How do you decide how much life insurance to carry?
Every other Monday, I answer a question or two from readers. Got one for me? Send me an email!
I've been researching life insurance. My husband and I each have a bit (me through a whole life policy my parents purchased when I was a child; him a policy that his employer pays for that provides 1x his annual salary), but now that we have multiple children, we think it would be helpful for us to have more than that.
Do you have any thoughts on life insurance - how to find the best quotes (wouldn't it be great if life insurance companies just published their rates instead of making you go through a whole long process just to get a quote!) and how you've figured out how much you need?
Any thoughts on long term disability or other types of insurance along those lines? And/or whether or not you purchase any life insurance for your children (because it's so much cheaper to get a policy set up when they're young than it would be for them to purchase later on!)?
Thanks for any thoughts you can offer!
-Alison
Yes, it would be so much handier to shop for insurance if you didn't have to apply first. I'd like to buy it off the shelf, like you buy a box of cereal.
(Another similarly hard thing to shop for: mattresses. Oh, how I hate that!)
Sadly, I'm not aware of a simpler way to shop for insurance, although perhaps some readers will have ideas for you.
Anyway! We currently have life insurance through the same company that provides our home and car insurance. We switched to that company a few years back after realizing that we were over-paying a bit for our home and car insurance.
When we choose life insurance amounts, we try to take a realistic look at what either of us would specifically need if the other spouse died. I think it's easy to buy into the idea that you need to carry a multi-million dollar policy, but that has not seemed necessary to us.
If I'm the one left on my own, here's our plan:
If I didn't have to pay a mortgage, it wouldn't be that hard for me to earn enough to cover the rest of my expenses, especially if I was careful with my spending (which we know I'm quite capable of. Ahem.). So on Mr. FG, we carry enough for me to pay off the house and cover funeral expenses.
(As far as income production for me goes, I have my blog, I could take up piano teaching again, I could pursue photography for pay, I could start a decluttering business...I have lots of options that could cover non-mortgage bills.)
If Mr. FG were left on his own, the household income wouldn't take as much of a hit, but he'd probably need to hire some help to cover some of the work I do, and to cover childcare (though our kids are getting closer and closer to not needing that much, even the younger ones.)
So, we carry less insurance on me...enough for a funeral, and to give him a fair amount of extra cash to help hire out tasks I do.
We do not carry any life insurance on our kids. We look at life insurance as a way to replace income loss, and at this point, our kiddos, much as we love them, are income-suckers, not income producers. So, we haven't felt the need to insure them.
I know some insure their kids to cover any possible funeral costs, but we do have an emergency fund for unexpected expenses and we're comfortable leaving it at that.
Mr. FG has disability and accidental death type of insurance through his work, and we've just left that coverage as-is. As far as I know, we don't have that type of insurance on me, as I'm self-employed.
I think that about covers it! I'm no insurance expert, but I hope it's helpful to hear what we've done.
In closing, I'd say the most important thing is to consider what you are wanting life insurance to do for you. Think through what each of you would need, financially, to manage on your own, and then get enough life insurance to make that happen.
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Readers, how have you decided how much life insurance to carry? And do you carry life insurance on your children? Share your thoughts and help Alison out!
We have a very similar philosophy. We carry enough life insurance on each parent that either of us could pretty much finish raising the kids in the same manner without going broke. We also both have sizable retirement accounts, which factors into how much we need. I also think it is unnecessary to replace every dollar of income from the passing spouse for what would have been their natural life time.
I would like to add that financial experts seem to agree that whole life insurance is a rip off. Term is rediculously cheaper and allows you to customize the amount of insurance you need at different times in life. When you're 35 with small kids at home you really need life insurance, but when you're 70 and don't even have an income, life insurance is completely unnecessary.
I am a senior citizen and I think that your plan sounds very adequate.
When my children were young I carried small policies on them which were very inexpensive. When they went to college I cashed the policies in and gave them the money for expenses. I only have a small policy for myself which is fully paid by my mother a thousand years ago and increases in value every year.
Even though I am a senior I really enjoy your blog.
I find that so encouraging...I love that people from all ages and stages enjoy reading my blog. Yay!
