I actually thought it was high since i was quoted at about $50/per month…the number really jumped after I mentioned I smoked approximately 1 pack of cigarettes in the past 3 years. I assume that two percent takes into account everyone including people that are terminally ill or morbidly obese. Unlike health insurance, life insurance companies can take these things into account along with income, job changes, marital status, educations, etc.
They actually ask about extreme gopro sports which lowered my rate since I don’t do them. However, if I did take up skydiving in the first few years and bite it the contact would be nulled (same goes for suicide), but after a few years (2 or 5 can’t remember) you get carte blanch to jump out of whatever you want without fear of losing out on you premium.
Well, if he lives 50 years, then it has a 2.6% IRR.
If he lives for 1 year, then it has a 10,000% IRR.
We don’t have enough information. Find out when he’s going to die and what the stock market’s going to do in the meantime. Then we can tell you.
IMHO - Unless he just really wants to give some money away when he dies, a single person with no kids needs only enough life insurance to cover the funeral bill.
i don’t get why people get such long term life policies. you know how mortgage insurance is bad relative to term because mortgage insurance only pays the remaining equity portion, i think the same is true with t20 and t30 policies. i’d imagine people are overinsuring a majority of the time when they get a t20 or t30 policy as their wealth increases over time and begins to offset the liabilities that you are protecting with term insurance.
I set my term to expire right around the time I turn 59 1/2 which is also right around the time I’ll have my house paid off (all else equal). Timing is everything.
When I got out of the Marines, I was 25 years old and weighed 205 lbs. (I was a smoker then, too. But that’s beside the point…) Now I’m 34 and weigh about 320. I pay about $60/month for $500k for 10-year term.
If I could go back in time, I would look at a 30-year term policy or some other kind of whole life, simply because I might have been able to get a 30-year for about what I’m paying now.
Just food for thought. You never know when you’re going to gain 100 lbs, or start smoking, or develop ALS (but don’t worry. NFL coaches will save you by dumping ice cold water on their head), or some other terrible disease.
You should say * conditions apply, as that is only the condition in bold print. The fine print is ‘It’s smart buy only if then you die (according ) to the plan.’
@STL: what i’m saying though is that if you were to die at age 58, you’d get what around $500k and only have liabilities of say $20k on the mortgage? that’s being way overinsured. sure, it’d be great for your family to have $480K in liquid capital but you are matching against liabilities that no longer exist. i say, when you buy a house and have kids, go t10 and after 10 years, see where your liabilities lie. there’s good chance many of us will have our houses paid off at 40-50 and will have saved up plenty towards our kids’ education. matching your day 1 liabilities over 20 or 30 years is being way overinsured. it basically assumes you will not accumulate any wealth. the only way to justify this is to say that t20 or t30 policies are “investments” but we know this isn’t true.
@geo: the effects of inflation are all the more reason to shorten your policy term.
Assuming you have a fixed premium amount on your term policy, inflation will erode the cost of that as well, at the same rate.
So when it’s up for renewal and your health is significantly worse than 10 years ago, what do you do? Pay higher premiums for the same coverage? What if you are in a worse than expected financial position and can’t afford adequate coverage?
Not challenging you or anything, just curious as to your solution.
since your main liability is a fixed cost that goes down over time. your coverage should go down over time. i suppose if you have 10 kids and you want to put them all through school, you’d be in a unique situation but almost 100% of those i know with life insurance are overinsured come year 5 of the policy.
at the reset date you would assess what you need. you will probably need much less coverage, if any at all, considering most of us will have a good savings rate and have employer LI anyway. if my employer LI provides $200k in coverage, which is does currently, are my liabilities really going to be much more than $200k in 10 years? probably not. is it worth getting 50k in coverage? probably not.
if you have no baseline employer coverage, you may need to get some coverage but in the end, you’ll end up spending less, covering the liabilities you need to cover at your reset dates. getting t20 or t30 coverage well into your 40s and 50s is not cheaper than getting coverage from 30-45 and then stopping. they still charge you for your expected mortality for years 40-60 despite you only being 30. its not like they are charging 30 year old rates for the years 40-60. doing t10 three times will not be THAT much more expensive than doing t30 once so considering you may need to only do t10 once, it doesn’t make sense to do t30. why do your wife and kids need more than a house paid off, education funds and 2x what your spouse needs to save for retirement (you’re dead remember so she gets it all)?
working in WM has taught me that almost everybody in the top 20% of society has no liabilities at age 45 and if they do, it’s because they live in a ridiculously expensive house or saved nothing until they were 40. i’d assume most of us on this forum would not have these problems. only if you plan on significantly growing your liabilities over time should you get t20 or t30.
My liabilities for my kid are definitely more than my mortgage. My mortgage annual outlays if I die would be the same, or potentially way less if refinanced. The cost of my kid and my wife’s ongoing costs (she is a professional as well though and makes good money too) increases. Really, the two liabilities kind of offset. I used a t20 for my needs, both on my wife and myself. Doing a t10 now and another t10 in 10 years makes no sense with the uncertainty of future health. If I find I need more coverage, I can layer another t10 on down the road. But we are covered now until the kid is 18. After that I don’t care. House will be paid in 5-10 years.
i still don’t get it. once the house is paid, your wife no longer has that annual cost, at which time she can use her contribution toward the housing cost on the kid’s living expenses. when the typical person buys insurance, they forget that at the time of death, the spouse no longer has a major housing cost. additionally, sorry guys, but in 90% of cases, the spouse will find another spouse in her lifetime if we croak in our 30s or 40s and you won’t have to have her retirement nest egg fully funded at death. it’ll already be most of the way there when she takes your half anyway.
note: all of my advice is only appropriate for dual income households. if you’re burdened with having to support the cost of living for your spouse, you’re going to need a near infinite amount of coverage, forever.
Given your posts, I’m assuming you believe whole life fixed payment term (10-20 yr) products are a waste of money?
I understand your just matching your liability’s, just-in-time philosophy on LI, but not quite sure if I agree. Perhaps if you factor in TVM into your total costs, you come out ahead, but with health/life/financial situations being so uncertain, I’m not sure you can execute the plans with perfect timing and as ideally as you outlined above.
yes. whole life is a bad play if your liabilities will disappear. whole life is only good for buying out business partners and other situations where you must have a sum at death no matter what.
the only wild card with mulitiple term life policies is initiation costs. if initiations costs are very high relative to coverage costs, which may be the case for smaller LI contracts, then one term life could be better. in my experience, i’ve never come across a situation where t20 or t30 was better for the person than t10 or t15.