Life Insurance: How much?

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Serious question here for you guys in the know. How much life insurance do you think I need?

Right now the wife and I have a total payout of 640,000 a piece with 10,000 on Alyson, but that seems kind of high to me. I think my wife was talked into the policy by a good salesman who worked the "you're parents now" angle. I think we pay something like 50 bucks a month for this, and is directly taken outof Patty's check. Anyway, without getting in to too much infor, here is a bit of background.

  • We are both in our early thirties and in very good health (no vices, eat healthy, exercise, etc
  • We don't have a mortgage, but do own some land (400 acres) which is a serious concern as its family land and we don't want to lose it...even if I am not around. Alyson has 4 deeded acres as of right now however...just in case something happens
  • Alyson's college is taken care of (trust fund)
  • Our retirement :dunno: We have trust funds, and currently my salary goes into retirement,as well as some of Patty's, but most of hers goes to living expenses. We should be okay...but who knows
  • If Patty and I should go together (car accident for instance) my dad would get get the money and the land
  • Alyson would go to my best friend and his wife (no kids)

I really can't tell if we have too much or not. We really don't have a lot of debt, but we do have the land to contend with. Since other people rely on it (farming) we really owe it to everyone concerned to keep things in place. At the same time, we have Alyson, and at 19 months, she will need care for a long time.

I was just curious because the other day Patty and I went for a ride by ourselves on snowy roads. We got to thinking aloud what would happen if we both died in a car accident. We never really got a clear answer. That was kind of scary to be honest with you.
 
Our agent used a formula that used the idea of income replacement to determine an amount. Go out and shop around with some reputable agents and see what the concensus is. For the price, it sounds like it is term life insuarnce. We have a mix of term and whole which costs more, but theoretically the whole life builds value. If it is through her employer, it probably ends immediately if she leaves the job which is something to be aware of. We had pretty good life insurance through my previous employer, but then things started getting bad there and I left, losing all that insurance. Keep in mind that leaving could be involuntary--budget cuts, illness, etc.
 
Travis - If any insurance company reads a few of your outdoor adventure stories you will not need to worry about buying insurance - they would never sell to you.

Lets review some recent titles.

1. How to use a tree to tap into the electric grid in 1 easy lesson.

2. How to turn a snowmobile into a guided missle. Some of my friends at NASA down here think you may be onto something or maybe they said on something.

3. Testing blue jeans for chain saw resistance for fun and profit.

Life Insurance??? You better check out Health Insurance!
 
Life insurance can be one of the biggest rip-offs there is! It is also one of the most profitable for the Insurance companies too. Not that I am opposed to it, it's a great thing most people know nothing about it and buy on emotions and not facts. First, if you get a chance, take Dave Ramsey's Financial Peace University. This is an excellent Financial class. Not a get rich scheme but sound advice. He covers insurance among a ton of other things. It will open you eyes!!

The reason you need the insurance is to replace any income loss in case of death to keep your spouse from going under. That might include paying off the house and enough to cover Funeral costs. Everything depends on your finances. So you need to look at how much you make. How much it would take to keep you or your spouse above water for at least a year or maybe two.

In your case with no mortgage you don't need much. As for your daughter, that is an emotional issue, but she generates no income. So the most you need it enough to cover burial costs and maybe some for time off work to get over the loss.

I don't remember the details but Term Life is much cheaper and by far the better deal. When you get old you typically don't have big expenses to have to cover and don't need a lot of insurance. Often times they tell you about the cash out if don't use the insurance by a certain point. Well if you run the numbers and again I don't remember all the details. But you are much better off buying Term Life and investing the difference in a good mutual fund. At the same period of time you will have several times more money (based on the average performance) than what the Life Insurance policy pays out. So in effect you gave your money to the Insurance company all those years and they are keeping most of it.

In the class we took Dave laid it all out and it absolutely amazing to see it black and white. I can't recommend that class or at least his book enough!
 
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Just an observation. It seems that have done some very good planning. I would assume that you have gotten good advice from a professional. I would take this question back to them.