Hi Kristen! First off, I love your blog! As for life insurance, I think you're doing exactly the right things. Basically, life insurance's main purpose IS as an income replacement, so not insuring your 4 great kids is OK. My parents took out a small policy ($1K) on me as a baby. When I was 21 my mom signed it over to me and 5 years later I cashed it out to help pay for grad school. She was puzzled but was OK with it. I got my Master's degree in Teaching and that $1K was so helpful. It really was LIFE insurance for me.
The life insurance that comes out-of-the-box with retirement savings will pay my wife 75% of my salary until retirement age. we complement this with an additional insurance that can sustain 5 years of income worth (10 years if living modestly). We recently reduced the costs of the complementary insurance by 60% by getting quotes from all insurers in Israel (I sent 10 emails and made 5-6 phone calls).
I work as an economist and enjoy following several blogs on personal finance. This blog post is on point, and recommends term4sale as a site that lets you easily compare quotes for term life from multiple insurance companies at once:
http://thefinancebuff.com/how-to-buy-life-insurance.html
Personally, I would only consider purchasing term life given the high fees and commissions baked into any "savings" aspects of whole and universal life insurance. I prefer to invest in mutual funds directly (I favor Vanguard index funds) for my savings. Hope that is useful to some fellow frugal-ers out there!
I will give another vote for investing in Vanguard Index funds.
My dad is a personal finance person through PrimeAmerica so we went through him to insure me. We probably over insured me but I'll adjust it down the road. The prices are reasonable, especially since I'm in the top tier of health.
We have insured the wazoo out of my husband; most of it barely costs anything, because of his jobs. It'll cover funeral expenses, a house, money enough for me to go to college and finish this time so I can then support the kids, and there's enough so that if I have a bad year or two it won't matter, and I'll have enough to dump into retirement for me so I won't be a burden, no matter what kind of job I get.
It may seem overkill, but I can't sleep at night without knowing I wouldn't suddenly be scrambling with unexpected expenses. For the same reason we each have a plan detailing what the other will do should something happen. My husband's uncle died and for the first few months his widow didn't have to make decisions, she just followed the plan. I thought that was a great idea (his uncle was young, it was a tragic accident).
We do have a small amount in the kids because it literally cost a dollar to add that. It will cover funeral costs, which unfortunately I'm already familiar with. Those things are expensive and of course you want to do it right.
We have term. The amounts we have are only needed while the kids are young, we'll both adjust down as we get older. I also urge the writer to make sure you have a will; some states (we were just in one) will give the kids to the state first and figure out custody later, and that just sounds awful.
My kids are all in their late teens now. When they were babies, we bought term life insurance policies to carry us through until the kids were in their 20s. I have always been a SAH- homeschooling mom. We bought enough to pay off all potential debts (mortgage) and to maintain the lifestyle we wanted and enough to pay for college tuition for all kids. We do not have any policies on the kids.
At the beginning of this year, we went through Zander Insurance (the company Dave Ramsey recommends) to get life insurance for both of us. We had a small amount through my husband's work (that we paid for), but we realized that we could get more for our money if we went out on our own. We got the same amount for both of us, and oddly enough my insurance is slightly higher than my husband's because I have a "history of anemia"??? But anyhow, I highly recommend Zander. The process takes a while from start to finish, but now we don't have to worry about it!
We don't carry much. We both have 2x our annual salary paid for by our employers. I think mine costs me $3 pretax per 2 week pay period.
We no longer carry a mortgage, have good savings, and have money socked away for our son's college which will continue to grow over the next 9 years.
Our lifestyle is far from extravagant so we'd be fine.
However, before we got to this place financially, we paid more for a 5x annual salary through work, which required a health screen and a visit from the insurance company.
First and foremost ONLY get a Term Life insurance policy. It's cheaper than Whole and it provides better coverage. Whole is basically a fancy over priced savings account. My husband and I have 10x our annual income coverage and combined we only pay $50 a month. We got ours through Zander Ins. They are a broker so they shop all insurance policies and (what I like most) they don't sell your info.
I highly suggest checking out Dave Ramsey's Insurance principles, they are outlined on his website! We follow them!
