Life Insurance

[radwife]

My in-laws are strongly encouraging DH and me to sign up for life insurance now while we are young and in good health. I'm not even sure where to start. Have any of you signed up? If so, have any words of wisdom?

[SuzySunshine]

We went with the AMA coverage just recently and were very happy with the cost and the sign up was painless.

[seaside*bliss]

I have a policy worth $100k if anything ever happens to me. I can rest easy knowing that my family won't suffer if I were to die =)

[SuzySunshine]

Actually our financial planner said that school loans die with you - its the one loan she told us never to put in both of our names.

[migirl]

DH and I both have life insurance (he has a $1million policy, I have $500k). We found our policies by using a broker who does a lot of work for the residents here.

[moonlight]

IL's co signed on a good number of DH's student loans. MIL insisted he get coverage. She took out the policy and is paying for it. One less thing to worry about I guess.

[HouseofWool]

Student loans die with the holder - so don't worry about that. We both have 250K plus a small one from AMA. I would like to bump DH's to 500K before long.

Today I got started on our wills. Yippeee - we so grown up.

[Pollyanna]

I don't have a policy but we have one for dh. It is my understanding that the policy be for 10% of your salary. Ours is based on dh's future salary.

[radwife]

Sounds like it's something I should definitely look into. I have a little bit through work, but the MIL wants us to get a supplemental policy. It's just annoying to make more phone calls, fill out more paperwork, etc. I think I'm just burnt out from just doing all of the moving, change of address, find new doc/dentist stuff! Thanks for all the input everyone!

[Vishenka69]

We got life insurance for DH before buying the house. Since he's the sole breadwinner, I won't be able to carry the mortgage on my own. We did everything through the guy who handles retirement plans for DH's group. He was great at making suggestions regarding policy and who to get it from and all we did was sign the forms. He also suggested that we take out a small policy for me once we have kids.

It is my understanding that the policy be for 10% of your salary.

I think the general rule is 5-10 times your salary. 5x will cover immediate expenses and give you a few years to get back on your feet whereas 10x (if invested correctly) will cover expenses over the next 20+ years and can help cover large expenses like the house, college for the kids, etc.

There are several online calculators that can help you figure out how much you need.

[Vishenka69]

Our policy is for 3.5 times DH's salary and we had to provide paystubs to prove how much he makes. I think 10x might seem a bit suspicious. But on the other hand 10% would be a drop in a bucket when it comes to expenses.

[bokelley]

WE have 250K on each of us. I was also told that government backed student loans die with you, but not private ones. And since DH went to a private school, I am thinking about increasing his.

Sounds like it's something I should definitely look into. I have a little bit through work, but the MIL wants us to get a supplemental policy. It's just annoying to make more phone calls, fill out more paperwork, etc. I think I'm just burnt out from just doing all of the moving, change of address, find new doc/dentist stuff! Thanks for all the input everyone!

You may be surprised. Once we decided what kind of coverage we needed, our agent made it tremendously easy. He took me out to lunch and filled out the forms there, then offered to pick DH up from the hospital and drive him home to get his signatures!

[GrayMatterWife]

--The first step is to decide if you want to get insurance through a group-rate at work, or independently through a company. It will be cheaper through work, but it will be portable and will have a guaranteed premium rate for a set number of years if you buy it independently. That is, if you get it through work, you lose it when you leave that job, and you'll have to start all over. But it's cheaper. However, there are usually limits on how much you can buy through work (usually between 3 and 5 times your salary). That may not be adequate coverage for you--depends.

--Figure out what type of life insurance you want--term, whole life, or a combination. If you get insurance through work, it's a term policy. If you get it independently, you'll need to know what kind of insurance you want--and you should have this decision made BEFORE you speak to the agent. Remember, an insurance agent is a business person, with his own interests, He's not your buddy looking out for you. Listen politely to what he says, but don't let him talk you into buy something you don't need or want, or "guilt" you into buying more insurance that you need. FWIW, I'd get a term life policy, not whole life. Whole life policies are an investment vehicle (and a bad one at that, in the long term). You can get much more coverage with a term policy, but you do not build up equity in your policy with a term policy. But, if I were you, if you want to build equity, take the difference between what you'd pay for whole life and pay for term life, and invest if in a mutual fund or even a money market.

--If you get insurance independently, determine how many years you'd like your premium guaranteed for--1, 5, 10, 15, 20, 25, 30 years. The longer the policy premiums are guaranteed for (that is, guaranteed not to increase), the more expensive the policy will be. But, if you get a five year guaranteed premium policy, you will need to go through the entire application process again, for underwriting, in five years, to get a new policy. And, the older you get, the better chance you have of something being medically wrong with you, which means higher premiums upon re-application (and, even if you have nothing new that's medically wrong with you, the premiums will be higher upon re-application, just because you are older).

--Wherever you get the insurance from, you will need to figure out how much insurance to buy. Honestly, I'd buy a book on personal financial management--such as written by Suze Orman or someone like that--to help you (impartially) think through how much you should buy. Do NOT ask your insurance agent. He is highly motivated to get you to buy as much as possible. Over-insuring is a waste of your money. Go in knowing how much you'd like to buy.

--Know the available riders and whether you want/need them. Think through the available riders--such as accidental death riders. We have accidental death riders that pay out more if the insured dies by accident, rather than by disease. We bought these because, at our age, it is more likely that we will die by an accident.

--Be prepared to take a physical. If you are buying insurance independently (not as part of a group rate, like through work), you'll probably have to take a physical if you want to buy a $100K policy or higher. It's no big deal--they come to your house, draw your blood, take your blood pressure, etc. If you buy a REALLY expensive policy (more than $1MM), they may make you do all sorts of tests that you have to come into the hospital for, though, like a full-body scan. I've never bought such a policy, so I can't speak to such an experience.

FWIW, both DH and I carry life insurance. We have independent 30-year term policies through USAA that began about 10 ten years ago. Before DS came along, we were insurance for $100K each. Once we had kids, we upped that to $500K each. We also purchase additional life insurance on DH through his work (it is really cheap, and it brings his insurance total coverage to about $750K--for a non-accidental death). These coverage amounts are based on how much we believe we would need to pay off the house, and educate the kids--they are not designed to cover years of lost income, as we are both able to work and support the family, should the other person die. And these coverage amounts were determined in light of other assets we have, as well. At the end of the day though, our financial security plan rests on accumulation of wealth, not on life insurance. We are not insured so heavily as to make one of us "rich" if the other dies.

We also have long-term disability insurance for both of us--which I consider very important. Statistically, it is more likely that one of us will become disabled that to die in the next twenty years. My LTD is run-of-the-mill LTD through my work. I don't need a portable or extensive policy because we don't rely on my salary for long-term survival. We will rely on DH's attending salary in a couple of years to fund the kids' education and our retirement. DH carries a professional-specific LTD insurance policy through MetLife, whereby if DH becomes disabled so that he can't be a neurosurgeon (even if he can retrain to be some other kind of doctor...), he will receive a monthly LTD insurance payment through age 65. However, this kind of insurance is EXPENSIVE, I have to tell you. YIKES!! Because of the expense of the monthly premium, DH is not really carrying a sufficient amount of this kind of insurance--if he were to become disabled, the monthly checks would not be commensurate with what he would make as an attending--he's covered only for what he would make as a resident. However, our policy allows us to adjust this amount once he's an attending and we can more comfortably afford more coverage for him.

We do not insure the lives of either of the children.