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life insurance: term versus universal

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julabean

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198
Hi everyone:

I have a life insurance scenario that I am completely torn on. We''re having the nurse come out tomorrow to do the screening, so I''ll need to decide in the next 24 hours or so about our approach to life insurance.

I am unsure of whether term life insurance is the right option for us for the following reasons:
My husband is turning 35 this year, I am turning 24. We do not have kids yet and probably won''t for the next five years or so. Most term policies are between 10-20 years, which would have them expiring right when DH turns 55. My dad just turned 55 and his term life premium quadrupled. I''ve also read it''s harder to get another term life insurance policy once you reach your mid-50''s. The last thing I''d want is for my husband''s life insurance to expire when our (future) children are in their mid-teens, preparing to go to college. While I can hope our financial situation will be one where if DH was to pass away without life insurance, I could muddle through, the whole point of insurance is for me to not have to face that situation.

The other option is obviously universal insurance. The monthly rate is high, but not unmanageable, and if we buy it now, we''d have it for the length of time I''ve read that it starts to be beneficial to go for universal insurance over term (15-20 plus years). It''s also a locked rate. Also, with the markets doing what they''re doing at the moment, I''m not convinced I could be making more money after taxes by investing the money elsewhere. On the other hand, going with universal insurance will be flushing money down the drain unless we keep it for the next 20 years.

I really have no idea what to do now! I don''t feel we fit the traditional need for term insurance do to our age discrepancy and how old we''ll be when we start our family, but I also don''t want to be flushing money away if it can me better invested elsewhere. DH pretty much leaves the money decisions to me, so he''ll go with whatever I finally decide on. He sees the pros and cons of both, but isn''t any more sure of what is the right way to go than I am. Any thoughts, suggestions, or experiences would be much appreciated!
 

bebe

Ideal_Rock
Joined
Nov 20, 2007
Messages
2,845
I know it''s a confusing decision. Maybe get the term and have the option to change to universal ?
Personally, we have term. And we are both 54. Not too expensive either.
 

curlygirl

Ideal_Rock
Joined
Apr 9, 2005
Messages
2,637
DH and I have policies that are part term/part whole life. Honestly, I don't even remember how or why we did it this way but it seemed to make sense at the time! We met with our financial advisor first and he gave us his input and then we went to the insurance person. It's not that expensive in the grand scheme of things and since we are in our 30s and have 2 small children, we feel it was the right thing for us to do because the money is being invested. I'll ask DH for more info--my eyes kind of glazed over when we were doing all of this! All I did was pass the medical exam and sign where I was told!!
I think you should do all the research and speak to a professional who can explain all the pros and cons before making any decisions.
 

Abril

Shiny_Rock
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Apr 1, 2008
Messages
197
If you have no dependents, then I wouldn''t get life insurance at this time. Seriously consider canceling the paramedical screen.

When you do have kids, term is the way to go. Lots of coverage for very cheap. You can get a one million dollar policy for $600/year for a 39 year old male (though the premium will probably go up in 4 years). And only insure the person whose salary you depend on. No point in insuring someone if the surviving spouse can get along just fine financially on their own. I suspect the insurance agent wants to sell you universal, because it gives them the highest commission. I doubt that the insurance agent has your best interests... they know better than to push life insurance on a couple that has no dependents.

As for the length of the term insurance, you only need to insure the primary wage earner until you anticipate the kids will become independent. And it''s better to err on the side of too long a term, since renewing a term policy in your 60''s is prohibitively expensive.

The death benefit amount should be about 20 times your yearly cost of living. For example, if you think $50,000/year is what you''ll need, then a 1 million policy is recommended.
 

TravelingGal

Super_Ideal_Rock
Joined
Dec 29, 2004
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17,193
Good question, we need to get on this. We both have insurance through work, but I think we need more than that.

So if TGuy and I both depend on each other''s salary, we both should get insurance, correct? I haven''t even started to look into this but we are going to get everything done this summer before we go to Australia without Amelia.
 

Regular Guy

Ideal_Rock
Joined
Jul 6, 2004
Messages
5,954
I think Abril''s got this figured out. A google search on term vs... will help review options. If you do pursue, and consistent with attention to Abril''s suspicions, as per my second thought on this...if possibly value neutral...consider a no or very low load company as a provider, like Ameritas...helping you, and helping insure someone''s not getting you in for their benefit.
 

