life insurance coverage

lemen99 · January 2011

Ryan signed up for a term life insurance plan when we got married, locking in a pretty good rate.

Now I'm wondering if the coverage amount is enough. Does anyone know if there are rules of thumb on this or how to know how much is enough?

We do save money, so theoretically we could increase it, but I struggled with knowing what that balance is.

I also am looking into a plan for myself, as I'm no longer working and no longer covered, and wondering what coverage level I need.

uofibabe · January 2011

I have 100K and DH has 50K through my work. May increase later after we have a 2nd child.

IndyWife06 · January 2011

We really struggled with figuring out how much is enough, and my dad had some pretty good advice. He said that in the event something were to happen to one or both of us, you want to make sure that whoever is left would not struggle financially for some time, say a year. At the same time, you don't need so much that those left never have to work again because life would go on.

So we thought that we wanted enough to pay off the mortgage/or pay it for some time, pay off cars and in the case of DH, his student loans. We also wanted enough that college for Nick could be funded. And then I think we thought about enough to cover living expenses for a while (either replace income for a working parent or provide child care for a SAH parent).

It is so morbid, but necessary, to think about this stuff.

MrsJMB · January 2011

We have $500K on each of us. $500K policy on me since my work doesn't offer anything and $300K on Joe plus $200K through his work through the buy up program his company offers.

lemen99 · January 2011

IndyWife06:
We really struggled with figuring out how much is enough, and my dad had some pretty good advice. He said that in the event something were to happen to one or both of us, you want to make sure that whoever is left would not struggle financially for some time, say a year. At the same time, you don't need so much that those left never have to work again because life would go on.

So we thought that we wanted enough to pay off the mortgage/or pay it for some time, pay off cars and in the case of DH, his student loans. We also wanted enough that college for Nick could be funded. And then I think we thought about enough to cover living expenses for a while (either replace income for a working parent or provide child care for a SAH parent).

It is so morbid, but necessary, to think about this stuff.

I like that thinking.

Any idea how much to allocate for college (times 2!) that far down the road? We def have enough for mortgage + living expenses (no other loans) and then about I don't know, 500k leftover after that. I think then what we have for DH should be adequate.

I don't know why I keep thinking mine doesn't need to be nearly as high as DH. That doesn't really make much sense since we both have the same degree and made the same when I quit 4 months ago. Theoretically we'd be in the same spot if something happened to either of us, I think.

uofibabe · January 2011

lemen99:
IndyWife06:

We really struggled with figuring out how much is enough, and my dad had some pretty good advice. He said that in the event something were to happen to one or both of us, you want to make sure that whoever is left would not struggle financially for some time, say a year. At the same time, you don't need so much that those left never have to work again because life would go on.

So we thought that we wanted enough to pay off the mortgage/or pay it for some time, pay off cars and in the case of DH, his student loans. We also wanted enough that college for Nick could be funded. And then I think we thought about enough to cover living expenses for a while (either replace income for a working parent or provide child care for a SAH parent).

It is so morbid, but necessary, to think about this stuff.

I like that thinking.

Any idea how much to allocate for college that far down the road?

Thanks!

Very good questions to think about....all I could think at the time the benefits lady was asking me was: credit card debit and funeral and then a little left over for Clark. I'm thinking I will want to increase this next time around.

aloveindy · January 2011

I think this depends on what your future plans are, if something were to happen to your DH and you wanted to continue to be a SAHM during the next 18-20 years then I would think that your DH's coverage would need to be higher. I hate to be so crass but you would need to replace his income and he would need to be able to pay for adequate childcare to replace your current role in your family, so there is probably an amount difference there.

Now if you want it to be a replacement of both of you being working parents then I think the amount would be equal. Make sense?

For what it is worth, DH and I each have 500k of 20 year term and then I have some additional permanent LI that my Dad had started on me years ago, I can't remember right now if DH has additional perm LI. Then we both have our normal co. paid LI equal to our salary.

sarahann1941 · January 2011

We just upped ours after Nora.

we have more on Scott than me because he makes more $$ than I do.

We wanted to have enough where both kids colleges would be funded and that my brother and his wife (who are their guardians) wouldn't struggle financially with the addition of our 2 to the 4 kids they already have.

lemen99 · January 2011

aloveindy:
I think this depends on what your future plans are, if something were to happen to your DH and you wanted to continue to be a SAHM during the next 18-20 years then I would think that your DH's coverage would need to be higher. I hate to be so crass but you would need to replace his income and he would need to be able to pay for adequate childcare to replace your current role in your family, so there is probably an amount difference there.

