Life Insurance ???!!!???

this is such a personal decision based on one's family size, finances, etc....but I need to get some visibility into what others do. 


We have 2 young children, a home in Maplewood, and are in our 40s.  If one of us were to die today, it would take a $1.5mm policy to bring us through the next 20 years. The cost of this will be upward $4k/year. It's so expensive, but I don't see an alternate option.

I find it hard to imagine that people pay this crazy amount every year...but I guess they do? Or not?  Is this the norm? 

Thank you. 


Shop around. I only pay around 500/year. I went to Lifequotes.com. Locked in a rate for 20 years with Met Life. (I don't have a 1.5 million dollar policy though.) Still, your quote seems outrageous.


do you really need 1.5 million? That's a big number.


The rate you quoted seems high.  We used insure.com and found the process painless.  Our family felt it was necessary for peace of mind.  Especially after a scary hospitalization when you start having those what if thoughts.  You might also want to look at disability insurance too if workplace doesn't cover.


I don't think life insurance is meant to support the survivor completely for 20 years. You should really think of it as a substantial buffer. We have term insurance for 500K each. That amount would cover the mortgage and leftover funds would serve as a cushion, but neither of us would be able to quit working and live off insurance funds. Also, some downsizing would be necessary if the family only had one salary to support us. But then our lives would change completely and that's just being realistic. 1.5 coverage for each spouse seems like overkill. And we also have two kids at home.


Will the surviving spouse qualify for social security benefits?


Are you looking into whole life, term life, or an annuity?  Would you be better off putting the money into savings or investments or a trust with the spouse as beneficiary?  How is your general health now?  How is the health of your spouse? Does your spouse work?  If not, does your spouse have marketable skills that would enable him/her to enter the market place should the need arise?  What expenses would you no longer have as a family if you (or your spouse) were to die while you are still pre-retirement?  What reasonable alternatives would the surviving spouse have to current expenditures (i.e.: private vs public school? home ownership vs renting? fewer/different vacations?) These are just some of the factors you need to look into and consider when making the kind of financial plan you are now considering.  Insurance is not the only way to go in protecting your family financially.  When making your decision, consider that factors can change over time. Your family may need more money or less from insurance as circumstances change. Consider tax implications too.  Depending on what you choose to do, a significant chunk of the money set aside for the spouse and children after you are gone may go to Federal and State taxes.  


thank you for your replies...please note that the $1.5 million is indeed, the net cost of  what 20 years of living expenses would be. We have 2 children under 5. This includes mortgage, taxes, monthly daycare expense, heating, eating, and perhaps if one of us were dead, we'd need to hire extra help around the house...we cannot depend on family. We'd need 18 years, hence the 20 year premium. Its not meant to take care of the surviving spouse. 


to clarify...do you mean 1.5 on each of you? So the cost is 2k per policy? 


You are trying to enable the surviving spouse to stay in the house you occupy at the time of one spouse's death and raise the kids in the manner to which they are currently accustomed.  That is taking care of the spouse [and the children] until the children are grown and able to care for themselves.  Day care expense, assuming no additional children, would only be needed for five years or less, not the full 20. Depending on the type/duration of the mortgage, that expense might not exist for the entire twenty years either and there is always the possibility that you would have moved by then.  Thus, some of your projected family expenses will be less than anticipated.  Others such as real property taxes and general living expenses may increase over time due to inflation and might need to be upped in your calculations.


So to be clear - you/spouse/kids wouldn't qualify for social security survivors benefits?


$4k premium seems a bit high, but your health and demographics may be influencing it. I just executed a $1.5m policy last year, am late forties white male without health issues, my premium is closer to $1,300 a year with 10 year term.

I went through my financial planner who shopped it around. Rates ranged up to 2x what i paid.


Circumstances do change over time. Daycare ends. If the surviving spouse was at home, older kids mean they can go back to work. And sometimes you move into a smaller house. That is why term policies, esp 10 year policies work well. It doesn't mean you don't have other vehicles for saving and financial security too.


yes, shop it around.  It seems like it should be between $1,200 and $1,500 a year for a term policy.  Your amount sounds right to me, don't lower it if you can find a policy you can afford.


There is a reason why many advisors recommend a coverage 5x your salary as a rule of thumb. $1.5 mil is not a lot of money for a single parent with 2 young kids in our area, especially if the deceased spouse had a good salary/income, and the goal is for the children to grow up in the same house till college with a similar lifestyle as before, which is fairly common. If you want to throw in college savings, we are talking about additional $600K-$900K in coverage.