Haven

Super_Ideal_Rock
Joined
Feb 15, 2007
Messages
13,166
We recently went through the process of choosing and purchasing life insurance.

One of DH''s very close friends sells whole life. He really believes in whole life insurance, and we set up an appointment to discuss it with him. We decided we would get whole life policies, set up the medical screening, and then started to doubt the choice because it was costly and we were reading things that were pretty anti-whole life.

We delved a bit deeper, spoke to our financial guy, a few different life insurance companies, read the personal finance gurus, and realized that whole life was not the right option for us.

We ended up purchasing term life insurance policies for both of us. DH is 39, I''m 28, we have no children yet. We bought a home together in June, and we own rental properties. We figured out our needs based on a loose yet likely timeline of when we plan to have kids. We ended up getting three policies for each of us:
- 30 year 250K
- 20 year 500K
- 10 year 250K
This way, we have $1 million in coverage for the next ten years, when we still have our mortgage and our future children would be small enough to need daycare. Then, we''ll have 750K for ten years after that, when we still have dependent children and a mortgage, and then 250K for ten years after that after the theoretical kiddos are independent, and we''re getting close to retirement and will have a lot saved up if we follow our financial plan.

We chose to get the insurance now because the increase in cost each year for DH was actually significant, because he is close to 40 and he has a parent that died before the age of 65. It cost next to nothing to cover me, since I''m young and healthy, with two living parents. The total cost of our six policies for an entire year is only $1300, which we just paid with a check when we signed the policies.

Do some research into the differences between whole and life, and you''ll be able to determine what is best for you. We found that we didn''t need our life insurance to act as an investment as well (whole) because we have pretty diverse and sound investments going on right now, and we can do better with the money we would have poured into the whole life.

Good luck. I know it was kind of a nightmare for us to determine what we needed because there is so much information out there. We got the best advice from disinterested third parties, rather than from the insurance salesmen, of course.
 

Dancing Fire

Super_Ideal_Rock
Premium
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Apr 3, 2004
Messages
32,396
no brainer...term,term,term !! don''t get fool buying into universal policies like we did. put the extra $$$''s into your mortgage every month.
 

strmrdr

Super_Ideal_Rock
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Messages
23,295
20-30 year term CONVERTIBLE TO WHOLE LIFE WITHOUT PROOF OF INSURABILITY
That last part is the important part.
Time it to convert to whole life at the end of the term.
The price crossover is in the 50s between term and whole life.
 

monarch64

Super_Ideal_Rock
Premium
Joined
Aug 12, 2005
Messages
17,893
Term with conversion priveleges (to UL) is probably your most cost-effective and realistic option for you.
 

curlygirl

Ideal_Rock
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Messages
2,637
Date: 4/21/2009 10:21:19 PM
Author: strmrdr
20-30 year term CONVERTIBLE TO WHOLE LIFE WITHOUT PROOF OF INSURABILITY
That last part is the important part.
Time it to convert to whole life at the end of the term.
The price crossover is in the 50s between term and whole life.
Yup, this is what we did! I was confused when I first posted but I spoke to DH and he explained it just as strm did. After the term is up, it converts to whole life.
 

mrssalvo

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Messages
19,132
Date: 4/21/2009 6:37:07 PM
Author: Dancing Fire
no brainer...term,term,term !! don''t get fool buying into universal policies like we did. put the extra $$$''s into your mortgage every month.
ditto.
 

strmrdr

Super_Ideal_Rock
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Date: 4/22/2009 10:23:32 AM
Author: curlygirl
Date: 4/21/2009 10:21:19 PM

Author: strmrdr

20-30 year term CONVERTIBLE TO WHOLE LIFE WITHOUT PROOF OF INSURABILITY

That last part is the important part.

Time it to convert to whole life at the end of the term.

