?
Post by mustardseed2007 on Jul 22, 2019 12:08:22 GMT -5
I have 6 times my income currently.
DH has 6 times also. I have 4x as much life insurance as DH because I earn more, but his premium is more than mine b/c of an underlying physical issue (he had to have part of his lung removed when he was in college).
My income has gone up quite a bit, which is the reason it's not 10x my income, but the amount of insurance is more than enough to pay off my house and hopefully pay for the kid's school and taxes and stuff so DH could stay in the house if I died.
This is a sore subject in our house. DH refuses to get a life insurance policy. His parents told him them they were a scam and he believes that 100%. Insurance agent, his investment guy, or I can change his mind. He feels that if something happens to him that he has enough in investments to cover things. He has enough for his salary for 3 years. At our last investment meeting we went round and round about that not being enough and he needing to apply for even a 250K life insurance policy to help cover stuff but still no.
I on the other hand have over done my life insurance 20X salary. I didn't list DH as my beneficiary because I don't trust him to not blow the money plus the amount plus my assets put my estate into taxable range for Oregon so some of the money will need to be used for taxes if it comes to that. My thought is that it is enough to pay the house off and upkeep for DD until she is 28, college tuition, gymnastics $$$ and still a lot leftover. I also pay $350 a year for the policy and it expires when I'm 50 so a good deal in my mind. The cost difference between 500K and 1mil was 20 a year which is why I went with the 1mil. I will choose a much smaller policy before I turn 50 as DD will be college age by then.
Post by covergirl82 on Jul 22, 2019 12:10:23 GMT -5
DH and I have $500,000 each. We got the policies in our mid-20s, which was good because it was before I had the kids and 2 C-sections. We picked $500,000 because we wanted to have enough to cover the house payment (because we weren't making much money back then, so any life insurance through work wouldn't have covered much), some for college savings/expenses for 2-3 kids (because that's the number of kids we had planned on, but we don't plan on paying their entire college tuition, if they decide to go to college), and some for medical / end of life expenses. We each have 1x our salary at work.
My personal plan would be to use DH's work life insurance for paying down the house and then refinancing the rest, which would be a smaller payment than our current payment. (Plan A would be to stay in our current house so it would be less change for the kids; Plan B would be to move to a smaller place/condo if our current house got to be too much for me to maintain by myself.)
ETA: My annual cost is $234 and DH's is $534. Our policies expire in about 8 years. We'll reevaluate amount of coverage at that time.
186momx, that's crazy. Is it possible to take out life insurance on another person without them consenting?
I just got off the phone with the guy from SelectQuote. I'm still really cheap to insure, so I think it's a no-brainer for me to pick up some more coverage for the next 20 years. DH, being 43 years old and a guy, would have annual premiums that are about 3x mine, so we'll have to decide how much coverage to add, and for how long.
I wish we would have taken out larger policies when we first got them and were younger and cheaper to insure!
When I was working, I carried 7X my salary, and DH had me covered for another 2X his salary. Then he had 4X his salary and I had him covered for another 2X my salary. We maxed out what our companies offered.
Now that I'm not really working much, I don't have life insurance. He could easily replace me from a childcare perspective without much of an issue. We have plenty saved for funeral expenses, and I have a decent retirement account that would go to DH and the kids. We have about 4X DH's salary for him. I think we should get more, but when we went out on his own, it was all we could afford because he's a smoker (vaping).
I have 3.3x my salary in an individual policy and 2x my salary through work. DH has 5x his salary in an individual policy and 3x (I think?) salary through work plus 10 years of salary replacement at 50% of salary (if I understand it correctly). (DH's company at the time we got the policies only offered him $50k in coverage.)
Both policies are 25-year policies with another 21 years on them.
We got our individual policies when we just had one child and much cheaper house. I've waffled about whether we need to increase our individual policies, but at this point, DH think's we're probably pretty set.
I have about 5x my salary on my own and then another small policy through work. I had nothing up until a couple months ago. Unfortunately, I based my amount on what I could afford each month vs. any real salary math. My financial advisor helped me figure out what made sense for my monthly budget and what would actually help the girls. Now I just have to get my act together and make a trust and all that stuff so that the money gets dispersed to the kids correctly and XH deals with it correctly. That and a will is up next on my adulting checklist. XH and I had nothing like that set up, which is terrible, but also means I can just set up my own however I want now.
twinmomma- I always advise people to have one trustee of the trust who absolutely will not have physical custody of the kids. And I wouldn't trust your XH to act in anyone’s interest but his own. For example, if this money is sitting there and he has other kids, you can bet his college plans for his other kids will be to use the trust you established for your girls. He might even guilt the girls into agreeing to that arrangement.
The trustee just needs a backbone, common sense, and your child’s best interests at heart. There’s no special training needed.
Post by sandandsea on Jul 22, 2019 15:17:40 GMT -5
We have 5 & 7 times our salaries. Most of the policies are through work so we would have to redo it if we left our companies. DH’s stock also immediately vests upon death so that would be another 3-4 times his salary. Our salaries are about even (excluding his options) so we’d still have a pretty high income if one of us did die. It would more than pay off the mortgage and for kids college at this point so we feel okay with that.
We are actually thinking of reducing our life insurance. Good idea? No? We have a college fund set up for the kids and they will be going to college in the next 2-4 years. Our house would be paid off in a few years, probably 5, and we don't have a lot left. We were actually just discussing maybe just 2xs our salary. That would pay off the house, and leave some to cover any additional college cost with some left over. Plus we have a small amount at each job. It seems from Dave Ramsey, at some point you are self insured? When you have no debt and you have investments? Advice appreciated, because I sent DH to work this week to check on the life insurance he took out through them - is it separate from the company, so do we need more in case of a job loss, etc...
rere - what you’re describing is why I don’t have insurance. DH does not need to replace my salary - I’m not working enough. So he really just needs to cover part time child care and house stuff (cleaner, errands, etc) which he can easily do on his salary. Insurance for me would be a waste.
So I don’t think you’re wrong to reduce it. I think lots of people overinsure.
rere, that is the idea with term life insurance. That you get the term until the point that you would be self insuring like you said house and debts are paid off, kids out of the house, money in savings for funeral expenses, and investments to live off or in retirement. That is why most are somewhere between 10- 30 year term to get you where you want to go. The whole point of insurance is to take risk off of you, so once you don't have risk you don't need insurance or you self insure. That is kind of the idea with deductibles too. Honestly, I will be looking more strongly at long term care policies once I am in my mid 50's or so.
However, be careful of canceling old policies and taking out new ones because now you are older and typically they are more expensive. A good life insurance person will see if you are at the right amount, but typically will not tell you to cancel an older policy.
rere, I definitely think it's specific to your situation, and it sounds like you're in good shape given your life stage and mortgage situation and kid age and everything.
My issue is mainly that our kids are so little and that there are 3 of them. Between childcare and kid activities, then eventual college, and imagine any of them has any issue that would cause us to want to switch them to private school or something....and we're easily talking about over a million dollars I think. For our house, we owe less than half of what it would sell for, but we live in the land where an older average size house costs a million dollars, too. So I'm leaning toward being over-insured, but it sounds like you're in a very different (and good!) situation.