20 tear term life for both my husband and I so that if one passes, the other can live debt free with some extra. We carry long term disability on each of us as he has a somewhat dangerous position. No short term, that is what our Emergency Fund is for.
My best piece of advice is to check out where you insure your car and home, they may do package deals that will get you a great price!
My husband and I both work and we have a mortgage and two young kids-- we each carry 10x our annual income. The interest off that would easily replace the income lost if one of us died. We're probably a bit over-insured, but I have several friends who lost one or both parents at a young age and it is so, so, so important to have a plan.
I have life insurance on me and my daughter. I'm a single mom, who doesn't get any help from my ex. Ours covers funeral expenses. Mine would also pay off the debt I have and save a bit for my daughter. I also have a will w a kids protection plan and medical power of will should something happen to me. It has short term and long term care for my daughter and even my cat(a list in order of who I'd want to care for them). My plan was originally started by my parents, I took it over and tweaked it for me.
I have some thoughts, more about what questions to ask than answers to offer:
1. What type of policy?
Term life is a straight bet: I pay the company to bet that I will die during the term of policy. If I win the bet (i.e., die), the company pays me the insurance amount. If I lose (i.e., don't die), the company doesn't pay me the insurance amount. Either way, the company keeps the monthly payments. The bet is cancelled at the end of the term.
Other types - such as whole and universal - are savings and/or investment plans wrapped up in life insurance policies. This is done because life insurance is taxed at a lesser level than insurance proceeds. It can get complicated very quickly. The more complicated it is, the more scope the company has to pull a fast one on you. If you want a savings or investment plan, and you're confident that you understand all the terms, upsides, and downsides, then go for it. (By understand, I mean understand well enough to explain to your grandparent or a 10 year old.)
2. Why to insure?
Do you need to cover funeral costs? Existing debts? Child- or pet-raising obligations? Want some tax-advantaged money for your family when you die? A fancy investment policy with a lower tax rate? Your answers to these questions will help you determine what sort of policy you need, and how much.
3. Whom to insure?
An old habit was to insure only the income earners. This did not turn out well when the non-income earner died, and the income earner realized the full extent of the non-earner's contribution to the family. (As a thought exercise, imagine the cost of buying ready-made food to replace the home-cooked, or cabs instead of being driven by a family member.)
So when considering insurance, consider each adult separately, including income, role in the family, cost to replace that role. DO NOT forget the SAH parent - because we all know how valuable they are, right?
One tip: policies are usually priced by age by decade (among other factors). If you're 39 and want a better rate, you need to move faster than a 36 year old who wants the same rate.
This is a great question and I'm looking forward to others' responses.
Also - check with your credit card companies, membership organizations (AAA, professional assns, etc), and banks offer a bit of insurance to their customers/members. A couple thousand here, a couple thousand there, - might be enough to cover your costs if they're modest.
Make that list now, so your survivors aren't trying to figure out your AAA or Professional Architect member number to see if there's a policy involved.
Yes, that's kind of what I was getting at. Rather than just blindly following a random formula (insure for x times the salary), think about what exactly would be lost when someone dies, and how much money you'd need to replace the income/services that person contributes to the family.
The bonus to giving it thought like this is that it makes you come up with a plan for what should happen after someone dies. I know exactly how I would proceed if something happened to Mr. FG, and that helps me sleep at night. I know that between my plans and the life insurance money, my material needs and my kids' material needs would be taken care of.
We got advice on this from the lawyer who did our wills, etc. The amount of coverage you need could vary dramatically from person to person...
Totally! I was thinking that another factor is how much of a safety net one has in terms of friends and family. Were I to die while my kids are young, I know that my family and my church family would step in, long-term, to help Mr. FG with the kids. And if I were the one left, I know they'd help me with things that Mr. FG normally covers.
If someone didn't have this much family or didn't have a lot of close friends, they might need more insurance than someone who has a really good safety net.
That is true. We moved closer to family a year ago and that factored in when we thought about how much we needed. Before that, I thought of might end up moving back near my parents if something happened to my husband. I am a stay at home mom now with a little one, so we factored in paying off the house, child care, and a little wiggle room for the time it would take me to find a job.
Our child is married so we don't carry insurance on him but we did keep a policy through my husband's job when he was at home....only because it was $1 a month extra on our own policy. Otherwise, we would not have bought insurance for him.
