Last time I did a Money Talk with you all, my readers, the response I got was amazing! I truly appreciate all of the advice, so I’m here, asking for help again.
Ever since having baby RB40, more and better insurance has been on my mind. No longer is it just The Big Guy and I to worry about ourselves. Now we have the little girl who depends on us for everything. What would happen if I was suddenly laid off, or if I was disabled and could not work. Even worse, what would happen if either one of us died. The Big Guy has life insurance up to his eyeballs through the National Guard, but I only have about $250,000. So, we’re asking what are our insurance needs and why to you, my readers, before we go meet with the insurance agent. I want to have clear perspective from the best readers on earth! Help!
Current Insurance:
As of today, the Big Guy has almost $1 million in life insurance. All of it is term, but I know we will be totally ok (at least financially :-( ) if something tragic happens. I have $225,000 in term life insurance and $25,000 in whole life. Baby girl has nothing…..
What Do We Need?
I did an internship for a life insurance company while in college. Actually, I’ll tell you the name of the company: Northwestern Mutual. As far as insurance companies go, this is as honest and solidly run company as you’ll find (no, I’m not getting paid to say this). I found during my internship how solid the company is (they were one of the few to not take government bailouts and actually bailed out other insurance companies – that’s how financially stable they are). And, they’re commitment to honesty and taking care of their policyholders is unmatched by any other company in the industry.
While I loved learning about the business side of insurance, I hated the selling part. I am not a persuasive person. I can’t sit down with a person, find what makes them tick, and then connect with them on their level. Numbers (and almost only numbers) speak to me and I have a hard time breaking out of that. I came into the internship believing that insurance companies were 100% out to get their policyholders, and I just wanted to get an internship on my resume.
What is discovered was that insurance is a great way to protect yourself – and even build a back-up retirement plan. Even as a term-life insurance devotee, I acutally started to prefer whole life, seeing as Northwestern Mutual was returning a guaranteed 6% on whole life policies in 2010. For those of you that don’t remember, 6% was an incredible return the, especially since it was guaranteed.
Disability Insurance:
I’m thinking Disability insurance is a must, seeing as I’m the only one working, and I make more than The Big guy (probably) would if he went back to work. Now, most employers provide basic disability coverage – usually 60% of your salary – just because you work for them, but my employer doesn’t, because all of the benefits where I work are sh*t. So we’re going to have to purchase something. Maybe purchase 60% coverage and then the Big Guy gets a job while I stay home with the kiddo?
Life Insurance for the Baby:
I would like to get her a $25,000 whole life policy. It’s not a lot, but along with the death benefit, she will have a significant amount of cash build up in the policy by the time she turns 18. It would be a nice little gift to her.
More Life Insurance for Me:
Right now, with our debt sitting at about $105,000, and my insurance at $250,000, the insurance would pay off all of our debt, but not really set both of them up for life. I’m not wanting to make them millionaires if I died, but maybe $100,000 more in life insurance is in order? And, I would like to convert another $50,000 of my term life insurance into whole life.
Long-Term Care Insurance
The Big Guy and I both need this. At our age, it’s super cheap to purchase, and it’s almost certain that we will need it at some point. I don’t want our care to put a burden on our or our daughter’s finances later on :-). You can read more about the costs of longer-term care and end of life care here, but suffice it say it’s not cheap. I want to protect us.
We’re also considering long-term care insurance for the aunt and uncle that I talked about in the first Money Talk. You know, the ones who asked us to take over their finances. Obviously, they have no savings, and seeing as so many people will need long term care at some point in their lives, and they have no children of their own, the financial responsibility would fall to us. I think it might be wise to purchase the insurance for them in order to protect ourselves later on.
Bottom line is that on our budget come December when our personal loan is all paid off, we still cannot afford to do everything on this list. I was thinking about meeting with our agent, telling him everything we were considering, as well as giving him a budget of $100 a month. From there, maybe we can work together to determine which products should be the priority and which should wait another year.
What do you think? What insurance should be our priority, and looking at our budget, what should our insurance budget be that we present to the insurance agent?
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I think your opinion was skewed from working with an insurance company. My mom was an insurance agent in her first career and she really had to believe in the products to sell them… even though the numbers don’t support that belief. She even took out whole life policies on me and my siblings. You don’t really need anything more than term life insurance and disability at this point, I think (as a layperson). Put your money toward your own investments instead of paying high premiums on whole life policies and LTC. If you’re seriously considering these expensive policies, why not talk with a fee-only financial planner first to get an unbiased professional take? A life insurance agent, as well-intentioned as she may believe or portray herself to be, is still a commissioned-based salesperson and her view will be colored.
I’m an insurance agent, however, I am not a life and health person. So, with that being said, my personal opinion is you’re trying to overinsure.
Insurance 101:
Insurance is to indemnify, make you as close to financially whole as possible. It is not meant to make you BETTER than you were before.
Personally, I am not a whole life fan. You and your husband should have a life insurance payout that is equal to 4 years of your individual salaries. That gives each spouse 4 years to get bank on track after your deaths.
You are far too young for long term care insurance in my opinion, UNLESS you have genetics in your family history working against you for MS or something along those lines. The odds of someone in teir 20’s needing LTC are less than 1%.
I think you’re running on fear to purchase insurance and that is a bad idea. Aside from that, if you truly plan to retire by 40, why do you need anything but term insurance that lasts until you’re 40? Retirement means you can self insure!
I would agree with the other commenters that term life insurance is your best option at your age. Your plan of $100/month budget will buy lots more protection with term than any other choice. I would also agree that it sounds like you’re trying to overinsure. As a couple in your twenties, your individual earning potential is far greater than your need for large benefits in case of an untimely tragedy. I would recommend increasing your term insurance to a comfort level that will still enable you to make other income pursuits such as investments and savings.
Disability insurance is important and should be strongly considered. LTC at this time is something you can put on the backburner and consider later.
After seeing your existing insurance coverage and your situation, as an insurance broker I think disability insurance should be your top priority. Although you can argue that you need more life insurance, the fact is you already have life insurance coverage and so does your husband. A bit more on yourself may give them more breathing room. But I feel like since you don’t have any disability insurance and you’re the sole income earner, you should definitely consider it for yourself. Your husband will also have to return to work to get a policy, since benefits are based on income loss, and he is currently not working.
Hope you are able to obtain all the coverage you need on your budget!
I tend to agree! Thanks for the input…..I think out life insurance coverage is sufficient, although I may convert 25 – 50K to whole life, and then we’ll pursue the disability.
Have you written anything about health insurance? Or am I just not seeing it? Wanting to retire early but oh boy health insurance.. Stresses me out.. HELP !