Life insurance question

[Pilsy]

If I were you, yes, I would get another policy to supplement the work one. My work policy only pays out 1x my annual salary, and I'm pretty sure my H's is the same; we consider that insufficient. Just before our older daughter was born (so 7+) years ago, we set up a 30-year policy for him and a 20-year for me. I think they are worth $1M and $750K, respectively.

[goldengirlz]

Aug 6, 2021 14:39:10 GMT -5 Pilsy said:

If I were you, yes, I would get another policy to supplement the work one. My work policy only pays out 1x my annual salary, and I'm pretty sure my H's is the same; we consider that insufficient. Just before our older daughter was born (so 7+) years ago, we set up a 30-year policy for him and a 20-year for me. I think they are worth $1M and $750K, respectively.

So we’re actually okay on coverage. We have at least $1.5m on each of us. We buy the supplemental coverage through our jobs.

I guess the question is more about locking in a rate while healthy that won’t reset if/when we change employers. Should we be looking at private supplemental coverage (and whole vs. term) or does it not matter?

[Pilsy]

Gotcha.

My preference is to have my coverage separate from my employment, so yes, I would recommend getting a policy on the open market (and doing away with anything you have to pay for through work).

[ellipses84]

Yes, I’d get a supplemental policy outside of work ones and keep both. Sometimes the work ones will allow you to keep them after, but policies / companies can be changed by the employer, so I wouldn’t count on that alone. I recommend people get life insurance before any sort of genetic testing, too. There are usually options for policies that don’t require a medical exam, but the amounts are pretty low… like $50k payout for $30-50/month and then they’ll provide offers like pay $2/more a month for an extra $5k in coverage periodically. It much better financially to get a policy with medical exam, before any more major health issues.

[dr.girlfriend]

I got separate life insurance before I got pregnant, thanks largely to this board. I didn't want to count on having the same employer, and at that time I was the main breadwinner and also carried all the benefits.

[audry80]

yes, 100%. I have both and it's nice to not have to worry about changing jobs and losing coverage.

[mlkgls]

I would in your shoes and it’s actually one of my 2021 MM goals to find a 10 or 15yr term policy once I shed a few more of my pandemic pounds. I have about 1M through a supplemental work policy, have been with my employer for 20 years and have zero plans to leave, but there are no guarantees in life. Heck, they could just decide not to offer the benefit next year if so inclined. 

I have no idea how to go about obtaining it, but it’s on my To Do list. 

[ohgillian]

zaneyzoo

I think it’s important to have coverage outside of work, for the reasons you’re asking about.

[steamboat185]

We have a term policy (actually 2) on DH. The bigger one is set to expire in the next year or two when we pay off the mortgage. The smaller one will run until the kids start college. It was tempting to get more, but when we thought about what we actually might need insurance for it was to 1.take time off work 2. payoff the house 3. Ensure the kids have college funded. When we looked at what we have invested, “free” insurance through work, plus social security benefits, our number was smaller than we expected. Taking out one 10 year and one 20 year policy with staggered amounts also saved us several thousand over the policy term.

I get 6x’s my salary through work (supplemental and included). I can take it with me if I leave.

[dr.girlfriend]

Aug 6, 2021 17:29:42 GMT -5 mlkgls said:

I would in your shoes and it’s actually one of my 2021 MM goals to find a 10 or 15yr term policy once I shed a few more of my pandemic pounds. I have about 1M through a supplemental work policy, have been with my employer for 20 years and have zero plans to leave, but there are no guarantees in life. Heck, they could just decide not to offer the benefit next year if so inclined. 

I have no idea how to go about obtaining it, but it’s on my To Do list. 

I used selectquote.com and had a really good experience.  They were able to tell me that Prudential had a "more generous" height/weight chart, and in fact told me the weight I needed to reach to get their preferred rate.

And as a general PSA, I would tell people to not wait for the "perfect" time.  We were waiting for my husband to be smoke-free for five years, and then a few months before that landmark he got diagnosed with diabetes and basically became uninsurable.

[mlkgls]

Aug 6, 2021 18:20:56 GMT -5 dr.girlfriend said:

Aug 6, 2021 17:29:42 GMT -5 mlkgls said:

I would in your shoes and it’s actually one of my 2021 MM goals to find a 10 or 15yr term policy once I shed a few more of my pandemic pounds. I have about 1M through a supplemental work policy, have been with my employer for 20 years and have zero plans to leave, but there are no guarantees in life. Heck, they could just decide not to offer the benefit next year if so inclined. 