Term insurance is a commodity. You definitely should shop around. Sometimes company sponsored are good buys, but most of the time shopping around is a good thing.

At your age and your financial position, I would be carrying 1,000,000 on myself and 500,000 on my childs mother. This is cheap insurance to provide you peace of mind regarding your family land holdings.
 
Travis - If any insurance company reads a few of your outdoor adventure stories you will not need to worry about buying insurance - they would never sell to you.

Lets review some recent titles.

1. How to use a tree to tap into the electric grid in 1 easy lesson.

2. How to turn a snowmobile into a guided missle. Some of my friends at NASA down here think you may be onto something or maybe they said on something.

3. Testing blue jeans for chain saw resistance for fun and profit.

Life Insurance??? You better check out Health Insurance!

Oh stop it...I am 33 years old, I live an active life :D:D:D:D

Actually there is more to it then that, and I am being serious here. I can take a good ribbing now and then, but I am not sure some of you really know what life is like out here. Its not Surburbia where you live on 2.0 acres and mow the lawn twice a week and shovel the front walk and pretty much have nothing else to do. Not that there is anything wrong with that though.

This is farm country where we grow crops, milk cows, cut wood and have fun when we can. Its not that life is hard, its just different here.

I grew up cutting wood, driving tractors, fetching lobsters and playing on snowmobiles. There is nothing I have done this year that my family has not done at some point in their lives whether its dropping trees on powerlines, hitting rocks with sleds, or cutting their legs with chainsaws . Its not reckless, its just what happens when you get out and do stuff on such a big scale and do it so often.

I could purchase my lumber from a lumber supply place, or work overtime and pay for propane and heat my house, and sit around and watch television on the weekends. Instead I harvest my own logs, cut firewood, and go snowmobiling. There is no shame in that, even when mishaps do occur. I mean keep in mind, its not like I'm cutting just a few trees here, 30 cord is equal to about 300 trees. That's a lot of trees to fell, limb, cut the tops off, drag out and put into a pile...all while walking on ice, snow and branches. Most people complain when their employer has ice patches on the walkway, I'm wading through waist deep snow while lugging a chainsaw!!

Still should I ease off a bit and enjoy my property while still in one piece?

Not a chance. I enjoy my property every single day. This is what my family has done for 387 years. Its what we do and what we are, even if it sounds crazy to some others who live more tranquil lives. :thumb:

Hey Pete, I did not mean to single you out here, I know you were messing with me and I can handle that. Its just that I live the good life and know it.
 
You don't call running into rock piles at high speed with a snowmobile a vice? :eek:
Seriously, with a family and assets, you need insurance. Term is cheapest in respect to amount of coverage vs. cost. Whole life builds up funds for the future. Depending on the state of the economy, whole life can be a hedge against losses in the future.
How much you need can be calculated by a trustworthy, trained and experienced life insurance agent. They can be hard to find but do exist. Ask the richest people you know who their agent is and get a referral. Do your homework.
Most importantly, get it while you are young. At your age, you are on the edge of the chart when premiums start skyrocketing. And, get accident double-indemnity. Working equipment, like you do, does put you at risk.
Just look at your wife and daughter. That will answer the question as to whether you need the coverage.
 
Travis - None of it meant to be negative. I many ways I envy you.

I lived in CT for many years. Most think the path from NY - Boston is one big city. I was in the east end of CT. Lotza land and more cows than people in our small town. I flew a small plane (homebuilt Long-EZ) if you cut the engine at random over CT and let the aircraft crash on its own, most people would think it would hit a building. They would be wrong. Most times it would hit a tree or a rock. Difference in Maine is that yes you would hit a tree or a rock but no one would know it.

I have been in Florida for some years now and would like to visit you but I cannot take cold weather. Cold for me now starts at anything below 70.
I find it interesting that from my residence I can see Aligators, Eagles and Ospreys and with just a look a little bit in the other direction I can see and hear the Shuttle take off.

Keep enjoying your land and outdoor activities and lets hope most FamilyWoodworker's never need to collect on any type of insurance.
 
