life insurance

theteno · January 2014

Hey All! I don't know where to begin here. I know we need something. All I know is term is cheaper, but whole life is better. Any info/advice? Thanks!

cinderin · January 2014

whole life is not better :-)

I would just get term. You could see if your work offers any or offers a group rate at a broker.

brij2006 · January 2014

Term insurance is what you will want to get.

The theory is that whole life policies are more expensive, and your money is better spent in investments than paying for a whole life insurance policies.

As far as how long of a term to get. I like to see people get themselves to 65. At age 65, that's when you will begin to live off of your investments, and if anything were to happen, your spouse will receive your investments to live off of.

The rule of thumb on how much, is this...

1. Take 7 times your salary. (say, $35k salary x 7 = $245k)

2. Add up any debts, including the mortgage. (say $30k in student loans + $100k in mortgage = $130)

3. Include any expenses for children's college tuition or any other larger expense items you want to do/pay for in the future (say 2 kids x $50k in tuition).

= Amount of term insurance you will want. In this scenario it's $475k.

The point of life insurance is to allow your family to continue living, pay for burial expenses, pay off debts they may have needed 2 incomes to pay for, and have enough time off to grieve the loss.

You will want to do this scenario for both you and your H, and you each will get separate policies for how much insurance you need.

Feel free to ask me any other questions. I'm an insurance agent, and sell life policies.

theteno · January 2014

thanks @brij2006! you mentioned getting to age 65. DH and I are not terribly financially smart meaning that we don't have any investments as of yet. We have a savings account, but neither one of us is big on high risk investments and I wouldn't even know where to start with that. We'll probably start with term insurance now and I'll have to meet with a financial adviser or something for the other investments.

brij2006 · January 2014

I would highly recommend to meet with a financial planner to get yourselves set up for your future. The earlier you start it, the better off you will be in the future. We use a financial advisor with New York Life, and have been very pleased with how they set things up. We also like that their fee's aren't taken off the top, and their commission is based on how well your investments do. So they're enticed to make you more money.

wiggyslilsis · January 2014

I decided to come lurk in here because we are meeting with a financial planner soon and I am glad I did....good info @brij2006

We are going to get life insurance and retirement. I feel bad that Ava Nichol is almost 2 before we are doing this

I wish we had set it up before she was born because time has just flown since having her.

brij2006 · January 2014

@wiggyslilsis One of the biggest recommendations I can give is to get yourselves set up financially first before starting any funds for your children. They can pay for their own college, but the last thing you would want is to be burden on them in retirement because you didn't get yourselves set up financially.

LittleLady77 · January 2014

I need to do this. I have a hearty life insurance policy through my work but if DH dies I get $30k. Not cool.

carcrashheart · January 2014

don't forget to get LO a policy as well.

DH has a policy of 1 mill on himself.

i have something measly like 25k, through his employer (not great).

LO has 10k i believe, also through DH's employer.

wiggyslilsis · January 2014

@brij2006 we have an account set up for Ava Nichol already but only because it was so easy to just set up a bank account and make $50 come out automatically every month. Plus other family members add to it as well. It is just a savings account in her name though and won't even begin to cover her college but is more for other expenses.

I totally get what you are saying though...it makes perfect sense and part of the reason why I want to do our own retirement as well as the one DH has set up through work.

Ayres12 · January 2014

This is a helpful post- thanks. DH and I have been talking about doing this very soon.

bobcee · January 2014

@brij2006 we have an account set up for Ava Nichol already but only because it was so easy to just set up a bank account and make $50 come out automatically every month. Plus other family members add to it as well. It is just a savings account in her name though and won't even begin to cover her college but is more for other expenses. I totally get what you are saying though...it makes perfect sense and part of the reason why I want to do our own retirement as well as the one DH has set up through work.

@wiggyslilsis - I have heard that as far as financial aid for college goes, that setting up a savings account for your kids actually is one of the worst things you can do. Not saying it's a bad thing to have savings for her, but I think it's actually better to have it in your name because when they are considering things for financial aid, they only assume a certain portion of the parents' savings will go towards college but assume most or all of the kids savings will go towards it. I don't know how true any of this is, but maybe someone who knows more about it could give some advice?

Instead of a savings account for the kids right now, we have accounts set up for them through the WA GET program (which is our state's 529) for college. It may be something you want to look into. Then we just have our savings and keep track of what $ is the kids. Again, not sure if this is the best way, but something to consider. We should also probably talk to a financial planner....

wiggyslilsis · January 2014

@bobcee that makes sense. It is my name, my husband's and hers so I don't know if that makes a difference. We aren't really doing it as a college fund. It is an everything fund so a car, money to get into an apartment, wedding money, etc. It will also become her account that has a debit card attached to it. Our plan is that when the money builds up in there and she gets older to put a portion in a certificate (hopefully by then the interest will have gone up) and then it will just be her bank account to use and that money in the certificate will be hard to access.

I will look into the GET program to save up for college. What happens if the child doesn't go to college?

brij2006 · January 2014

wiggyslilsis said:

Iwill look into the GET program to save up for college. What happens if the child doesn't go to college?

Most 529's, the money goes back to the parents if the child chooses not to use it for college.

bobcee · January 2014

brij2006 said:

wiggyslilsis said:

Iwill look into the GET program to save up for college. What happens if the child doesn't go to college?
Most 529's, the money goes back to the parents if the child chooses not to use it for college.

@wiggyslilsis - This. Or it is also transferable to another relative as long as that relative resides in the state. The only thing you're losing out on is the interest that money could've gained (or lost) in something else in the years it was tied up in the GET fund. But basically you're paying today's rates for their future college tuition or other related school costs. And it pays out at the cost of the most expensive public university in the state (so UW) the year you draw it out. If they end up going to a school out of state you still get what it would pay out for the cost here and are just responsible for any difference.

They also have options on how to pay into it - so you can lock in the rate now but then you're committed to pay x amount each month, or you can just pay lump sums at whatever the current rate is which is what we like to do because we rather pay in what we can afford when we can just since you never know what may happen (obviously the con to this is that the rate goes up every year so you end up paying more than if you lock it in).

wiggyslilsis · January 2014

That makes sense! I will definitely bring it up to the financial planner when we meet up with him. My concern is that we are planning on moving out of WA in the next 5 years.

bobcee · January 2014

Hmmmm...yeah I don't know how that would work then.

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