We are like you - insurance is to take care of the family if one person dies. The more money that person contributes, the more debt the family has, ect, the more coverage you need. So when we had a mortgage, we made sure there was enough in the policy to pay off the mortgage. Plus enough to supplement for my husband for the reasons you listed, more for me because I was a SAHM & he didn't want me to have to work more than part time if something happened to him.
Now that we have no mortgage & no debt we really only need enough for funeral expenses. We're planning to prepay our funerals sometime in the next 10 yrs. My mother did that & it was one of the best gifts she ever gave to me. Making the decisions before hand takes such a weight off of your family - you don't have to do anything at all after a death except choose the date & time of the service & show up...it's all planned & the funeral director does everything, even down to ordering flowers & scheduling music for the service. At least that's what ours did. She & I went together when she sold her family home. We went over everything & I was assured it was just the way she wanted it with no worries but more than that it seemed to take such a load off of her knowing her death would not be a financial burden on her children.
Egads, we are weird.
Whole life on each of us — big policies for the big people, little policies for the little people. I do understand more or less how they work and have three fantastic people (nonrelatives) to explain things to me when I forget.
Why whole life? Term is just dumping money down the drain, in my book, Dave Ramsey or no Dave Ramsey.
Twice now I have borrowed against the cash value of our big policies (and repaid) — once to buy some land, once to cover the fact that a guy didn't pay us for a commodity and we absolutely were screwed otherwise.
Absolutely goes against all popular advice, and well I know it.
I've said it before and I'll say it again: I'd like to see Dave Ramsey try farming.
No, this is not our only investment plan for the future/retirement, but it is sure handy, and it works for us.
p.s. Kristen, I have not gotten the script error yet today, and I'm just letting this page sit open. So hooray for prompt repairs!
Oh, good! I reached out to my hosting company and to my four ad networks, so hopefully one of the four is busy taking care of it. I haven't heard back for sure about what the problem was/is, though!
My dad used to sell insurance, and he was a big fan of term life. That said, my husband and I are only covered with what I can get at work -- he has Type I diabetes and I have an auto-immune disease, so we are the untouchables in the private market. We don't have a policy on our grown kids, and didn't have one when they were young. However, after my parents died and my siblings and I planned their funerals, paid for with their policies for funeral expenses, I realized my husband and I would have been in trouble if we'd had to pay for a funeral for a child, which, thank heaven, we did not. We never had a lot of money, and don't still. It would be tight for either of us if one of us died, so although we paid our house off, we still keep insurance. Since I can only get a certain amount at work, that's what I get. I have to pay for it, but it's much cheaper and at least they accept us.
From what I have heard Dave Ramsey say - your situation is one where it might be beneficial for you to take out those little policies you sometimes get offered through your bank or credit card. They don't usually require any proof of insurability and can give you some piece of mind until you save enough to be self-insured.
We have similar to the FG family--enough on him to pay off the house and a little more, enough on me to cover increased take-out and after school care and whatnot.
We might actually be a overinsured right now, because we were preparing our wills and I realize that Mr. FP has extremely generous pension benefits. However, those are tied to his job, and with term life insurance, it's better to buy young and get the best rate.
It's also important to think about the worst-case scenario, in which both parents die. Would your children's guardians have enough to make ends meet? My sister would take on our boys, but she would need a bigger house (in a high COL area) and a bigger car, and she can't afford those things on her own.
No insurance on the kiddos for the same reason Mrs. FG gave.
We also used Zander Insurance to find the best rate and it went very smoothly.
Good advice about taking into consideration the loss of both parents at once. My brother-in-law's family (who would be the ones to get our children) would have to have a larger house to accommodate our kids ... plus cover daily necessities as well as helping with college costs. Thanks for bringing up that point.
I think that the advice in this article is a great approach. I have a smaller life insurance policy since I work part-time and care for a school-age child. We have a larger policy on my husband through his employer to cover our living expenses if needed. He also has some disability insurance through his employer. We do not carry life insurance on our child.
