Comments on: How Much Life Insurance Do You Need?

By: Stacy

Stacy — Thu, 17 May 2012 04:51:02 +0000

I feel like life insurance is really important for people to have due to all the liability there is.

By: Frank

Frank — Thu, 31 Mar 2011 03:45:54 +0000

Whole life is a total crock of BS for most people. It’s prohibitively expensive for almost anyone, at least for any significant death benefit. If you need anywhere between 500K and 1Mil, which is quite standard for most people using the 10 to 20X income formula, then have fun with those monthly payments on whole life. I don’t know how many people have an extra 3, 4, or 5 hundred bucks per month laying around, but I sure don’t.

By: Ryan

Ryan — Fri, 20 Aug 2010 23:27:35 +0000

Here is something I don’t understand. In the example given, it was assumed that each spouse brought home $4000, but it was also assumed that every dollar of this $8000 per month would be spent on food, mortgage, savings, or child expenses.

But, this can’t be true. If I die, my family loses my $4000 a month. But they don’t need to replace my $4000 a month. See, I won’t need to eat, drive a car, or take a shower in the grave. So no food, car payments, nor water bills. And our retirement savings can be cut drastically as well. The NET income needs to be replaced, not every dollar that I bring home. Right?

Ryan

By: Leonard Robbins

Leonard Robbins — Tue, 10 Aug 2010 00:33:16 +0000

Dad S, you may also want to consider “laddering” your policy(s). Remember that you can always purchase more than one policy from the same or different carriers as long as you inform each insurer of your plans. Also, when considering more than one policy, try to keep the amount at $250,000 or more since you will usually get a better rate than a lower amount.
Whatever you decide, you’re doing the right thing by thinking about it, rather than just pulling a figure out of the blue!

By: Ryan

Ryan — Mon, 15 Feb 2010 14:20:11 +0000

Dad S, Term insurance should be cheap enough that adding a few years to your policy is probably worth it. You never know what will arise between now and then and having that extra time on your policy will probably help you sleep better at night. With most term policies you can drop it if you no longer feel like you need it. But adding a few years to your policy later on means you will pay premiums at the new rate. (for example waiting five years to change your policy might be more expensive than getting a longer term now).

By: Dad S

Dad S — Thu, 11 Feb 2010 19:27:48 +0000

I am looking at buying term insurance to replace income lost if something should happen to me (wife works but wish to leave her income out of the equation)…I make about 6K a month after tax but wondering how long of a term i should get…I have 15 years to retirement but have young kids, 2 and 5…since the youngest will still only be 17 when i retire, should i opt for the longer 20 year term or stick with the 15 year term to retirement? Also, as we have some assets built up, i am really only concerned about near term unexpected events and making sure the kids are comfortable through college…What advice can you offer?

By: Ryan

Ryan — Tue, 26 Jan 2010 03:34:33 +0000

Teacher mom, It is very difficult to answer your question because you don’t give enough information about your financial situation. The rule of thumb used in this article is 17 times the annual salary of the person in question, but that formula doesn’t always work for everyone or each situation.

You need to consider how much money you would need if one of you were to pass away. Take a look at your current expenses, possible future expenses (funding college, insurance, moving, etc.), possible changes to life situation (remarrying, for example), and try to determine how much you would need above your current income to reach those future expenses. You might wish to consider how much it would take to pay off any debt you might have, including your mortgage, then go from there.

In any calculation I would do, I would consider how much it would take to payoff the mortgage (or all debt), then add a buffer based on the assumption of how much I would need to maintain a decent lifestyle with my current income from working, with no house payment. There is no “exact’ formula because each situation is different, just guides that might make things a little easier. I hope these tips help.

By: teacher mom

teacher mom — Tue, 26 Jan 2010 01:27:00 +0000

I am trying to figure out how much life insurance to take out on my husband. He is an executive chef with no benefits. I am teacher with great benefits that will help my husband if something was to happen to me, me on the other hand…We are both 30, excellent health, two kids (3 and 4) what is a good plan?