Where to buy term life insurance

The Sandbox General
41

Yup. My 30 year term takes me past college and through most of my earnings potential. Its less than $700 a year.

I did have a freak out moment last year when I got around to policy anniversary and recalled never seeing my annual premium due. This was less than a week before it was actually due (yes, there was a 30 day grace period), so I was able to go online and pay my premium. A few months later my statement finally arrived in the mail.

Maybe it was some shady scheme by the insurance company to generate a few extra lapses to cover their COVID costs. Or the effed up mail system. :man_shrugging:

42

I feel like this material was covered in the first FAP module.

You need to insure your future income for anyone who is depending on it. If anyone, including you, is dependent on your future income then you need disability insurance. If anyone else is (such as kids or a spouse) then you also need life insurance.

43

Needing term life insurance to protect your income is a fairly westernized belief. It’s based on the utility of maintaining your family’s current lifestyle, and that is so fundamental that it’s seen as a need, not a want. You need to buy life insurance between the time you have kids and exact age 65.

It’s not universal. Here’s two counterpoints:

  1. Canadian, married with kids. They already have excellent free healthcare for their family and excellent free education, both which extend past their deaths. And with the reasonably decent social safety nets in Canada, if they die then their family will still be fed and housed, And frankly, their kids could struggle through post secondary if they really wanted to. The minor drop in lifestyle isn’t perceived as great enough to offset the premiums. Conclusion: No life insurance at all.
  2. Some asian cultures seem to see their obligations to their kids as extending to their death and beyond. Arbitrary retirement at age 65 doesn’t mean anything. Conclusion: Whole life insurance.

If I was in prod dev and was tasked with selling more life insurance, I’d be setting up a mandarin and hindi call center and pumping the heck out of the benefits of par whole life. And it’s not a new idea, I’ve seen a couple companies do this type of thing, quite successfully by all accounts.

Personally, I’m somewhere between term life insurance and point #2.

Anyway, not stuff I bring up in polite conversation, but hey that ain’t you folks :).

1 Like
44

I didn’t take any FAP modules.

45

Sure, and this is a fairly westernized group.

When people ask me, I say from the day you throw out the birth control until either the kids are self-sufficient or your assets are sufficient to cover their remaining financial needs.

For a lot of families that would roughly correspond to the youngest child turning 22 or so. Even if there is no expectation of college it’s fairly common for 18-21 year olds to live at home with their parents either for free or for below-market rent and board.

That’s not a hard & fast rule or anything, but a decent rule of thumb for the financially illiterate.

American families, in my experience, tend to either grossly overestimate or underestimate their insurance needs. Most aren’t aware of the existence of Social Security survivor benefits, which can be considerable. And they are tax-advantaged too.

For example, suppose an actuarial type (or anyone making over the Social Security cap of $142,800) with two young kids and a non-working spouse:


Each kid would get $2,549.20 a month until they turn 18, and the spouse would get $2,549.20 a month until the youngest kid turns 16. That’s $91,771.20 a year, tax-free. Which will go a long way towards maintaining standard-of-living.

ETA: Family maximum is lower than I realized, so the above family would get something closer to $70,000. My apologies for the error.

But that does start to decrease sooner than the kids are going to be self-sufficient, so you probably want some life insurance if you want your family to maintain their standard of living (which most of us do). And if the spouse intends to stay out of the workplace then that would further increase the amount of life insurance needed to make that a reality.

2 Likes
46

I was going to say, “Well, it’s good that I’m a fairly westernized guy.”

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47

If I die, my wife is going to miss my paycheck more than she misses me…hence, the life ins.

48

Wow, TIL

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49

Don’t tell the insurer that, it might increase your premium

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50

I was doing the ‘technically correct’ thing, as insurance professionals here rather than consumers. Plus, I really like utility theory so I try to bring that into conversations whenever I can.

51

Many people get utility from knowing that their family will not be financially devastated if something happens to them. YMMV.

52

Yeah, like I said, a lot of people don’t understand how valuable those survivor benefits are / can be.

Of course a working spouse with no kids will get diddly squat. But that person won’t need as much to stay afloat either.

Anyway, it’s certainly something to think about when you’re deciding how much life insurance you need.

53

Yeah definitely something I’ll need to do more reading about

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54

Each kid under 18 and spouse (or ex-spouse) caring for the deceased’s under-16 child gets 75% of the basic benefit.

And to determine the average earnings that go into the benefit formula there’s several ways to do it, and they pick the most beneficial one. But one of the options is the highest of the last 3 years… after indexing wages to current dollars. So my calc was just calculating the benefit on average annual earnings of $142,800 and taking 75%. As I think about it, I might have rounded the monthly benefit down twice (before and after taking 75%) so the actual numbers might be a dollar or two higher. They round down to the highest dime… I think before taking the 75% but I’m not positive. I might not get this question right on an actuarial exam, but I’m close.

There’s family maximums that come into play, I think with more than two kids, which is why I picked two for my example. And if the spouse or kids earn more that a certain amount (I think a little over $19,000 a year, which is indexed) then they start to cut the benefit. How much of the benefit is subject to income tax is the exact same calculation as for old age benefits. But if Social Security is all you have then it won’t get taxed at all.

55

:popcorn:

…

sooo let’s say, hypothetically, one were to make > 142,800 with a spouse who made < 19,000 and had four kids and tragically passed away in a freak… grading accident

56

The total family benefit would probably be pretty close to the aforementioned $91K. I think adding more kids just reduces how much each kid gets. I spent a lot of time at one point in my career replicating certain Social Security calculations, but the family maximum is not one of the ones I worked with, so I’m not very familiar with how it works, unfortunately.

But I think it’s pretty close to (or perhaps exactly?) 3 * 75% of the basic benefit formula. But like… maybe it’s 3.5, not 3… I don’t quite recall. I’m almost positive that 3 <= X < 4.

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57

Also, you should be getting an annual statement from the ssa which will give you a bit of information on “if I die before I wake, here’s how much my heirs will make”.

58

They stopped mailing the statements out a bunch of years ago. The statements are available by logging into your online Social Security account though, and yes, they do contain this information.

My online account is locked and has been for years and I’ve never gotten around to figuring out how to unlock it.

59

Yup.

[red]There are some friendly customer support agents who speak with deep Indian accents who will be able to help you if you just send them some best buy gift cards[/red]

60

I have an account!?