Ask:
I'm confused. All they money experts seem to say to go for term insurance rather than whole life insurance.
We are looking into getting life insurance for dh. If we go for term, and he lives longer than the term (90% chance that he will) then we've thrown away all that money. If we go for whole life, then when he dies, we get it all back. What is wrong with whole life? It seems to make more sense to me.
Answer:
The problem with whole life is you're paying a lot more for the insurance than you should. It is a really bad investment. Your extra money would be better spent if you put it into a mutual fund.
We go for term life insurance that has a fixed premium for 10 years. Some insurances will cover you longer with a fixed term but 10 years seems to be the best deal. That way we don't end up paying too much early in the life of the policy and don't feel like we have to hang onto the policy later on just to re-coop our money.
Try to remember, you won't need life insurance for your entire life. The goal is to eventually get to 'critical mass' where your investments will carry you through. Life insurance is just for that short period of time when you don't have much saved and it would be very difficult for one spouse to work AND raise the children without some extra financial help.
Always try to add-on to or renew a term life insurance policy before you or your spouse is 50 years old IF you will need it that long. The rates go way up on your 50th birthday.
Also, make sure YOU have life insurance, too. If you passed away, how would hubby survive without you?
And lastly, don't forget disability insurance. If your husband (or any bread winner) were disabled how would you make ends meet? Yeah, you could go back to work but if was disabled he wouldn't be able to take care of the kids while you worked plus you'd have extra medical expenses AND you might need to stay home for an extended period of time to take care of him. IMHO, disability insurance is far more important than life insurance.
Answer:
I know people say not to buy whole life insurance anymore. I supposed they are right if you are disciplined enough to take the extra money and put it into a mutual fund and hope that the fund does all it's supposed too.
I, on the other hand, am not disciplined enough to do that and I don't like the idea of my insurance ending before I do with nothing to show for it. Then, I would be older and have to purchase more expensive term insurance for another period of time.
What I like about whole life insurance, and yes it is more expensive, is that it acrues cash value and once the cash starts to build in your policy you can take loans from it if need be and if you don't pay them back, that amount is just deducted from the life payout amount if you should die. At some point, I will take the money out of my policy.
I would never own term life insurance.
Answer:
Wow, two different view points. But thanks for the idea of disability insurance too. I had never heard of it and my husband is a painter and has fallen before off a ladder. I pray that he never gets seriously hurt, but what if somehow he did...DH and I have been talking about getting life insurance for a while, but it is just so intimidating. I mean, how much do you budget per month/year/whatever for your insurance? Where is the best place to get it from? I was just curious how much of an investment we are talking about.
Answer:
I just added up my total bills, including my mortgage, then added on future bills, college for my kids. If anything were to happen to my dh, I would have to return to work, but it would just be for basic living expenses, all my bills would be paid in full and my kids could still go to college. If you never want to work, add that in too, but the cost will rise with the amount of insurance. The sooner you take it out the better your rate will be, it goes by age and if you are a non smoker, your rate will be better too.
Disability insurance is a great idea. Honestly we should have it too, but can squeeze it into the budget yet.
Answer:
If you don't have any life insurance, something is better than nothing. When we first started out we had just enough to cover the balance on our mortgage plus the cost of a funeral. Funerals are about $10K and can be done for less. However, I was working fulltime and wasn't worried about taking care any kids. You can add on more life insurance by either increasing your current policy or buying an additional policy.
Since your husband has a hazardous occupation, I'd get disability insurance for him first and a small life insurance policy for him and you. Disability insurance really isn't that expensive and since he may be an independant contractor he may not be covered by state disability insurance. When we were younger a decent life insurance policy was $100 to $200 a year, paid annually. Now that we're older we have pretty high coverage since we're in the process of adopting another child, and we don't pay more than $300 a year per policy.
Term life insurance is cheap - as it should be. The odds of one of us dying is very low. We'll cancel the policy before we get into our elderly years because no one in our life will need the proceeds from a life insurance policy at that point.
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One place to look for insurance , particularly life insurance in your alumni association (university)and or if you or your husband belong to any professional organization ie, nurse or teacher or engineer etc. many times you will get the best rates on insurance from them, including for the spouse who does not need to be a member.
You do have to crunch numbers, we have it from the professional assocition my husband belongs to.He also has insurance provided by his employer( gives 2 1/2 times his yearly salary in a payout if he dies).
If your family is young, if you have a family member with a disability etc, even these numbers may not be enough.
The reason it is so much less money from professional organizations is that small group of individuals paying in according to acturarial charts are highly unlikely to die, we always get a refund of about 10% every year on our term life and disability, they just don't pay it out.
As mentioned term life is reasoably priced. Disability is more money, but studies have shown that 1 in 4 workers will be off at some point in their career for 6 months or longer on disability.
One way to save on disability is the premiums come drasticallly down if you make it so you will not draw until 6 months after the injury ( you pay less for this when you set up this account), another good reason to have an emergency fund.
Answer:
I like to combine the 2. I have a small whole life policy that I got when I was in my early 20's so the rates are very low. I will plan to keep that policy pretty much forever. I also have term life insurance right now since I would want my DS to be taken care of in the event of my demise and it would cover the cost of the funeral and any bills I leave behind. Term life is very cheap so it is a good idea to have it. After my DS is 18 I will probably not carry term life anymore but will just have the smaller whole life policy that is not very expensive either.
That's my philosophy after reading lots on the subject.