  • If Patty and I should go together (car accident for instance) my dad would get get the money and the land
  • Alyson would go to my best friend and his wife (no kids)

:huh:

Why would the money go to your dad as opposed to your daughter? Maybe this was a typo. If my wife and I both go, the money goes to our executor, who manages it until the kids hit 21 (IIRC)

Others already gave some good advice. Income replacement is the key, but the other key is for how long. In my case, I want the money to be able to cover my wife + kids all the way through college. So you've got your daughter covered for college, so all you would need is to cover living expenses for about 15-18 years.

(but go and chat with some insurance agents that you trust.)
 
Good point Art. Ours goes to our each other, or our daughter. If it goes to your dad, and something happens to him, its now part of his estate the way I understand.
 
:huh:

Why would the money go to your dad as opposed to your daughter? Maybe this was a typo. If my wife and I both go, the money goes to our executor, who manages it until the kids hit 21 (IIRC)

Not a typo. I think when we filled out the paperwork we had to chose a secondary beneficiary. We felt Alyson was too young so we would give it to my Dad and let him dole out the money to Alyson as needed.

My best friend and his wife are attorneys, but as good of people as they are,they cannot have children. We were concerned about my parents being a bit old to watch a baby full time for 21 years, so we felt Matt and Carrie would take care of her just fine. I guess it does not really matter if the money went to Matt and Carrie, or my parents, both are pretty well set as far as money goes. Ultimately it would go to Alyson, whether as gifts from her Grandparents, or as her new parents.:dunno::dunno:

I think the biggest thing I have gleaned out of this is that we really need a will. About the only thing stopping us is the attorney fees. We cannot get Matt or Carrie to do it because it would be a conflict of interest (since they are getting Alyson).
 
The Truth About Life Insurance

Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.


I'm not a fan of Dave Ramsey. IMHO, he is more of a showman than advisor. What he says is true, but only if you ignore the rest of the facts. While using cash value insurance to build up some of your assets towards the future, you also are being insured and protecting the future of your family. He deliberately ignores that to make his point.
Whole life a/k/a cash value insurance can be a good investment depending on the state of the economy. It used to be sold (properly) as a hedge against inflation.
What Ramsey says assumes one will have a nice, comfortable, steady income for life. Got news for ye. Life ain't predictable. That rock pile can jump in front of you at the least expected times. In life, expect the unexpected.
I invested an inheritance for my daughter in 1999. Most of it went into mutual funds that had a long track record of success and were recommended by an experienced and trusted broker. But, against all advice, including the agent I bought it from, I also bought her a $50,000.00 paid up life insurance policy with cash values and the option to purchase double that in the future without any physical exam.
Guess wat? In 2000 those reliable mutual funds LOST OVER 90% OF THEIR VALUE.
Her paid up insurance policy just chugs along growing in value each year. And no matter what happens, financially, to her or her husband in life, it will always be there.
AND, she developed a minor heart arrhythmia problem. Diagnosed as not serious. But it is now on her medical/insurance record. (the inheritance came from her brother who died at age 27 of sudden arrhythmia attack) So her ability to purchase more without an exam is of inestimable value. This will be especially true when she and her husband start having children.
So, my original opinion hasn't swerved. Travis asked, so we are chiming in with advice. He needs to speak with a trustworthy financial/insurance advisor and consider options.
 
Frank, your insurance company can go bankrupt too. There are no guarantees they will be there either.

My Mutual funds lost big time a few years back, but I knew that it was possible. You have to realize that it's not a short term investment nor is it risk free. (Assuming you are in a fund that is in the Stock Market) There are better short term investments. I just let it ride and they have more than made that loss up now. Last time I looked I had somewhere around 15-18% return over the years. I can't get that kind of return many places.

Fact is in life you make you choices and you roll the dice and take a chance. I agree that you need the facts before you make your choices too. Bottom line is Travis's choice.
 
Frank, your insurance company can go bankrupt too. There are no guarantees they will be there either.