As for the premium the biggest factors are your current age and physical condition. For a 20 year term life with $1.5 mil coverage, a man in his mid 40s, in good shape, and has a clean family medical history, the premium should not be more than $2,000/month. For a woman it should be less. Niceporch, send me a PM if you want my insurer's info. 


it seems excessive to me. There'd be SS benefits and the remaining spouse certainly could get a job at some point. Most people take out enough life insurance to pay off the mortgage, a few years cushion, not use it as the only source of income for 20 years.

If you have a fairly comfortable lifestyle that would warrant $1.5m in coverage, seems the working spouse (s) should have a good income- doesn't the job provide basic life insurance and offer additional coverage? Any job I've had recently offer 1x salary "free" and you could buy up to an additional 5x for a pretty good rate (well, well south of $4k a yr-I think I've paid around $8-12 month for each 1x salary


Definitely check the availability of work insurance, which is generally convertible to private insurance if you leave the company.  When I left my company, I found that a new policy was more cost effective, but if my health had been at issue, I could have kept the work plan then.

How to save is a trade off...if you are both healthy, and can afford the $4k/year premiums, then the decision is whether you are better off doing that, or taking part of the premium money and simply saving it in a fund you do not touch, to be available for whatever may come along.

If you can afford to insure at a level that will mean that a surviving spouse could continue on with no changes, then it is a fine thing to do, I would not join those who call it "excessive", although it is a higher level of insurance than many people carry.


if you do not have disability insurance, I would look into that as well. Premiums for disability insurance are higher than term life as the likelihood of paying out on such policies is greater.  I would consider both products and see what level of premium you can afford and what level of coverage that gets you.


the original question included "is this typical". To which, I would say no, it isn't. Typically people get insurance to cover the amount of the mortgage plus some cushion. If you want your cushion to be 20 yrs, go for it but I don't think that's typical. I still don't understand how there's no offered workplace insurance given we seem to be taking about a 6 figure salary here. I also think you need to get a better sense of what SS would pay. If you are high income with 2 kids, it might be more substantial than you think


I imagine the policy quoted was not a term life product.  what about insurance on your wife?  probably need $250-$500k there as well  (if not more)


Wow $4k/year is a lot for term insurance. We pay $1.5k/year for $750k of coverage per spouse -- so half the coverage you are considering. The premium for the me (female) is $500/year. Premium for my spouse (male) is $1,000/year. (These numbers are rounded.) When we bought it, I was in my 40s, husband was in his early 50s, and the premium is locked in for as long as we want the policy. Shop around. Also, it depends on your health. If you are a smoker, have high cholesterol, a chronic disease, or the like your premium will be higher. When we got ours, the only "flag" was my husband's somewhat high cholesterol. They said they'd reduce his premium if her lowered his cholesterol to a certain number within six months. He didn't do it.

You do NOT need to buy a policy that covers every penny of expense over the next 20 years. 

1. The surviving spouse will still be working.

2. The surviving spouse will presumably be increasing his/her income every year. 

3. You will be earning a nice chunk of interest on the payout. Let's say it's a $900k policy. You'll earn about $50k/year in interest in a mutual fund. Could be more. If you don't pull any out the first few years, you'll have compound interest.

4. One less person in the house does reduce expenses -- clothes, commuting costs, one less car, one less airfare on vacation, restaurants, entertainment, one less life insurance premium, health care, etc. -- figure at least $150k-$250k over 10 years.


We each have enough to cover the mortgage, but little else as I don't want to encourage Film Spouse to wax the top step of the stairs.


LOL The same thing crossed my mind! Seriously though if you had enough to pay off the mortgage, expenses would drop dramatically plus all the other reductions shoshannah pointed out above 


have you considered what the survivors would get in social security benefits?  Each minor child would get up to 75% of the parent's benefit amount.  If the benefit is $2000 month (I think you would need to be making close to 100k/year for that amount), each child would get up yo 1500.

The spouse would qualify for dependent benefits if they had low income (very low--about 15k/year I think) as long as there is one child under 16...but there is also a family max that I just can't figure out...i have heard different things...2 kids should get their full benefit, but if there are 3 dependents, that might be over the maximum.

You can get what your approximate benefit would be from SSA.

Are you looking at a term policy or whole life?



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