Life insurance Coverage

amother

Thu, Aug 22 2024, 2:22 pm

Hi,

Taking out a 30 year term life insurance coverage plan now. I'm 24 and expecting first child. How much coverage is recommended for frum family for each of the husband and wife?

We both earn income, $95k a year from me and $40k a year from husband (works part time). This will probably change in the near future with my husband taking a full time job soon.

$1.5m each would be enough? For every future child we have I would take out another term policy.

Coverage in case of death cv, not for an investment.

amother

Junglegreen

Thu, Aug 22 2024, 2:34 pm

So for starters- just to clarify- term policies are in no way investments regardless. They are completely useless unless a person passes away within the term, there is no option to be used for anything else (unless you get a long term care rider, which I personally recommend)

The amount you get should be dependent on income you make but really on the income you’d need to replace all of the things that person did. Ill use my household as an example:

For me, I am a housewife who brings in zero income. But here is what would need to be replaced-

Playgroup/after school babysitting
Driver for kids schooling (or maybe full time nanny?)
Grocery shopping services
Lots of takeout, maybe service that cooks meals
Cleaning lady
Tax preparer
Gardener

For DH- his income + pool maintenance + handyman

Whatever numbers you get as a necessary income, it should be calculated so that the income is coming out of long term investments as profit. You want the main funds to generate income, so you no longer need to worry about finances

My DH has a 3m policy. The goal is to have it in a low risk long term investment, or even just a high yield savings account, that it would generate an annual income. 3m in a high yield savings account would bring in 150k per year, without touching the 3 million at all

amother

Firethorn

Thu, Aug 22 2024, 9:25 pm

Dave Ramsey suggests 10x your income or 1M so I would use that as the minimum.

Keep in mind that if your health changes even slightly your rates could change drastically down the line. You may want to go with a larger plan now when you are younger and healthy and it's cheap rather than add more later on. This is assuming you can afford a larger plan now.

We recently bought a house and I am upping my insurance because of the higher need to cover the house in addition to other expenses. It would have been easier to have gotten a larger policy to begin with and not have to deal with it again.

There is a term plan type called return of premium that is more expensive than regular term but gives you back the premiums at the end.

There may be an option for a term conversion rider, that allows the plan to be converted from term to permanent life. This is helpful if the plan is for a long term and allows for it to become a whole life policy later on in case health changes.

Also, I would recommend signing up for Areivim as well.