DIY Term Life Insurance

[Stormy Kromer]

DS is 25 and is planning on getting married soon. His wife to be is also 25.

I'm going to highly recommend to them to each get Term Life Insurance as soon as they're married, or even right now and name each other as beneficiaries.

I'm thinking 30 year Term in an amount of at least $500,000. Both are healthy and neither smoke so I'm thinking it should be relatively affordable.

I don't know any Life Insurance Agents that I can recommend to them and I want them to avoid the pressure of upselling them to a Whole Life or Variable Life Policy which I'm sure would happen. They'll both be maxing Roth IRA's which will be a much better vehicle for long term savings than cash value inside an insurance policy. I can say this with confidence because I have both VUL's and Roth IRA's.

I'm wondering if anyone on the forum has taken out a Term Life policy directly with an insurer, either online or over the phone. Buying Term Insurance should be pretty simple, I'm hoping it will be for them

Thanks for any input or advice you can offer them.

 

[LRDave]

term4sale.com is a great place to start.

 

[HarveyS]

not recently. 20 years ago I bought on-line. Had several quotes and picked on. The company I selected sent someone to my house to draw for blood work, took weight, height. Very simple then and I can't imagine it has gotten any harder. Today, Dave Ramsey recommends Zander Insurance. I have not worked with them, but they would not up-sell to whole life based on their recommendation from Ramsey.

 

[OldShooter]

What problem are you trying to solve?

 

[njhowie]

We've done multiple policies through accuquote.com over the years and have been extremely happy.

 

[euro]

What problem are you trying to solve?

+1

I'm not sure I even see a compelling argument for getting life insurance as a newlywed couple where each has (and plans to maintain) a job, unless there are kids in the mix. Hard to know from the info provided.

 

[Stormy Kromer]

+1

I'm not sure I even see a compelling argument for getting life insurance as a newlywed couple where each has (and plans to maintain) a job, unless there are kids in the mix. Hard to know from the info provided.

Sorry I didn't provide much information in the original post. They're buying a house with a 30 year mortgage and are planning on children in the future, so I can see a need for life insurance for both of them.

I'm the one that doesn't need it anymore.

 

[OldShooter]

+1

I'm not sure I even see a compelling argument for getting life insurance as a newlywed couple where each has (and plans to maintain) a job, unless there are kids in the mix. Hard to know from the info provided.

Well, I can. But why $500K and why 30years? With inflation, $500K is likely to have something like $250K in purchasing power in 30 years. Has that been considered? Saying 30 years implies to me a level premium policy. This will cause DS & new wife to be paying unnecessarily high premiums now, when their income is probably much lower than it will be later in the term. Level premium also sort of locks them into the policy because they are prepaying.

The biggest reason I can see for buying now is to get a guaranteed renewable policy. If someone's health deteriorates, buying life insurance may not be on the table any more.

But $500K? I dunno. Why is that the right number?

And (probably) level premium? IMO a bad idea. Just go year to year. They almost certaily will be increasingly able to afford higher premiums as they mature.

Personally I had year-to-year straight term for maybe 20 years at which point the kids were gone, DW had a really good job, and we had significant net worth. No need for the insurance any more. 30 years sounds to me like too long.

But my original question still pertains.

Edit: Oops, was typing when @Stormy's post showed up.

 

[njhowie]

+1

I'm not sure I even see a compelling argument for getting life insurance as a newlywed couple where each has (and plans to maintain) a job, unless there are kids in the mix. Hard to know from the info provided.

There are numerous compelling arguments.

It's easier/cheaper to get a policy when younger. Obviously the life insurance company has less risk as you're more likely to outlive the policy. The longer you wait to get a policy, the higher the premiums are going to be. If you know you're going to have kids, mortgage, and financial responsibilities in the future, why wait to initiate the policy, or not get it? When younger, the premiums for a term policy are very cheap. Why wouldn't you want to have it if it provides for your family should you pass away at an early age for some unexpected reason? As far as having/maintaining a job, nobody really knows what the future holds and the unexpected can always happen.

As you get older, maybe you develop cancer. At that point, when you are obviously higher risk, forget about getting a life insurance policy. Getting it when younger, when you are healthier is clearly the way to go.

Browsing around, I saw that there are now even 35 and 40 year term policies available, which should be appealing to younger folks.

 

[Jerry1]

Not sure I see the need for life insurance either. Not until kids. Also, I’m not sure, but if the mortgage has payoff insurance on it, that may have good pricing, I’m just not sure.