I think that debt is a closely related topic to this question. I've had insurance agents try to sell me more life insurance based on debt. (I had a former agent tell me that I was "un-American" for not having credit card debt and a card loan.) If a family can pay off all car loans, student loans, credit cards, etc., then it will greatly reduce your need for life insurance. After that paying down a mortgage can also greatly reduce the need for life insurance.
Student loans are discharged if you die! So you don't need to plan for life insurance to pay them off. I'm not sure that will be any comfort, but it is good to figure into your planning.
I mostly agree with all the comments, but I would add to think about what would happen if both parents were to die at the same time. In our case, our kids would go to my parents. Our life insurance is enough to pay off our home so the kids and my parents could live here and my kids wouldn't need to switch schools. There would be enough for a tuition fund for each kid to go to a state university as well as a small cushion for living expenses for my parents to support my kids.
Yes, we have things set up so the life insurance for both of us would go to the guardians of our kids. Our house would be sold, and the profits used to help our guardians care for our kids as well.
We each have 20-year term, for about 5X our annual household income. We forgo employer-sponsored plans that we have to pay into, as we change jobs occasionally and want to maintain continuous coverage.
After my mother died, I went into deep mourning for a couple of years, and it would have been nice to take some time off of work, but that would have hurt us financially. And we had to let her house go, as it wasn't paid off, and the mortgage was triple what we could afford.
We took that experience into consideration when purchasing our own life insurance. We wanted to provide a decent (but not ridiculously large) cushion for the surviving spouse to be able to pay off the house, take some time off to reconsider next steps, and to be able to provide for whatever our family looks like at the time (no kids yet, but four nieces and nephews that we like to be supportive of). Also, we started our retirement funds late, and there is enough coverage for the survivor to be able to invest modestly for that.
When our term is up, we expect to have the house paid off and our retirement shored up, so we expect to no longer need life insurance.
We carry the maximum through my husband's employer on both of us and have additional fairly large term policies on both of us.
I have been out of the workforce for 10 years raising kids, the last thing I would want to do after losing my best friend is to put my kids in school and go back to work (at a much lower income than we are accustomed to). The emotional burden of a loss like that can not be overlooked. Adding a financial burden is not something we are willing to compromise on.
For my husband, to replace my role as a homeschooler he may need to pay private school tuition or reduce hours at his job to do it himself. There would also be childcare costs to consider. My life insurance would give him choices on how to best deal with the situation.
Additionally we consider the situation where both of us die (car accident?) or worse, one dies while the other becomes incapacitated, our assets and insurance would allow our children to be raised by their guardians without being a burden.
We will no longer carry insurance when our assets are sufficient to replace income, or for me when the children are grown.
Kristin,
Have you considered health insurance costs into your planning? Assuming you have your current insurance through Mr FGs work, that was always the item that worried me the most. Health insurance costs are astronomical, and could eat up a lot of income very quickly.
I've thought about that, and for the moment, I'm not crazy concerned about it. We do have insurance through Mr. FG's work, but honestly, it costs a LOT of money out of pocket, and actually, for a few years, we opted to get our own high-deductible insurance plan privately because it ended up being cheaper!
So, I know we can survive ok on privately-purchased insurance, and given that I wouldn't have a mortgage to contend with, I feel confident that my budget/earning plan could keep us insured.
It's definitely a good thing to think about when you're buying life insurance, though.
I think what you need is based on your own personal situation.
My husband and I each got a Universal policy when we were young and healthy, enough to pay the house off and provide several years worth of wages. We had 2 children at that time. In retrospect I really wish we would have just invested the amount of our premium rather than have a life insurance policy. Our policies were to eventually pay for themselves (as in the interest would cover the monthly costs) and we all know that interest rates are so low so this will not happen in our lifetime.
Funeral costs are sky high, my mom's basic funeral cost more than 15k.
More important to me was a living will to make sure all we have worked for does not go to the state and it will be managed by my oldest son.
