Term Life Insurance-need some input please!

[BrerGnat]

Hi all. I'm researching different types of life insurance and wondered what you all think of Term Life Insurance? Does anyone have it? Do you think it's a "waste of money" or is it worth it for peace of mind?

Our situation is difficult. DH is in the military and I'm a SAHM of 2 toddlers. Our 3 year old has autsim. Our 1 year old has some signs of developmental delay as well and we've started therapy until we know what exactly the issues are. I do not have Life Insurance in my name, but it's time to get some, because if, God forbid, something happens to me, it will be QUITE costly to take care of our kids (namely, the one with autism worries me...can't just send him to normal daycare and since we're not sure what will become of the younger one...).

Anyway, we've also realized that DH's military SGLI (life insurance) and the Permanent policy we have for him will just NOT cut it if something happens to HIM (more likely, as he will be going to Iraq next year, he's a Marine, etc.) because I can't just up and start working with two special needs toddlers. So, we need to supplement his coverage as well as get some in my name.

Financially, we can't afford TOO much per month, which is why Term coverage appeals to me. We need a pretty high coverage amount to ensure care for our kids for the next 20 years or so. Plus, if something were to happen to BOTH of us, we want to make sure that there will be enough to take care of them without it being a burden to their guardian. Again, the autism issue complicates what would be a "normal" situation.

I have spoken to an insurance advisor, and understand all the pros and cons, but just wondered if anyone out there is in a simliar situation or if anyone has Term coverage, what do you think of it?

Thanks in advance. This is one of those things that I wish I didn't have to think about, but it's time to stop ignoring it too...:(

[Strmchsr]

I've worked the insurance industry, so I certainly understand the pros and cons as well. You didn't mention your age, but I assume you to be fairly young with young children.

Term life insurance is good for young people who want to guard against something catestropic. Generally I recommend getting a decent amount in term - say on a 10 or 15 year term, if you're in good health. Then, also, get a smaller amount - $25K or $50K in permanent that will grow and gain cash value. If you go with a good company that reinvests the dividends, you can get a $25K whole life now that will be worth 4-5 times that in a few years. That's what I've done. I have a fairly decent size term life policy to cover anything catastrophic while I'm young and healthy, but I've also invested in a whole life policy that will grow and provide my survivors with a nice amount if I live to an old age.

Now, here's the big problem. You have children that may need care for a good long while. The big benefit of term life is that you can get a large amount while you're young, but (usually) as you get older you don't need that amount because your kids go off to get their own jobs/families, etc. plus your house and other big bills are paid off. If you're looking at being a long term care-giver for these children, including during their adult lives, then your financial need won't decrease. That being the case, you're MUCH better off going with a larger amount of whole life while you're young and can get it at a much cheaper rate.

Let me also recommend that you get something small on your kids. I bought a term life policy rider on my DS when he was born. At age 5 he was diagnosed with type-1 diabetes. Because I had that rider on him I was immediately able to convert it over to whole life with no health questions. A diabetic is non-insurable so if I hadn't gotten that on my son when he was born he never would have been able to have life insurance to take care of his own family. You have to plan because you never know what will happen.

I'm not sure if this answers your questions, but if you have more, feel free to PM or email me.

[Ian]

I worked for a large life insurance company for close to ten years. I won't mention them by name, but I'll give you a hint ... their symbol may or may not be a large stone of some sort. ;)

Anyway ... What Chris said pretty much sums up my feedback perfectly. Generally, your needs for life insurance declines over the years, so declining term or just some sort of 20 year term should be fine.

Then pick up some sort of small whole life policy to cover death expenses. Another option is a small whole life policy with a term rider. That's generally cheaper.

Of course group life through work is normally a better, cheaper option than even term insurance.

[AZ Disney]

Hi,
Let me first say that I have no experience whatsover in the insurance industry, but would like to tell you this story. I have friend through a Mom's group and her husband passed away suddenly about a month ago. She has been telling us all how important it is to get life insurance and make sure it's signable. If it weren't signable she would have had to pay all the funeral expenses up front, but since it was signable the insurance company pays the funeral company directly and then sends you the difference. So it's one less thing that you have to worry about during such a difficult time. She also has been grilling into our minds how important it is to have a will set up. You just never know and always think it couldn't happen, but it does everyday.
Good Luck!

[Ian]

Just for clarity's sake, the term you're looking for is "assignable", not signable.

Basically, that means you "assign" the policy to the funeral home and allow them to receive the funds from the insurance company when they're disbursed.

One word of caution on this ... you need to be 100% certain you're dealing with a reputable home if you're going to assign your policy to them. Unscrupulous funeral homes have been known to drastically overcharge people who assign policies to them, knowing that A. they're in a bad state of mind because a loved one has just passed away and B. that people are more likely to spend more money when it's not coming out of their pocket.

In addition, there are extreme cases where "mystery" charges show up after the check arrives that magically amount to exactly the dollar figure of the proceeds of the insurance policy.

