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Adventures, Advice and Questions from a group of Mormon women who met in Queens, NY and have now scattered all over the place.
 

Tuesday, February 27, 2007

Money money money

My husband always figured when he was 30 he'd get life insurance. Well, it's that magical year.

So, we've been figuring out what kind of insurance, how much, who with, and for whom. Definitely for him. But then the agent suggests if I were to die (and yes, when dealing with life insurance you have to be very matter-of-fact about death) that insurance for me would help cover childcare costs and such. Then she suggests insurance for the children--a lump sum to cover funeral costs if any child were to die.

I don't know what to think. Is she just milking it, trying to sell insurance for me and my kids? It's not a huge amount per month, so is it worth it to pay? And the chances of my kids or I dying in a freak accident...in HARLAN? Slim to none!

Sigh. I get annoyed with insurance because I'm a low risk person and feel like I'm often paying for nothing. But, to leave dh with no money if any of us die would leave him somewhat financially strapped--perhaps that's not fair.

So, I'm curious your take on it. Do you cover more than the person with the main income? Why or why not? Don't feel like you have to get specific in numbers--I'm interested in any general take on the issue.

23 Comments:

  • Hi Katie,
    I'm reading a really good book right now by David Bach called "Smart Couples Finish Rich." In the book he discusses the need for life insurance. He believes that both parents absolutely need life insurance because if the stay-at-home parent were to die, the other parent would still need money to pay for daycare. I would imagine there would be other expenses as well, such as a housekeeper possibly. A lot of insurance agents will try to overinsure you. I would add up any debt that you need to pay off, your mortgage + taxes, and other expenses that you would need covered including the cost of medical/dental insurance and use that number as a reference of how much insurance to buy. I don't think the children need life insurance. We've been offered that in the past as well. I think the chances of that are so slim that it is not needed. I hope this helps.
    MC
    posted by Anonymous Anonymous at 2/27/2007 09:06:00 AM  



  • It is worth getting. Freak accidents occur, but so do illnesses. If you, your spouse or kids should ghet a terminal illness, you would not be able to get insurance at the lower costs.
    posted by Anonymous Anonymous at 2/27/2007 09:08:00 AM  



  • Katie - my BIL sells insurance so obviously DH & I trust him and know he's not gonna take advantage of us, and that is SO nice. We both have life insurance (on his recommendation) but T doesn't. It's not very expensive like you said, so it is worth it I think. That's our situation at least.
    posted by Blogger Beth at 2/27/2007 09:14:00 AM  



  • Hi Katie. We finally got around to getting life insurance when we bought our house. We got insurance for both my husband and myself, but not for our son - I don't bring in any income, but as you and others mentioned, it would be an added cost for the family if I were to die, so it's worth it to cover that cost. I think anon #1 has a good formula in her post - what you need to think about is what you want the insurance to pay for. Some things to think about - college for the kids, living expenses for a period of time (how long is up to you) so you don't have to worry about working, debts, etc.

    To me, it's worth paying for - it's one of those checks I just have to write without paying attention to - don't think about the money, think about how glad you will be that you got it if something should ever happen. Car accidents and cancer can happen anywhere, even in Iowa.
    posted by Blogger marian at 2/27/2007 09:16:00 AM  



  • Katie, We have life insurance for DH, 3X his annual income. I don't have any, but I agree, it is probably worth having and as soon as I get around to it, I'll do it. Life insurance for kids sounds like a bit of a scam to me.

    I've also done some reading on long-term disability insurance. We don't have this, but it is also on my to-do list. I've read that the chances of becoming sick or disabled and unable to work are much greater than actually dying....and it can be a huge financial crisis if you don't have insurance to supplement income in these cases.
    posted by Blogger Jen at 2/27/2007 09:29:00 AM  



  • With my allstate agent, life insurance for one kid or for fourteen kids costs $2 a month (total, not per child). Considering how expensive funerals can be, to me it's completely worth it. I don't know about you, but I can't come up with $5,000 at the drop of a hat.
    posted by Blogger Emily C at 2/27/2007 09:44:00 AM  



  • We got life insurance for DH, and we applied for almost as much for me. Sadly, because of my diagnosis of PKD, I can not be insured. However, DH's work offers $10,000 life insurance automatically on empolyee's spouses. That wouldn't be nearly enough to cover long term day care, etc, but it would be at least enough to cover funeral expenses and some immediate part time help. We are considering it.

