November 09, 2011,
T.O. asks from Buffalo, MN on November 08, 2011
Life Insurance..... - Buffalo,MN
My husband and I have life insurance through his employer, but I know it is a good idea to have our own term life policy that we pay for - just in case he loses his job. I am a stay at home mom and if anything happened to me, I would want my husband to be able to stay home with our kids until our youngest is in school (he's almost 3 now), pay off our mortgage, and be able to live comfortably. On the flip side if something happened to my husband I would still want to continue to be able to continue to be a SAHM and pay off the mortgage, and be able to live comfortably until I went back to work.
My question....How do I figure out how much is enough??? Are there any websites that provide any good information? We are way overdue on getting this into place and I think about it everyday.
E.M. answers from Honolulu on November 08, 2011
We figured it by how much money I would need per year to live on plus inflation times How ever many years til youngest is 18. (you can fund the college funds too if you want... We did.... Same with a bit extra to account for the fact that you will likely get a lower paying job after so many years out of the work force and not get as much in retirement so it needs to be accounted for too). You will also want the living spouse to have the ability to pay for child care if need be and health insurance for you and kids (I would look at insurance policies for your family and then times the price of it by four or five to be on the safe side!)
This number will be huge and as such I suggest you get a trust as the beneficiary of the life insurance (the living spouse can be one running it, or a bank, or other relatives... You an choose!) That way if both of you die some person that was less wise with their money will not lookat your kids and think$$$$ and spend it all getting out of debt, or on a brand new house, leave your kids penniless and then ask another reliative to step in and raise them. Same goes if the living spouse get remarried then divorced and has to split the assets 50/50!
2 moms found this helpful
M.P. answers from Portland on November 08, 2011
I suggest you talk with an agent. (S)he can help you know how much is reasonable given your ages and income. Ask about the different types of insurance. Term life may not be the best plan for your stage in life. Or perhaps it would be better to get a combination of kinds.
If the purpose is to allow you or your husband to stay home You'll need to figure out how much it would take to do that. You'll need to know how to invest so that the money lasts. An agent can help you with all of that.
S.W. answers from Amarillo on November 09, 2011
Just remember that the life insurance you have through your husband's employer may end when he leaves the job. So it is best to have a separate insurer.
Talk with an insurance agent perhaps the one that has your homeowner's policy. If they don't do life, they may have a company that does and can recommend one for you.
The other S.
A.V. answers from Washington DC on November 08, 2011
Part of our figure was how much would it take to pay off the house and keep us going without the other spouse for six months? A year? Put the kids through college? We went through Select Quote for both me and DH.
P.K. answers from New York on November 08, 2011
First, hopefully you have mortgage insurance. Do you have a financial
planner or a friend who is in the insurance business? I guess the way I
would figure is his salary x 20 years plus some extra for education for
kids. If you are young you can get insurance policies very inexpensively.
Try to talk to someone about this.
V.W. answers from Jacksonville on November 08, 2011
Do you manage okay on your husband's income? Then multiply his annual income times how long before the survivor would be going back to work. That's your starting point. Then, figure whether or not the survivor is likely to find employment at that same rate or more.... and add in for what you think is likely (if hubby makes 50k and you think you would only be able to earn 30k, then you'd need an additional 20k for EACH YEAR that you think you will earn less than the 50k--does that make sense?).
Add in the balance on your mortgage (and any other outstanding debt you would want to pay off and not have hanging over your head)...
If you need additional education before you are able to go back to work at a decent salary, add the cost for that into the equation as well (along with the time to complete it)...
That should at least give you a starting point.
In our case, we insured me for an amount that would comfortably allow my husband to be able to afford a nanny for the time the kids are still young enough to need that, which is a while yet...
M.K. answers from Milwaukee on November 09, 2011
Look at Clark Howard's website, I believe it is just clarkhoward.com. He is a consumer expert and has lots of good advice on what companys are good, like having a triple A rating, and how much you would need.
If you got to Clark's topic there is Insurance listed under it....
P.G. answers from Dallas on November 09, 2011
Talk to an agent. I used to be in the insurance field, and I can tell you that you actually CAN'T get too much. The maximum you can get is your "replacement" value - the ideal amount. The goal of insurance is to replace your financial worth to your family so they can deal with everything else when you're gone.
Example - young healthy person making 50k year - can qualify for 20x income or 1million of insurance. That person dies, the money is invested in a safe product (bonds/whatever) with an average 5% return annually which equals 50k/year.
I believe that a SAHM is able to get 1/2 the amount (possibly more) that the husband has.
Get as much term as you can afford. Click on me if you have any questions :)
D.P. answers from Minneapolis on November 09, 2011
Agreed...talk to an agent. We covered paying off the house, college expenses and living expenses so that our spouse could live at the same level without financial hardship.
☆.A. answers from Pittsburgh on November 08, 2011
Dave Ramsay suggests 10-15x your annual salary for level term. The idea is that the money can be invested to generate "roughly" your missing income.
Hmmmm....since you are a SAHM, maybe half of your husband's income times 10?
R.J. answers from Seattle on November 09, 2011
10-15x your annual salary is a good rule of thumb.
Another is to add up:
- Your Mortgage (but you won't want to pay that off, you'll want to keep it for the tax break but have the money to).
- Total bills/expenses for x number of years (go for at LEAST 3)
- Childcare costs for x number of years
- Funeral expenses (think 10k+)
- Private school tuition (if you intend to school privately) for all of your kids
- College Tuition (go for private cost NOW if your kids are young, because state costs and inflation mean that today's private school tuition of 30k per year is quite possibly what 15-22k of state school will = in 20 years of inflation and cost increase) for 4 years for each of your kids.
That's just the bare minimum. You or your spouse will have to continue to work with that formula, AS WILL THEY if you use the 10-15x your annual salary (think about it... that only covers the next 10-15 years out of 30/40/50 years of living/working. It's a really BIG number for most people. Alarmingly big. Until you start dividing it by decades and children and tuition.
Most people need a bare minimum of half a million.
We didn't have enough money for our "should" so we started off with half million each (grand total of $78 dollars a month combined). Which sounds like a lot. Until you divide that by 20 years. At 20 years... to see our son through college that would mean the dead parent would only be contributing 25k a year into the household. And LIFETIME (say 50 years), only 12,500 a year.
But even that is better than NOTHING.