The price crossover is in the 50s between term and whole life.
Yup, this is what we did! I was confused when I first posted but I spoke to DH and he explained it just as strm did. After the term is up, it converts to whole life.
It usually isn''t automatic you have to convert it before the term is up.
Just something to watch out for.
 

babysteps

Brilliant_Rock
Joined
Feb 13, 2008
Messages
597
Date: 4/21/2009 4:39:32 PM
Author: Abril

When you do have kids, term is the way to go. Lots of coverage for very cheap. You can get a one million dollar policy for $600/year for a 39 year old male (though the premium will probably go up in 4 years). And only insure the person whose salary you depend on. No point in insuring someone if the surviving spouse can get along just fine financially on their own.
[partial quote]

Just a thought on this, we do carry a term life policy on me (SAHM) - I''m in great health, it''s cheap, and for us the reality is that if anything were to happen to me (gulp) my husband would need to hire a couple of people to cover all the things I do, at least in the short term - there''s no way he could hold down his current job with our posse of kids without some significant help - a fulltime nanny and a cleaning service, just for starters! Sure, others would help out, and changes could be made over time, but we felt it was a good decision for us while our kids were young.
 

MichelleCarmen

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Date: 4/22/2009 12:03:46 PM
Author: babysteps


Date: 4/21/2009 4:39:32 PM
Author: Abril

When you do have kids, term is the way to go. Lots of coverage for very cheap. You can get a one million dollar policy for $600/year for a 39 year old male (though the premium will probably go up in 4 years). And only insure the person whose salary you depend on. No point in insuring someone if the surviving spouse can get along just fine financially on their own.
[partial quote]

Just a thought on this, we do carry a term life policy on me (SAHM) - I'm in great health, it's cheap, and for us the reality is that if anything were to happen to me (gulp) my husband would need to hire a couple of people to cover all the things I do, at least in the short term - there's no way he could hold down his current job with our posse of kids without some significant help - a fulltime nanny and a cleaning service, just for starters! Sure, others would help out, and changes could be made over time, but we felt it was a good decision for us while our kids were young.
My husband and I each have one million dollar term policies even though I'm a SAHM. Like Babysteps mentioned, if the SAHM passes away, the Dad will have to hire someone to watch the kids while he's working. I know a lot of people do not see this viewpoint and even a few of my family members shook their heads and gossiped at the amount we decided upon and my having it as well. They said that DH should have a higher policy but mine shouldn't be $1m.
Being a SAHM is a job, and the fact that child care is $1100+ a month for two kids, only proves the value of that service.
 

MichelleCarmen

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Messages
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Date: 4/21/2009 4:39:32 PM
Author: Abril
If you have no dependents, then I wouldn''t get life insurance at this time. Seriously consider canceling the paramedical screen.
I don''t agree with that statement, at all.

Even married couples w/out kids should have policies because many rely on each others salary for paying the mortgage. In addition, funerals are expensive. Also, what if the spouse has debt, such as a car payment? What if the spouse gets sick and leaves behind a ton of medical bills? There''s too many reasons to HAVE life insurance and not enough reasons not to. Would you want your spouse to be left with $500K worth of medical bills and have to file for bankruptcy?
 

Abril

Shiny_Rock
Joined
Apr 1, 2008
Messages
197
Date: 4/22/2009 12:51:13 PM
Author: MC
Date: 4/21/2009 4:39:32 PM

Author: Abril

If you have no dependents, then I wouldn''t get life insurance at this time. Seriously consider canceling the paramedical screen.
I don''t agree with that statement, at all.


Even married couples w/out kids should have policies because many rely on each others salary for paying the mortgage. In addition, funerals are expensive. Also, what if the spouse has debt, such as a car payment? What if the spouse gets sick and leaves behind a ton of medical bills? There''s too many reasons to HAVE life insurance and not enough reasons not to. Would you want your spouse to be left with $500K worth of medical bills and have to file for bankruptcy?
Dependent includes adults too.
 

MichelleCarmen

Super_Ideal_Rock
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Messages
15,880
Date: 4/22/2009 1:56:31 PM
Author: Abril

Date: 4/22/2009 12:51:13 PM
Author: MC

Date: 4/21/2009 4:39:32 PM

Author: Abril

If you have no dependents, then I wouldn''t get life insurance at this time. Seriously consider canceling the paramedical screen.
I don''t agree with that statement, at all.