Lots of good comments here. Thought I'd chime in from a different perspective. I was single until I was 54. I never thought marriage was in God's plans for me, so all my planning was focused on life/retirement as a single woman. Since I had no dependents, I carried only what was provided at no cost by my employer. I had enough in savings to cover the cost of a funeral, and no one would suffer from the loss of my income, so it was more than adequate, When I entered into a business deal with a partner (a rental property), he asked me to buy life insurance for the duration of the deal. I shopped for cheap term insurance and came up with WAEPA, which is for Military, Veterans and their families. (Thanks, dad!) It was super cheap to start with and every year, I got a rebate that averaged 25% of the annual premiums. Eventually, I bought out my partner and dropped the insurance, but it served its purpose while I had it and I highly recommend looking into it if you have a veteran in your family tree and a genuine need for insurance.
When I eventually married, I had amassed enough savings to retire, so I did. My husband still works, and his employer also provides a reasonable amount of insurance automatically. Our home is paid for, his kids (he's a widower) are grown, and we have no debt. Neither of us has any wish for a fancy funeral, or even one at all. We really have no need for insurance, so we just have what his company provides. When he retires, we will not buy more.
There are a couple of points that haven't been covered or that merit further emphasis.
1. Term Life Insurance is the frugal and smart way to go. When you're a young family, there is a lot of pressure to buy more expensive "investment" insurance. Don't fall for it, even if the salesperson is your brother- (or sister-) in-law, or your college roommate. Term, term, term. Anyone who tells you otherwise is trying to sell you something, period.
2. Never buy cancer policies or pay-off-your-credit-card policies or the like. They are the equivalent of extended warranties. Expensive coverage for what you get and unlikely to pay anything close to what they've cost you, no matter how low the monthly fee. In gambling terms, these are known as sucker bets. Don't fall for them, and this includes burial insurance and anything that supposedly provides for your pets after you die. That's what emergency funds are for. And I mean actual cash saved, not a Heloc or low interest rate credit cards. And Dave Ramsey's $1k EF is only a tiny first baby step, not a real, adequate EF.
3. Finally, as a single person, the idea of buying life insurance to provide your beloved extended family members a legacy if you die is not the best notion financially. Work hard, save your money, invest it wisely. When the time comes, if you've lived and planned well, there will be plenty to pass along to them or your favorite charity or your best friends or whomever you wish to gift.
Good thoughts! Life insurance is definitely a totally different ballgame if you are single, or if you have no children. I think what you and your husband are doing sounds very sensible.
Goodness, I forgot to mention that, unfortunately, parents who are divorced need to consider each other in the event of one or the other's death, as well. When my daughter's husband left her, she got him to agree as part of the settlement that they each keep a policy naming the other as beneficiary as long as their child is a minor. They split custody and child-rearing costs 50-50, and either one would be financially hurt if one of the parents died.
That was really smart of them!
I’m a single mom and my ex only contributes the very small amount of child support that the courts force him to pay, so basically I am the sole provider for my 2 younger kids, ages 17 & 14, plus my 19yo works full-time, but is still transitioning to full independence. I do add to my emergency savings every payday, and hope to one day have a nice cushion to help with emergencies. But until then, I still need to be covered in the case something happens to me (death, long term disability, short term disability or major illness). Therefore, I have quite a bit of insurance, because it helps me sleep at night.
I have life, STD, & LTD insurance provided by my employer, plus the maximum additional amounts I can get through them. This will pay for my funeral, pay off the mortgage and give the kids enough to pay the essential bills until they each reach 24. I have $10k life insurance policies on each of my kids. It’s .88 every 2 weeks for all 3 kids and I’ve watched a couple of my friends go through the financial devastation of trying to pay for a child’s funeral while still dealing with the immense grief. I have a supplemental plan similar to Aflac that covers me & my kids for accidents (because we are all either active, accident-prone and/or clumsy). This plan gives me a reimbursement check every year just for having my annual check-up that covers almost the entire amount I pay for it. I also have supplemental AD&D plan as well as a major illness plan. If I’m injured/disabled or struck with an illness, to the point of not being able to work for an extended period of time, I will need more than what my disability plan through work will cover.
Once my kids are all grown, I’ll lower the amount of life insurance because they will no longer be dependent on my income ( in theory at least, lol). So then, I’ll only need enough to cover my funeral and mortgage. I’ll keep the coverages on my kids as long as possible because the rates are so low.
I personally will not purchase a whole life policy so I have a term policy that will expire when my youngest son turns 24. I am following Dave Ramsey's principles so I hope that I will have my house paid off by then and will not any life insurance if not a very small amount.