I have no idea how to go about obtaining it, but it’s on my To Do list. 

I used selectquote.com and had a really good experience.  They were able to tell me that Prudential had a "more generous" height/weight chart, and in fact told me the weight I needed to reach to get their preferred rate.

And as a general PSA, I would tell people to not wait for the "perfect" time.  We were waiting for my husband to be smoke-free for five years, and then a few months before that landmark he got diagnosed with diabetes and basically became uninsurable.

I know, I know and thanks for the recommendation. My mini goal is to have it done by my birthday this fall!

[dr.girlfriend]

Aug 6, 2021 18:41:31 GMT -5 mlkgls said:

Aug 6, 2021 18:20:56 GMT -5 dr.girlfriend said:

I used selectquote.com and had a really good experience.  They were able to tell me that Prudential had a "more generous" height/weight chart, and in fact told me the weight I needed to reach to get their preferred rate.

And as a general PSA, I would tell people to not wait for the "perfect" time.  We were waiting for my husband to be smoke-free for five years, and then a few months before that landmark he got diagnosed with diabetes and basically became uninsurable.

I know, I know and thanks for the recommendation. My mini goal is to have it done by my birthday this fall!

Yeah, sorry, wasn't trying to be a nag.  Just think it's worth maybe calling and finding out...you may actually already be in the preferred weight class.  A similar thing happened to my brother-in-law...he was diagnosed with a precancerous mole and then could not get insurance.  And then he did end up passing away young from an unrelated cancer.  Fortunately my sister was financially okay without insurance.

[minzy]

This might be MM201, but at a certain net worth you may not need it.

Our outside of work 10 year term policies expired this past winter, and we let them go. My husband does still have some coverage through his job, but I just declined it when restarting mine. We already own the house and cars and have retirement and college savings going and a cushion. And if one of us dies anytime soon that’ll be one less person to spend what’s left. 😒

My mom had a life insurance policy of which I was a beneficiary, and I appreciated that. (She died when I was 17, and it got me partway through law school.) That said, I’m in a much better financial situation now than she ever was, so I don’t think it’s imperative for us to have life insurance at this point…

[minzy]

dup

[mlkgls]

Aug 6, 2021 21:03:30 GMT -5 dr.girlfriend said:

Aug 6, 2021 18:41:31 GMT -5 mlkgls said:

I know, I know and thanks for the recommendation. My mini goal is to have it done by my birthday this fall!

Yeah, sorry, wasn't trying to be a nag.  Just think it's worth maybe calling and finding out...you may actually already be in the preferred weight class.  A similar thing happened to my brother-in-law...he was diagnosed with a precancerous mole and then could not get insurance.  And then he did end up passing away young from an unrelated cancer.  Fortunately my sister was financially okay without insurance.

I didn’t take it that way. I appreciate the nudge, although it sounds like I may have already screwed myself since I’ve had a colon polyp removed that is technically considered precancerous. Bummer. At least if I did, I still have my work policy. PSA: don’t put off your colonoscopy. It’s really no bid deal. 

[dr.girlfriend]

Yeah, I guess I should not have said "uninsurable" for either of them -- more like "it would cost more to insure them than it was worth given the financial risk of their deaths at the time," if you know what I mean. My BIL and sister both made equally high salaries and had no kids, so she knew she would be okay although of course the idea of her husband dying at 50 was not even remotely on her radar. At the time we were looking I was the main breadwinner for our family as well, even though things have evened up over the years. But definitely I have the salary to carry my family alone if necessary. I was able to get a proportionately small (I think $100k? Maybe less?) insurance policy on my husband through my work without any medical info on him being necessary.

[simpsongal]

magma, thank you for sharing. I really need to be better about self exams.

re- life insurance, ditto OP suggesting you get it apart from work. DH and I also wrestle re: the term. We only signed up for 20 yr terms, which lapse when we're ~49. I think we could get extended terms at low rates (knock on wood, still healthy), we just haven't gotten around to it. But agree w/ minzy, that at a certain point you're self insured.