Even married couples w/out kids should have policies because many rely on each others salary for paying the mortgage. In addition, funerals are expensive. Also, what if the spouse has debt, such as a car payment? What if the spouse gets sick and leaves behind a ton of medical bills? There''s too many reasons to HAVE life insurance and not enough reasons not to. Would you want your spouse to be left with $500K worth of medical bills and have to file for bankruptcy?
Dependent includes adults too.
I''m saying that all couples should get life insurance, dependant or not. . .the part about being sick and leaving behind medical bills. Even if one salary is enough to support both individuals and they''re not catagorically a "dependant," there still should be a safety net for the unexpected.
 

julabean

Shiny_Rock
Joined
Dec 20, 2007
Messages
198
Thanks for all the advice, everyone. We''re going with term for now. The more we looked at universal life insurance, the less comfortable we were about someone else having primary decision making over what kind of investments the "savings" component of universal life insurance would go to. And the cost was quite a bit more than term.

Haven That is a really smart idea the way you explained your life insurance options. I''m going to talk to our agent about that next week.
 

Dancing Fire

Super_Ideal_Rock
Premium
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Apr 3, 2004
Messages
32,396
Date: 4/22/2009 12:42:24 PM
Author: MC

My husband and I each have one million dollar term policies even though I''m a SAHM. Like Babysteps mentioned, if the SAHM passes away, the Dad will have to hire someone to watch the kids while he''s working. I know a lot of people do not see this viewpoint and even a few of my family members shook their heads and gossiped at the amount we decided upon and my having it as well. They said that DH should have a higher policy but mine shouldn''t be $1m.
Being a SAHM is a job, and the fact that child care is $1100+ a month for two kids, only proves the value of that service.
my wife would put a contract on my A$$ if i had a million dollar life insurance policy.
 

diamondseeker2006

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Messages
55,983
Date: 4/24/2009 7:10:57 PM
Author: Dancing Fire

Date: 4/22/2009 12:42:24 PM
Author: MC


My husband and I each have one million dollar term policies even though I''m a SAHM. Like Babysteps mentioned, if the SAHM passes away, the Dad will have to hire someone to watch the kids while he''s working. I know a lot of people do not see this viewpoint and even a few of my family members shook their heads and gossiped at the amount we decided upon and my having it as well. They said that DH should have a higher policy but mine shouldn''t be $1m.
Being a SAHM is a job, and the fact that child care is $1100+ a month for two kids, only proves the value of that service.
my wife would put a contract on my A$$ if i had a million dollar life insurance policy.


Term...no doubt. Anything else is to the benefit of the life insurance company. You shouldn''t use a life insurance policy as an investment vehicle. We have very little coverage on me since my husband''s income covers our cost of living.
 

MichelleCarmen

Super_Ideal_Rock
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Messages
15,880
Date: 4/25/2009 10:00:45 PM
Author: diamondseeker2006

Date: 4/24/2009 7:10:57 PM
Author: Dancing Fire


Date: 4/22/2009 12:42:24 PM
Author: MC



My husband and I each have one million dollar term policies even though I''m a SAHM. Like Babysteps mentioned, if the SAHM passes away, the Dad will have to hire someone to watch the kids while he''s working. I know a lot of people do not see this viewpoint and even a few of my family members shook their heads and gossiped at the amount we decided upon and my having it as well. They said that DH should have a higher policy but mine shouldn''t be $1m.
Being a SAHM is a job, and the fact that child care is $1100+ a month for two kids, only proves the value of that service.
my wife would put a contract on my A$$ if i had a million dollar life insurance policy.


Term...no doubt. Anything else is to the benefit of the life insurance company. You shouldn''t use a life insurance policy as an investment vehicle. We have very little coverage on me since my husband''s income covers our cost of living.
It depends upon what your monthly premium is. For dh and me, it''s $79 per month and that is worth paying to ensure DH is covered even if he could support the household if something happened to me.
 

Dancing Fire

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Date: 4/25/2009 10:35:18 PM
Author: MC


It depends upon what your monthly premium is. For dh and me, it's $79 per month and that is worth paying to ensure DH is covered even if he could support the household if something happened to me.
or he can always find a rich #2 wife.
 
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