Unless it's completely impossible for you to pay the costs upfront, you should really never assign your policy to a funeral home. You give up a lot of control when you do that.

[queen2princesses]

I totally agree with the other replies.

I am biased as both my husband, my dad (and my late grandfather) are in the life insurance business.

But, we have 2 DD one 3 and one 2. I am a SAHM and even though I have my bachelor's, there would be some MAJOR adjustment if my husband passed away. Likewise, if something happened to me my husband would have to hire a nanny.

We have a fair amount for both of us in TERM and we started adding more WHOLE last year because we can get a better rate since we are young :) We are also using the WHOLE as a savings avenue as my husband's company does not match his 401K.

Like someone else mentioned we got insurance for both of our DD at 13 months (usually the cheapest age for most companies) with a rider so if something was diagnosed later they would not be denied insurance.

I can say that I was grateful that my parents did this for me as I was able to use the dividends of my whole policy (that they purchased for me at 1) to pay my "grown up" term policy for a few years.

I give you kudos for realizing that you guys could benefit from more insurance. I have some friends in the military and they think they are "all set".

For most companies getting TERM equates to giving up a few trips to the coffee shop a month. Now some companies are coming out with a family product which includes policies for everyone for a very reasonable price.

I hope my personal situation helps you realize that it isn't "just a waste of money"!

Good luck with your decision!

[MidnTPK]

My opinion, and I don't work in insurance, is that you need term. Term life insures you in case something bad happens. Whole life is an investment vehicle that you will pass on to your estate, plus an element of insurance in case something bad happens. The way I like to explain it is which should you be doing first: saving for your children or grandchildren's college? Well, whole life will likely be inherited by your grandchildren. Savings for college will be used by the children you have today....not grandchildren that might (or might not) come in the future.

Have you paid off all of your credit card debt? Are you fully funding your retirement and college savings accounts? Do you have six months expenses saved for a rainy day?

If the answer any of these questions is 'no', then get more term and put the money you would have put into a whole life into one of these investment accounts. Once these funds are adequately funded, then you can think about whole.

Insurance salespeople like to sell whole because it has generous commissions. They like to highlight the flexibility of borrowing against it. These are real benefits, but not until the rest of your financial house is in order.

[SteveL]

I don't know much about insurance, other then all of my premiums keep going up, but a local consumer advocate always advises his readers and listeners to get term life.
He also says to make sure it is the same policy that the insurance company writes in the State of New York.
Apparently New York's laws regulating the insurance industry are the most protective of the consumer.

[illini]

I've worked in insurance in the past (think my license is still valid, actually).

Whole life really isn't a good use of money. It's more of an "investment" rather than insurance. And as an investment, it's crummy. Instead, you're better off buying what you need in term (and in your situation, I'd buy longer term since your children may have longer term needs). Take the extra cash that you're saving from paying term instead of whole life and put it in a good mutual fund. It will grow SUBSTANTIALLY more than if you'd put it in whole life. If, heaven forbid, something happens to one of you, you'll have the term payout. By the time the term expires, you'll have a nice nest egg that should be substantially larger than if you'd invested in whole life premiums.

Whole life has a higher commission structure and is often pushed by insurance professionals. Keep looking until you feel very comfortable with your rep. I'd also recommend talking to a financial advisor about this decision and not just an insurance salesperson.

[MNNHFLTX]

My husband has an excellent group policy plus supplemental through work and we carry a hefty term policy for me. We do not carry whole life at this time as we have found other investments provide a much better return for us.

As far as life insurance for children--I have mixed feelings on that. A former friend of my husband's, who happened to be an insurance agent, paid the first premium on a policy as a "gift" when our son was born. We paid into that whole life policy for years before doing the numbers and realizing that was not a good investment at all, so we took the penalty and cancelled it. This was just our own experience and it may well be worthwhile to buy an insurance policy for your children under certain circumstances, as mentioned previously. But I would make sure that I understood the pros and cons before investing in one again.

[Mickey'sGirl]

Whole life really isn't a good use of money. It's more of an "investment" rather than insurance. And as an investment, it's crummy. Agreed. I used to design and test new insurance products for a large international insurer. I would never recommend a whole life product to anyone. True insurance is to protect against a catastrophic event. An investment is for the long term. I know that we had a 20-year Term product, and if I were buying for me (I have two young Autistic sons who also require a lot of "specialized" care should something horrible happen), I would buy it. Our investments are kept separate and we diversify them. Just my opinion.

[Ian]

Whole life really isn't a good use of money. It's more of an "investment" rather than insurance. And as an investment, it's crummy.Wiser words have rarely been spoken on these boards.

Whole life insurance is not really an investment at all ... it's life insurance with the potential to build some cash value and maybe earn some dividend (depending on who your carrier is).

It is never wise to purchase life insurance with the intention to use it an investment vehicle. You can always get a better rate of return elsewhere on the difference between a whole life premium and a term premium.