My Mutual funds lost big time a few years back, but I knew that it was possible. You have to realize that it's not a short term investment nor is it risk free. (Assuming you are in a fund that is in the Stock Market) There are better short term investments. I just let it ride and they have more than made that loss up now. Last time I looked I had somewhere around 15-18% return over the years. I can't get that kind of return many places.

Fact is in life you make you choices and you roll the dice and take a chance. I agree that you need the facts before you make your choices too. Bottom line is Travis's choice.

I guess we could go back and forth. I will agree that not all your eggs should be in one basket. A mix of different insurance plans should be part of a portfolio that also includes mutuals, stocks, real estate, etc.
Must strongly disagree with your first sentence. I can't speak for all states, but in Arkansas, an insurance company must have enough assets to cover it's policies. Even if the company heads south, the money is there for the policy holders. I'm fairly certain that most states have similar laws and protection.
As for the losses from our mutual funds. After four years different fund investments ranging from $5,000.00 to $25,000.00 were worth no more than a few hundred dollars each. I waited for changes but even the little hundreds were dwindling down to near nothing. I just closed them out before they vanished completely.
With investments, there is a risk. Insurance is always there.
 
I Insurance is always there.

Hog Wash! The CoC won't allow to reply to that like I would like. But I have more experience collecting from Insurance than I ever wanted. 3 years from time of filing the claim till we settled.

Agents DO NOT know the truth about at least some the policies they sell, probably most. Nothing against the agents!! Mine is a great guy but I have questioned him and I know he doesn't understand the truth about at least one type of coverage he sales. I am betting companies don't want them to know to much. I have heard of agents that quit the business or refused to sell certain policies once they learned the truth.

Insurance companies will do their best to pay you less than your entitled too. An adjuster when asked what his job was, was quoted as saying "To pay you as little of the money your entitled to as I possibly can". They will refuse to pay and play games till you call their bluff. Then they will try to wait you out and play hard ball till the last. Then they will settle so it doesn't become public record.

If you want to trust your money to people like this, it's your choice. After what I saw during this 3 years............

Insurance is a necessity. But you better do your homework unless you like tossing your money out the window. Everyone is entitled to their opinion, mine is based on a look inside the Insurance world and it wasn't a pretty site.
 
Hog Wash! The CoC won't allow to reply to that like I would like. But I have more experience collecting from Insurance than I ever wanted. 3 years from time of filing the claim till we settled.

Agents DO NOT know the truth about at least some the policies they sell, probably most. Nothing against the agents!! Mine is a great guy but I have questioned him and I know he doesn't understand the truth about at least one type of coverage he sales. I am betting companies don't want them to know to much. I have heard of agents that quit the business or refused to sell certain policies once they learned the truth.

Insurance companies will do their best to pay you less than your entitled too. An adjuster when asked what his job was, was quoted as saying "To pay you as little of the money your entitled to as I possibly can". They will refuse to pay and play games till you call their bluff. Then they will try to wait you out and play hard ball till the last. Then they will settle so it doesn't become public record.

If you want to trust your money to people like this, it's your choice. After what I saw during this 3 years............

Insurance is a necessity. But you better do your homework unless you like tossing your money out the window. Everyone is entitled to their opinion, mine is based on a look inside the Insurance world and it wasn't a pretty site.


Interesting exchange of perceptions.
Again, you are not wrong but it is only part of the story.
When I was selling for Mutual of Omaha I was told (trained) that it was policy to try to pay as little on a claim as possible. The intent was to protect the investors. Same when I was an underwriter for Continental Assurance Company. But, they must pay what the policy states. Especially with life insurance, there is no arguing. What the face value states is what is paid. Casualty claims (not the subject we have been discussing) can be subject to interpretation and argument.
But, the money is there. I can state that for a fact about Arkansas and believe it to be true for most states.
And, I do agree about doing ones homework. True for everything.
 
I think Frank brings up an important point...casualty claims are a lot different than "life insurance" claims. LOML works for a law firm that handles State Farm claims, so I've heard of some interesting ones. Insurance companies are indeed tight with their money, but it's amazing to see some of the ways people try to falsely get it out of them.
 
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