Home How much life insurance?

[Allisonfaye]

My husband and I have an ongoing debate over how much life insurance is appropriate. Here are the facts:

We have a 3.5 year old and a 5 year old, both of which I would like to send to college. They can pay for their own grad school.
We have a pretty sizable mortgage in the jumbo category.
I am a stay at home mom and have been out of the job force for 6 years. I have no plans to return to work in the future. If I did have to return to work, I am in a field that is very, very depressed right now (real estate finance, portfolio management). Child care would be significant if I did have to return to work.
We have lost a significant amount of our net worth in the crash of 2008.

We do have life insurance now but according to Suze Orman, we should be using it to generate an income to live off and due to the size of our mortgage, I wouldn''t be able to do that. Even if I took the life insurance and paid off the mortgage, the property taxes alone would eat up most of the income that would be generated.

I am not looking for a specific dollar amount or a general rule of thumb. I am looking for specifics like : You want to be able to pay off your house, and generate income for X years, etc.

Any advice?

 

[neatfreak]

Date: 6/22/2009 9:31:21 AM
Author:Allisonfaye
I am not looking for a specific dollar amount or a general rule of thumb. I am looking for specifics like : You want to be able to pay off your house, and generate income for X years, etc.


Any advice?

Things like that ARE a general rule of thumb though-just because a certain number of years is right for one person doesn't make it right for another ya know?

Personally I would want enough to pay off the mortgage, to pay my DH's income (assuming this policy is for him) until the kids get to college (in an ideal world-otherwise I would probably take like 3 years of his income which is enough time for someone to train for and get a new job for the most part), and to pay college tuitions for both kids. That might be generous but it would make sure you guys would be set in case the worst happened. You may have a hard time re-entering the workforce after being out for so long so I think it's smart to err on the side of more insurance personally.

And for you-if you want to take it out for yourself since your DH is the financial breadwinner I would want enough to cover daycare until both kids were old enough not to need it.

Hope that helps!

 

[Allisonfaye]

Date: 6/22/2009 9:36:39 AM
Author: neatfreak

Date: 6/22/2009 9:31:21 AM
Author:Allisonfaye
I am not looking for a specific dollar amount or a general rule of thumb. I am looking for specifics like : You want to be able to pay off your house, and generate income for X years, etc.


Any advice?

Things like that ARE a general rule of thumb though-just because a certain number of years is right for one person doesn''t make it right for another ya know?

Personally I would want enough to pay off the mortgage, to pay my DH''s income (assuming this policy is for him) until the kids get to college (in an ideal world-otherwise I would probably take like 3 years of his income which is enough time for someone to train for and get a new job for the most part), and to pay college tuitions for both kids. That might be generous but it would make sure you guys would be set in case the worst happened. You may have a hard time re-entering the workforce after being out for so long so I think it''s smart to err on the side of more insurance personally.

And for you-if you want to take it out for yourself since your DH is the financial breadwinner I would want enough to cover daycare until both kids were old enough not to need it.

Hope that helps!

I guess I should say that I don''t WANT to return to work. I am 46 and it is really important to me to be with my kids while they are growing up. We made a decision when we got married that if we had kids, I would stay home with them indefinately. I think if they lost their father, the last thing I would want to do is spend time training (going back to school) and then working full time.

Also, we have a sizable policy on me for childcare. I insisted on it and DH was in agreement.

 

[Allisonfaye]

I should say that I don''t not want to go back to work. I just don''t want to be forced to work because of the circumstances.

 

[steph72276]

I''ve always heard generally it should be 10 times the person''s income.

 

[D&T]

Hi Allison, just my two cents, but I don''t bank on life insurance as a means to a retirement vehicle but everyone is different. Especially the cost on life insurance for whole is very expensive, or return on preimium is expensive, I just buy term minimal to pay the funeral cost and a bit extra for other stuff, and put away the difference of premiums otherwised used for the whole/ROP life insurance in a CD account or something else, but the amount of premiums difference would be better suited in a different investment vehicle, but again just personal opinions. however here is a life insurance calculator and maybe that may or may not help you decide on the amount you are thinking of carrying. I stopped listening to her show after she misguided a listener on foreclosure vs short sale.

http://www.forbes.com/cms/template/tools/calculator/life_insurance.jhtml?_DARGS=%2Ffinance%2Fcalc%2Finsurance%2Fdroplet_form.jhtml

 

[D&T]

Oh - Allison, I didn''t mean to ramble off like that, I really just wanted to include the link. Please accept my apologies.

 

[Allisonfaye]

No problem. I am definately NOT interested in anything other than term. DH has three of those universal whole life policies and everything I hear/read says they are a bad deal. He can''t even watch Suze Orman anymore because she says this and his male ego has to discount everything that she says if she disagrees with him on one thing.

 

[Haven]

We purchased enough to keep the living spouse in the same lifestyle we currently have and plan to have in the future. You''ll have to consider your mortgage, childcare costs, education costs for the kids, and retirement costs.

The amount changes over time, of course, since you''d need more if your spouse passes away while the kids are still young vs. after the kids are out on their own. To accommodate this, we took out three different plans that covered 10, 20, and 30 years so the amount for which we are covered goes down every ten years.