The only time I recommend whole life insurance is a small (around $25k) amount to ensure burial expenses are covered. But even that really isn't necessary if you invest wisely.

[mttafire]

Im 37 my wife is 29. We both have a 250,000 20 year term and it costs..34.00 per month for the both of us. Is like 18 for me and 16.00 for my wife.We are non smokers and in "Perfect" health....Insurance wise:thumbsup:

[BrerGnat]

Thank you all so much for the replies. I have considered all your input and I have decided, for now, to go with some pretty hefty term insurance for both my husband and I for 30 years. I am going to hold off on the whole life for now. As for policies on our kids, I have read more times than I can remember how much of a waste of money it is to get life insurance for kids, unless they have an income that helps provide for the household, which is not our case. I'll skip that option, although I appreciate the input.

We are both young (I'm about to turn 29 and my husband is 28) and at this point, I'm more worried about the day to day care of our kids in the short term. Long term investments, at this time, are limited to our 529 college savings plans for our kids and my DH's 401K. We are looking to open up IRA's and invest in some mutual funds in the near future, but at this time, we need to prioritize and our kids come first. We don't really have any savings, but with a DH in the military, we don't really have to worry about stuff like job security or disability, as both those things are pretty thoroughly covered for us. I'm the financial person in the house and I am just trying to go down the list and start up savings in different avenues as we can afford them. Somehow, we sort of skipped over the need for insurance for me. :blush:

Anyway, thanks again. You have all been very helpful. I knew I would get help here.

Intercot rocks!!! :number1:

[JanetMegan]

I'd like to chime in and say thanks for all the responses here. I'm about to purchase some term insurance as well due to the fact that I am about to become 50% owner in a new business. Both owners are going to purchase the term insurance to help cover if anything happened to us the other could still run the company, so I appreciate Nat starting the thread and all the replies!!

[Ian]

For guideline's sake, you'll want to ensure you have anywhere from 7 to 10 times your annual salary(ies).

It all depends on how the household is set up. It seems from your OP that you don't work, so in general you'll want to shade more towards the 10 times option than the 7 times.

As you've mentioned, you can't necessarily expect to just jump right into the work world (and most likely couldn't achieve anything like income replacement even if you did). You could be looking at quite a long term need for income, so you'll want to think about doing at least ten years worth of DH's salary.

One thing to keep in mind ... I'm not sure how insurance companies will rate him since he has the potential to be deployed to Iraq. I honestly don't remember if that's something they can/do charge extra premiums for. Seems like they shouldn't, but this is insurance companies we're talking about.

[BrerGnat]

For guideline's sake, you'll want to ensure you have anywhere from 7 to 10 times your annual salary(ies).

It all depends on how the household is set up. It seems from your OP that you don't work, so in general you'll want to shade more towards the 10 times option than the 7 times.

As you've mentioned, you can't necessarily expect to just jump right into the work world (and most likely couldn't achieve anything like income replacement even if you did). You could be looking at quite a long term need for income, so you'll want to think about doing at least ten years worth of DH's salary.

One thing to keep in mind ... I'm not sure how insurance companies will rate him since he has the potential to be deployed to Iraq. I honestly don't remember if that's something they can/do charge extra premiums for. Seems like they shouldn't, but this is insurance companies we're talking about.

Thanks Ian! Yes, I have been a stay at home mom since my oldest son was born. I have a bachelor's, but can't even begin to imagine what kind of job I could possibly get if I needed to provide for our family. Plus, even if I wanted to work, I don't know that I could. My life is a whirlwind of therapy, doctor's appointments, and meetings.

We are going to get an amount equal to about 20 years of DH's income. We have to. We happen to live in a VERY good place for Autism services for our son, and if something were to happen to one of us, we would definitely stay right here for the long haul but unfortunately, it costs a fortune to live here! All our family lives in So. Cal, so moving somewhere less expensive, especially in the face of tragedy, would not be an option.

In addition, DH has SGLI (military group life) coverage and a $200K whole life policy he purchased several years ago, so I feel comfortable, financially, if something were to happen to him.

As for DH's insurability, we are purchasing the term insurance through USAA, which I'm sure you're familiar with (if not, they're a company that caters to military and retired military individuals and their families). We do all our banking/insurance through them and they are VERY good with the military members, since that is their primary customer. Their insurance policies carry no war clause, include a loss of sight/limb benefit, and guarantee future insurability, if/when he exits the military or the term policy expires. In addition, they actually expedite the process for people with pending deployments. They don't hold being in the military against you. Finally, their policies are affordable. This coverage for both of us will be less than $100 per month, so that works just fine for us!

[Ian]

Nat, I'm not even sure why you asked us for advice ... sounds like we should be asking you! ;)

Seriously, you guys sound like you know exactly what needs to be done and how to do it. I think you're right on the money with all your decisions.

:thumbsup:

[BrerGnat]

Thanks Ian. I forgot to mention that I have my bachelor's degree in "Google" ;)