When I was buying life insurance, the best deal I got was through my professional organization (CPA). The AICPA had really good pricing. I think it was some sort of co-op situation. I’d pay in about $200 and then get $150 back at the end of the year based on annual outcomes. Might want to keep that in mind unless at 25 they’re already members of an association.

 

[OldShooter]

... It's easier/cheaper to get a policy when younger. Obviously the life insurance company has less risk as you're more likely to outlive the policy. The longer you wait to get a policy, the higher the premiums are going to be. ...

Well sure (assuming we are not talking level premium policies) but I don't see that this is particularly relevant to the question: "What is their need for insurance now?" If zero, then they shouldn't buy it no matter how cheap it is. Personally, I would argue for buying now just to get guaranteed renewability, completely independent of the fact that the mortality tables make it look relatively cheap. So we come to the same point for totally different reasons.

 

[brewer12345]

It might be a little early to buy insurance. That said, if kids in the near future means she will be trying to get pregnant in the next year, buying now would be fine. I would suggest looking at an annually renewable term policy in addition to a 20 year level term policy (30 year is too expensive and they aren't likely to need it for that long). I would also suggest paying attention to the conversion option in the policies they are looking at. Conversion allows you to swap whatever policy you have for a permanent policy at the same face without going through underwriting again. This can be a valuable option, but may be time limited.

When I shopped years ago I did so online with a few insurers. I am very picky about insurer credit quality, so I only had a few in mind. I would suggest a large mutual insurer rated AA-/Aa3 or better. The insurer I picked (based on price within my limited set) sent someone to the house to take samples and weigh me and it was very easy. If you are buying a simple product like this, I see no need to involve an agent.

 

[LRDave]

I'd wait for kids to show up. I'd even roll the dice and wait until they've caught their limit. Once you know your family size, it is easier to roughly plan the game from that point until empty nest/retirement and no further need for life insurance.

 

[luckydude]

DS is 25 and is planning on getting married soon. His wife to be is also 25.

I'm going to highly recommend to them to each get Term Life Insurance as soon as they're married, or even right now and name each other as beneficiaries.

I'm thinking 30 year Term in an amount of at least $500,000. Both are healthy and neither smoke so I'm thinking it should be relatively affordable.

I don't know any Life Insurance Agents that I can recommend to them and I want them to avoid the pressure of upselling them to a Whole Life or Variable Life Policy which I'm sure would happen. They'll both be maxing Roth IRA's which will be a much better vehicle for long term savings than cash value inside an insurance policy. I can say this with confidence because I have both VUL's and Roth IRA's.

I'm wondering if anyone on the forum has taken out a Term Life policy directly with an insurer, either online or over the phone. Buying Term Insurance should be pretty simple, I'm hoping it will be for them

Thanks for any input or advice you can offer them.

DW and I just recently got a 30-year, $3 million term life policy with level premium. We went through an insurance agent with a reputable national insurance company. DW did quite a bit of research to understand all the ins and outs, and the process was straight forward.

We're both in our early 50s and have plenty of assets held in a couple of living trusts to cover a couple of kids in middle school in the event of our untimely demise without the insurance, so the insurance was more of an estate planning tool.

The investment options available to our policy are mediocre at best and we don't like the caps on returns either, but we view this not as a investment but rather as an estate planning tool, and from that perspective, we can live with the limitations. We set up an ILIT to own the policy, so that proceeds would bypass estate tax at our death and provide liquidity for our heirs to pay for any estate tax due.

Lucky Dude

 

[pb4uski]

DS is 25 and is planning on getting married soon. His wife to be is also 25.

I'm going to highly recommend to them to each get Term Life Insurance as soon as they're married, or even right now and name each other as beneficiaries. ...

While I'm sure that your intentions are good, I'm not sure that it is good advice. The question to ask is if hubby or wife died unexpectedly, what would the resulting financial stresses on the surviving spouse be?

Until they have a home or kids, the answer is typically none or not much... presuming that they both work and the surviving spouse could afford the apartment that they share, final expenses, etc.

Once a home or kids are in play then the answer is different and life insurance is needed, and you need to do an analysis to figure out how much.

 

[gwraigty]

I'd recommend staying out of their financial affairs, unless your advice is specifically asked for.

 

[Sunset]

It is quite possible both kids are eligible for term insurance as a work benefit, and the price via the employer will be dirt cheap.

I think the kids should (if employer option not available) wait, after all, they might not even get married at this point.