    We do not have life insurance on our son. We've never even thought of it, nor did our financial advisor (who sold us our original life insurance) even mention it.

    We also have disability insurance on DH. All told, it comes out to be about $73.00 a month. I think it's worth it.
    posted by Blogger Heather O. at 2/27/2007 10:06:00 AM  



  • Scratch that last number. I double checked with DH, and it's nowhere near $73.00 a month. It's much less for both life insurance and long-term disability.
    posted by Blogger Heather O. at 2/27/2007 10:12:00 AM  



  • One thing that you need to think about when dealing with "how much" life insurance to get is how you would want to deal with things if something horrible did happen (I hate that part of insurance too--just banking on something bad happening, but things DO happen)

    You need to consider if your DH died, if you would want to work, or at least if you would want to be able to just be home with the kids for a few years, or more, before needing to work. And the same for him, if you died, would he want to just stay home with the kids for a year or so, and yes consider the childcare/housekeeping, etc.

    In our family we also have had several meetings where we discuss wills, etc, who would take care of kids, and also discussed that obviously if something tragic occured that everyone would pitch in to make life easier (pay funeral costs, etc.), but even with that, everyone has life insurance.

    I also agree with the others about disability insurance, it's a small amount and definitely worth it.
    posted by Blogger wendysue at 2/27/2007 10:30:00 AM  



  • Hi,

    Sounds like you have some good advice here. I am in the insurance industry (not life) so my comments might seem biased.

    Short answer: get a second opinion then buy it. You will sleep better at night.

    Just out of curiosity why was age 30 the magic number for you guys?
    posted by Blogger Shah at 2/27/2007 10:54:00 AM  



  • I agree with Emily C. Having the stress to come up with the money to pay funeral expenses if something ever did happen to one of you kids would only make that time period that much harder. Funerals and losing a loved one are hard enough without having to wonder where the money is going to come from. If you can afford it, I say get the life insurance for your kids.
    posted by Anonymous Anonymous at 2/27/2007 12:08:00 PM  



  • Just as aside to the insurance. Make sure you have a will too. If both of you were to die, who would care for your kids, insurance money into a trust or go to the guardians, etc. I think that's a WAY more important thing to do than insure the kiddos.
    posted by Anonymous mimi at 2/27/2007 01:33:00 PM  



  • I agree that life insurance for both spouses and kids if possible is a good idea ( and many children's policies are automatically convertible to adult levels at age 21). Speaking with more than one salesperson is good no matter what you're looking to buy.

    I believe a living trust is far and away the best option for estate planning (much better than a will). Couples can make sure their wishes are met without any interference from probate court, including how your children are taken care of.

    I don't quite understand the reluctance people have in discussing the possibility of their own demise. Isn't it pretty much guaranteed that we'll all go through it? I would hope that the responsible mom or dad would want to put in place the best possible plan that would provide for their loved ones.
    posted by Anonymous Anonymous at 2/27/2007 02:08:00 PM  



  • We definitely have life insurance on Todd, but not on me. Maybe that's just because he figured if I died, he would just use all the shopping and crafting budget money to pay for a caregiver for the family :). I think it is a good idea to get insurance for both parents but I wouldn't for the children. I know some people love insurance and insure everything, but we are a little more adverse to the idea. I think it's partly because dh worked for an insurance company one summer transcribing "Deny" letters. He left feeling that most insurance companies are horrible cheats.