Another PSA - NEVER ACTIVELY CANCEL LIFE INSURANCE, just stop paying (this way you can take advantage of the grace period). My father cancelled his life insurance 1 month before he died. If he had just stopped payment he would have fallen into the grace period and my mother would have collected

[ohgillian]

Aug 6, 2021 22:03:54 GMT -5 minzy said:

This might be MM201, but at a certain net worth you may not need it.

Our outside of work 10 year term policies expired this past winter, and we let them go. My husband does still have some coverage through his job, but I just declined it when restarting mine. We already own the house and cars and have retirement and college savings going and a cushion. And if one of us dies anytime soon that’ll be one less person to spend what’s left. 😒

My mom had a life insurance policy of which I was a beneficiary, and I appreciated that. (She died when I was 17, and it got me partway through law school.) That said, I’m in a much better financial situation now than she ever was, so I don’t think it’s imperative for us to have life insurance at this point…

I agree that at a certain net worth you're arguably self-insured, but I think that's a pretty high net worth. It's one thing for a spouse to drop dead; DH and I could afford that no problem, even without life insurance. But it's another thing entirely to go through a protracted illness where a spouse lives, ill, for several years -- several years of reduced or no income for one and maybe a lot of unpaid leave for the other, years of co-pays and co-insurance, and paying for house modifications for wheelchairs maybe, etc. You can go thru a lot of money that way. 

[awkwardpenguin]

A few things.

It is a best practice to have life insurance that is not connected to your employment, and you should get it when you are young and healthy. Almost any medical condition will cause your premium to go up and many medical conditions will cause you to be uninsurable so it is best to lock in private coverage as soon as you reasonably can. In your situation goldengirlz, I'd be pretty surprised if you can get life insurance on the private market for your H at this point.

There is definitely a point where you are self-insured. Look at your SS disability benefits and SS survivor benefits - they should be factored into any "do we need additional life insurance" calculation. I agree that a combo of terms and amounts can be helpful in ensuring you are not overinsured, although sometimes it doesn't change the price much.

DW and I each have $1M policies with 23 years left, our kids are 4 and 6, and we are nearing the point where we can lower our policy amounts, at least on me. My company allows you to lower the policy amount one time during the term and pay a reduced premium for reduced coverage. I can't just reshop my policy because I'm totally uninsurable due to my medical history in the intervening years. So we just have to approximate when we can drop the policy amount and when we can drop it entirely.

[ohgillian]

Aug 9, 2021 14:58:05 GMT -5 awkwardpenguin said:

My company allows you to lower the policy amount one time during the term and pay a reduced premium for reduced coverage. I can't just reshop my policy because I'm totally uninsurable due to my medical history in the intervening years. So we just have to approximate when we can drop the policy amount and when we can drop it entirely.

I would say this is a helpful feature to look for when shopping for policies. Mine doesn’t offer this, which I know because I called and asked a while back. Although actually I may have just asked about shortening the term so maybe I should re-check.

[goldengirlz]

Follow-up questions:

How much do you pay for life insurance?

And at what point would you think about self-insuring?

We’re in pretty great shape financially, and most likely if something happened to one of us, the other would sell our house in a VHCOL area and move closer to our respective families (where real estate is cheaper.) That alone would free up funds. We both have high-paying jobs (which is different from even five years ago, when he out-earned me 3:1 — now I’m technically the breadwinner) so I’m less worried about not being able to support myself and our child. But of course, things could always change and an expensive, protracted medical issue could take a bite out of our savings. I’m also more confident about his long-term earning potential than mine.

[ohgillian]

Aug 12, 2021 15:13:08 GMT -5 goldengirlz said:

Follow-up questions:

How much do you pay for life insurance?

And at what point would you think about self-insuring?

We’re in pretty great shape financially, and most likely if something happened to one of us, the other would sell our house in a VHCOL area and move closer to our respective families (where real estate is cheaper.) That alone would free up funds. We both have high-paying jobs (which is different from even five years ago, when he out-earned me 3:1 — now I’m technically the breadwinner) so I’m less worried about not being able to support myself and our child. But of course, things could always change and an expensive, protracted medical issue could take a bite out of our savings. I’m also more confident about his long-term earning potential than mine.