More likely is the need for disability insurance, and the situation is worse financially speaking as the spouse has to support a disabled person (which might come with extra costs). Again employer's often offer this in the employment packages.
Note: it's better for the employee to pay the entire disability cost rather than take the employer paid option as the former is a tax free benefit (when claimed) so has more value.

 

[Stormy Kromer]

I had an uncle die at age 50 with 3 sons in grade school, he had no life insurance and I've watched the family struggle for years. I want to help DS & his bride avoid this possibility. DS does ask me for financial advice and appreciates my input. I stay out of the rest of his personal affairs and we get along great.

 

[pb4uski]

I had an uncle die at age 50 with 3 sons in grade school, he had no life insurance and I've watched the family struggle for years. I want to help DS & his bride avoid this possibility. ....

Good point, and I think everyone here would agree that a 50 yo father with 3 sons in grade school shuld have life insurance unless they are independently wealthy.... but that is not the current situation with your DS and his fiance. Most people would wait until they have a need (or just before) before buying life insurance.... otherwise you're buying and paying for something that isn't needed.

The only possible reason for buying now is if they think that they will not pass medical underwriting later.....that is a legitimate reason for buying life insurance earlier than needed.

 

[NgineER]

At this point it seems as if a life insurance for $500k is ok. I can't imagine it costing very much. You'd get the benefit of some bills taken care of if your spouse dies as a consolation price.

I have gotten quotes through policy genius in the past. They have been great and provided several options for term insurance without any upsell.

I think that starting with the $500k is a good way to do it. I currently have $2M, but I also have 4 kids, the $2M would allow my wife to not have to go back to work if I was to pass. I have $1M on her, which would allow me to pay off rental properties and retire should she pass.

I think Pb4uski suggested laddering the life insurance, which I wish I had done. I wish I had 4x$500k that would expire 5, 10, 15 and 20 years out, so that as our net worth went up, my wife would need less insurance pay out to support them. It should also be much less expensive to set up than one $2M that expires in 20 years.

 

[brewer12345]

Many insurers will allow you to reduce the face amount on a policy. Could not hurt to call and ask.

 

[pb4uski]

.... I think Pb4uski suggested laddering the life insurance, which I wish I had done. I wish I had 4x$500k that would expire 5, 10, 15 and 20 years out, so that as our net worth went up, my wife would need less insurance pay out to support them. It should also be much less expensive to set up than one $2M that expires in 20 years.

I wasn't actually suggesting that, but I agree that it is a good idea if you are confident that your need for life insurance will decline because your wealth grows.... however, if you have an unexpected job loss or things don't go as planned and something happens that you can't pass underwriting then you risk being under insured.

A better strategy if your current need is $2 million is to buy four $500k 30-year policies (or eight $250k 30-year term policies) and then just stop paying premiums on one or more as your wealth grows and your need for life insurance declines.... or as brewer suggests reduce your coverage if the policy provisions allow for that.

 

[brett]

I bought the max amount of optional employer group term eleven years after marriage when we had our first child. Did the same with optional group disability insurance.

We viewed insurance strictly as a tool to control risk. As we aged, our children became independent, we became financially secure, the risk was eliminated. We slowly decreased the insurance. We did not need it and the premiums were increasing with our age.

 

[EvrClrx311]

I just bought a new term policy this month, thinking I was going to add to what I already had (which was purchased 5 years ago), but seems the rates have fallen so much that despite being 5 years older and looking at the same term length (20 years) it's actually cheaper to just cancel what I bought five years ago and replace it with the new one.

So my experience is that term insurance rates are much lower now than they were five years ago, in case anyone is wondering.

I'm a 37 healthy non smoking male with no family history of medical red flags based on what insurance asks.

The rate I was quoted from USAA was slightly higher than the big four insurance players on the open market (when I requested a quote from a broker that looks at all of them)... but the ease of keeping everything within USAA made me stick with them and eat the extra $1 a month cost of the policy.

Our NW should surpass the value of this insurance in about 9-12 years (rough guess), so we'll likely drop it before we get to the 20 year mark. It just happened that the rate was pretty much the same for a 10, 15 and 20 year policy, so we went with 20.

 

[CaliKid]

It's so cheap I'd buy $500k each... as soon as they get married. It's probably do 20 year term. Then, once they have kids I would get more serious about the amounts to have because that's really when you need the big insurance. I would say any parent (except "self" insured) is negligent not to have a significant life insurance policy if they are a source of income for the house and that source of income would be missed if they die. Plus, I think any death (even non-bread winner) interrupts the household and the other spouse's ability to earn. Thus it's MANDATORY when they are kids.