    We like to think of the worst case scenario without the insurance, talk about how we would work through it (or not), and then decided if it seems needful. If paying for the funeral of a child would put undue hardship on your family that you wouldn't want to face at that already hard time (like Emily C said), I would get the insurance.
    posted by Blogger TftCarrie at 2/27/2007 02:36:00 PM  



  • Everybody is insured. I also have this life insurance policy that my gpa took out on me that is our emergency fund. We borrowed against it to move to NYC 5 years ago when we were young parents in debt with no jobs. Now that it has replenished itself (we have not paid anything back, only the interest on the loan, and that is still OUR money), it is back up again to almost the amount we took out, and I consider it to be our emergency savings....so they are good while you are alive too!
    posted by Blogger Kage at 2/27/2007 03:11:00 PM  



  • I think the "right" answer is different for every family. My dad suggested we take out a large 10-15 yr policy while dh is relatively young (it's much cheaper now). Then when we have to renew do a smaller policy assuming by then we have more in savings and that an insurance policy would only be supplementary if needed. We have an insurance policy on my husband but not one for me or our child. This is what makes sense for our situation.
    We got his life insurance policy through AIG on the internet and it was almost HALF of what different brokers were quoting us. I would check the internet.
    posted by Blogger Melissa at 2/27/2007 04:02:00 PM  



  • we've had mine privately for years, but just recently got Dh and the kids covered, through his work. I think it's important to insure parents, but not so pressing for kids, though if it's cheap enough and gives peace of mind, you may as well add them.
    posted by Blogger cchrissyy at 2/27/2007 07:08:00 PM  



  • Thanks everyone--You just gave me a lot of great advice. I appreciate it!

    Marian, it's a pity I can't run away from problems by moving to a small town! :)

    Shah, Dh chose 30 kind of arbitrarily as a time he hoped to have enough income to put into more than just month to month living and a little savings. Like, money for life insurance, investing, etc. I don't know how early most get life insurance(sounds like everyone here is really on the ball) but I think it's a good way to keep from putting it off too long.
    posted by Blogger Katie at 2/27/2007 07:30:00 PM  



  • I just finished a book by Suze Orman ( "Young, Fabulous and Broke") and she suggests getting enough life insurance that you would be able to live off the interest generated from a payout, without doing any risky investments. For example, a million dollar policy invested in a 5 percent CD would give you $50,000 a year. Not bad, right? According to Orman, a million dollar policy is pretty cheap when you're 30something. I've never got a quote for this type of policy, so I'm not sure what "pretty cheap" means to her, but I thought the idea was interesting.
    posted by Blogger Nanu at 2/27/2007 09:23:00 PM  



  • Insurance on husband - YES. Term life insurance--don't get life.
    Insurance on you - YES. It will only cost about $10/month for you and will give you HUGE piece of mind that your husband can be flexible with work and be thre for the kids if you get sick and die.
    Insurance on kids - NO. Don't. It is pricey for what you "get." You won't "need" it......you can put a funeral on a credit card and take care of details when you feel up to it. If you are strapped enough financially that your credit cards are maxed then you should put that $$ per month toward your debt NOT toward life insurance.
    posted by Anonymous JKS at 2/28/2007 02:41:00 PM  



  • Meant to say don't get "whole life" Whole life is more expensive because it is an investment too. It makes it hard if your situation changes because your fixed expenses for insurance are higher. You don't want to pay and pay and then end up losing the policy because you afford it anymore....and it is the type that was supposed to increase in value.
    posted by Anonymous JKS at 2/28/2007 02:46:00 PM  



  • In addition to what JKS said, you can usually make better money on a different investment then on whole life - my husband and I couldn't make the numbers work for us.
    posted by Blogger Melissa at 2/28/2007 03:53:00 PM  



  • Wow...I've learned a lot just reading all about this. I guess we'll set 30 as our magic number, too. Oh boy, all this grownup stuff you didn't even know about when you were a kid. Ignorance is bliss.
    posted by Blogger Heidi at 3/01/2007 06:12:00 PM  



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