Here is my PSA: please have a will and trust set up with guardians and back up guardians appointed for your children. Make sure your family knows about your wishes! You can also specifically (and confidentially) exclude people from being appointed as guardians if you feel there may be conflict on this point.
Children cannot inherit or be paid out by life insurance until they turn 18. Then they turn 18 and get it all at once, which is usually not the best case scenario. So trusts are a great work around for this, and not just for the very wealthy.
As to life insurance, we have term on both of us. We are young and healthy, so it's pretty cheap. Our kids are younger and my husband usually works 60 hours a week. So we have enough that if I die, my husband could hire a nanny to cover those hours.
We don't have life insurance on our sons. My sister did buy whole life policies for her kids- her son has type 1 diabetes and this way he can carry this policy into adulthood. She was advised that he will be uninsurable as an adult due to his diabetes. So she saw it as a way to look out for his future dependents.
Ok, so I have to chime in here on the "publish rates vs. long process to get a quote". You would be *shocked* at how complicated it actually is to calculate your premium. Trust me, the insurance companies would love for it to be simpler for you to get a quote; it makes it more likely you would follow through on buying a policy. I know, at least for auto and homeowners insurance, rates are published with the state department of insurance. However, there are so, so many different factors that go into the process of calculating how much your individual premium will be, that it is genuinely impossible to just look at a quick table and see how much you will be charged.
As for Kristen's "buy insurance like a box of cereal", just like people have different needs for insurance, people also present different risks to an insurance company. Your individual attributes are critical for assessing the likelihood the insurance company has to pay out on your policy. If everyone paid the same amount, the less risky people would have to subsidize the more risky people, and they would rather save their money. 🙂
Stepping down off my soap box now, as you probably already realized all this (and I do sympathize with the desire!).
I do think Kristen's advice to think carefully about your individual needs would be when/if you need the insurance is very good. I would recommend using a life insurance needs worksheet (can be found on many insurance company websites or other places) to help you think through this as it can prompt ideas on income or expenses that you may not have remembered. Talking with an insurance agent can also be helpful; just don't feel bad to ask questions and make sure you understand their recommendations. And as already mentioned, bundling insurance policies under the same company can give you a discount. Certainly worth checking.
Oh yes, I'm sure they'd make it easier if they could!
(Unlike mattress companies, who I am convinced are purposely making it difficult to shop and compare. ;))
My husband and I both carry large policies, and in my mind with good reason. My father died when I was 19 years old. He did have life insurance, but not enough, and at 72 years old my mother still works full time. My husband is our main earner, so he does have a larger policy than I. We have 2 children, one of whom has Cystic Fibrosis. I want to never worry about money if my husband God forbid were to pass away. Similarly, if I can ease his burden and leave an amount comfortable for him to travel, pay the house, pay for our daughters weddings...that brings me comfort. I can't know what the future will bring, and it is worth it to us to pay a small bill each month in order to have peace of mind that money will not be a worry on top of grieving.
Brynn, if you haven't done so already you may want to consult with an attorney about a special needs trust. I worked with disability issues for years, and there are ways to set up inheritance that would allow him to still qualify for assistance.
When the hubs lost his beloved stepfather, and we saw the unbelievable toll it took on his mother, we re-examined what we'd want. We also realized that his stepfather's extended illness (brain cancer) had depleted their financial reserves before he died, so we want to have a cushion for that.
Good for you! Too many people are so skittish about this part of life and just refuse to make plans. I consider it an act of love to spouse and family.
Since I out-earn DH I carry more insurance. He himself says that he is terrible with money, so if I go first then his portion of the inheritance will not be released in a lump sum.
After I accrued six weeks of sick leave I stopped paying for short-term disability. The conventional wisdom is to hold off on longterm care insurance until you're in your 50s, but because of my lupus I went ahead and got it.
I have to say, though, that there is great peace of mind in having no debt besides the mortgage. We Dave Ramsey'ed ourselves out of a mess 8 years ago and I still refuse to get a credit card, and we've purchased our cars with cash.
So true...and I'd really love to get rid of the mortgage too! That would be totally awesome.