Now if you want it to be a replacement of both of you being working parents then I think the amount would be equal. Make sense?

For what it is worth, DH and I each have 500k of 20 year term and then I have some additional permanent LI that my Dad had started on me years ago, I can't remember right now if DH has additional perm LI. Then we both have our normal co. paid LI equal to our salary.

I am pretty sure I would go back to work if something happened to Ryan, for the sake of money (and sanity maybe?). Maybe not immediately but that's what I think. Certainly the idea isn't that I'd never have to work again - His plan is 750k and I really don't think I could just coast forever on that. haha But yes, that is a good consideration! (In fact my thought is I am going back to work in some respect regardless but we'll see!)

My mom is the one who said she thought I should have 1-2 Million (!!) on Ryan. I thought oh we are way off. But, now that you mention it, she SAH for the last 26 years with 4 kids...so that probably is why she is saying that.

I'm wondering if we should have done 500 each. Oh well I'll start getting quotes and decide what level for myself!

Thanks!

butterfli325 · January 2011

I'll ask Matt when he gets home to see what his advice to clients is. I know for us, we both have VUL policies. He has 500K and I have 200K. We also plan on taking out a VUL on LO once he arrives too (morbid, I know) to lock-in a good rate and start building cash value. This is also from my husband who has a file on the computer titled "What to do if I die" with finances/mortgage/investments/etc....guess it's just the nature of the beast with his job.

IU_baby · January 2011

We have more coverage on Ryan because currently his income is greater than mine. Smart Money has a pretty good online calculator you can use.

I know in divorces, we generally calculate the amount of life insurance each parent would need given the amount of years they would have minor children, their current child support obligation and the amount each child would need for college expenses. It depends on the family income, their expenses as well as the number of children and their ages.

inkygirl · January 2011

We need to get this for DH this year. I've got $200K on just me, but he has nothing.

If you're a AAA member, they have amazing rates. I got mine through there and pay $12.99/month.

uofibabe · January 2011

I forgot but we do have I think 10k on clark but I would have to dig into my paperwork to make sure on that number ...i know it's a big difference.

triumphantreturnofplanningbug · January 2011

One major thing to think about in getting your coverage is the value of you staying at home. How much would it cost to put both children in day care if you were to die? How much work do you do for your family that would need to be replaced by a paid person if Ryan were a single parent?

I'd also strongly suggest getting more than a year's worth of living expenses for both of you. That first year is a beyotch, and the payoff from life insurance can take a long darn time if there are any snags or circumstances that get called "suspicious," which can mean you have to live off savings or credit and then repay others or yourself when you do finally get the money.

lemen99 · January 2011

triumphantreturnofplanningbug:
One major thing to think about in getting your coverage is the value of you staying at home. How much would it cost to put both children in day care if you were to die? How much work do you do for your family that would need to be replaced by a paid person if Ryan were a single parent?
I'd also strongly suggest getting more than a year's worth of living expenses for both of you. That first year is a beyotch, and the payoff from life insurance can take a long darn time if there are any snags or circumstances that get called "suspicious," which can mean you have to live off savings or credit and then repay others or yourself when you do finally get the money.

fleur-de-lys · January 2011

When we got our insurance our agent helped us out with the dollar amount (there was some formula but I forget what it is - I think it was similar to what Laura said). We have considerable insurance - not enough for me to retire - but enough to cover myself and 2-3 kids through college and to not have to change our lifestyle. Since I SAH, we wanted to be able to continue that until a time when it was my choice for me to go back to work not because I needed to.

Plus, since we are both healthy, it is cheaper for us to go ahead and get a 30 year rather than adding as more kids arrive (though theoretically your debt/income ratio should be going down so you might need less). I was surprised on how much they recommended for my coverage - but when you started to think about all the things I take care of - childcare, all the household, etc - you can see how expensive it could be if you had to hire someone else to do this. If you are getting insurance they might have you wait until after the baby comes - we got ours when I was pregnant with B and they had me wait until after because pregnancy meant that I was considered high risk and would have had to pay quite a bit more than when I wasn't.

I would talk to the person who gave Ryan his initially - he could probably help with an amount you felt comfortable with.

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