I don't know. I was really ready to a few years ago and the board told me not to, and now I feel gun shy about doing it. Our assets PDQ are about 7x income, and there's probably no reason not to do it at this point, esp because we pay a lot due to pre-existing conditions.

We did recently drop a supplemental policy that was only on DH, but we still have $700k term on both of us. 

[mlkgls]

ohgillian, do you include home equity and retirement when deciding if you’re able to self-insure? I’m about there, but 90% of it is tied up in the house or retirement funds so it feels a little bit like Monopoly money to me.

[awkwardpenguin]

We pay $1520/year for me and $432/year for her for $1M policies. DW is the breadwinner, and I won't consider us self-insured for her income until we reach an asset level of something like (Current Expenses-SS Survivors Benefits)*33 and we also have college fully funded. That is...a ways off. But for me it's questionable how much insurance I really need, since we'd need to replace my childcare but not my income. I haven't figured it out yet.

[ohgillian]

Aug 12, 2021 17:32:17 GMT -5 mlkgls said:

ohgillian, do you include home equity and retirement when deciding if you’re able to self-insure? I’m about there, but 90% of it is tied up in the house or retirement funds so it feels a little bit like Monopoly money to me.

I’m not an expert by any means. I personally wouldn’t consider home equity because I don’t want to have to sell the house if one of us dies. But I think the retirement accounts are fair game in doing the math to see if you have enough to stop paying for life insurance. Most of our non-house assets are retirement, or college.

This is where I come back to: we could afford for one of us to have died yesterday. But I don’t know the financial ramifications of, say, an ALS diagnosis. Which is why even though we pay $300/month, I keep paying it.

[goldengirlz]

Aug 12, 2021 19:38:02 GMT -5 ohgillian said:

Aug 12, 2021 17:32:17 GMT -5 mlkgls said:

ohgillian, do you include home equity and retirement when deciding if you’re able to self-insure? I’m about there, but 90% of it is tied up in the house or retirement funds so it feels a little bit like Monopoly money to me.

I’m not an expert by any means. I personally wouldn’t consider home equity because I don’t want to have to sell the house if one of us dies. But I think the retirement accounts are fair game in doing the math to see if you have enough to stop paying for life insurance. Most of our non-house assets are retirement, or college.

This is where I come back to: we could afford for one of us to have died yesterday. But I don’t know the financial ramifications of, say, an ALS diagnosis. Which is why even though we pay $300/month, I keep paying it.

When I run the numbers I was quoted online (just for me), I’d be paying $36,000 over 30 years for an $880k policy. If I invested those funds, using historical returns, I’d have something like $210k in 30 years (*I realize this also assumes a lump sum investment, which I wouldn’t be making with life insurance payments.) So the numbers seem to favor life insurance by quite a bit, even though I could live another 60 years, for all I know.

On the other hand, if I use the formula that awkwardpenguin posted, then we’re actually at the point where we don’t really need it and could think about investing instead for maximum flexibility. I’m actually more worried about the cost of long-term care when I get older than the possibility of dying young and leaving H with only his income (which is enough to support himself and DD.)

Decisions, decisions.

[awkwardpenguin]

Just to clarify, that's (Annual Current Expenses - Annual SS Survivor Benefits)*33. I wasn't clear in my post.

[goldengirlz]

Aug 13, 2021 10:09:14 GMT -5 awkwardpenguin said:

Just to clarify, that's (Annual Current Expenses - Annual SS Survivor Benefits)*33. I wasn't clear in my post.

Oh, ha. Then, nope. We’re about halfway there. Well, that helps the decision!

[mommin]

DH is the sole breadwinner and we have kids as young as 7. We got 30 year policies when we were 31/30 and they were plenty then. Now, not so much. We’ve kept those policies and now supplement with employer health insurance. They provide 1x his salary and we add 2x more for about $30/month. We also added dependent life for me $100k and the kids $15k each for a total of about $13/month. There is comfort in knowing that even if DH is without work for one day we will be covered to some extent by our own plans.

The policies we have privately ($500k for DH and $250k for me) seemed huge when we got them but a decade and two more kids later they aren’t sufficient. They will be great if we need them and don’t have the employer option to supplement but we also have a large retirement and savings at this point that would help make up the difference. At age 60, if DH is still working, we won’t mind if our term life insurance lapses since we will have more than enough in retirement at that point to provide for a sole beneficiary.