Life Insurance

[EddieWalker]

A friend back in CA passed away last week and I've been wondering how his wife is going to get by. He owned his own business, rented the building, and has a fair amount of inventory there all the time. If she doesn't have the cash to pay the rent, I don't know if she can move their inventory, or return it or what will happen to it. I know there will be some cash available to her, but I have no idea if she can deal with it, or how much went to medical bills before he passed away. From several friends who are in the area, they can't figure out what is happening. So far, no funeral, no returned phone calls and both the business and her home are locked up without any sign of life.

This has me thinking about my wife and how will she handle my passing. I'm 50, in decent shape. I don't smoke and all my doctor says I don't have any health issues or concerns. Of course, you never know when an accident will happen. If I passed away today, I would leave my wife with the land, home and equipment. My savings would probably cover my debt with enough left over for a simple ceremony. That depends on how long it takes her to be able to get my savings.

What do you guys recommend? How much should she receive to get through this if it happens? How do you find a good company to deal with? What type of policy is the most cost effective?

She has a very good job as a professor at the University with awesome benefits and retirement. The value of the land and houses, if she sold them should be significant, but of course she would have to deal with the animals and finding another place to leave if she sold the land. I doubt she could keep it up, so selling it would make the most sense. Having some money on hand that would last her a few years would make a huge difference in what she decides on doing.

 

[Bird]

Eddie, I think it's different for each individual. In my own case, if or when I die, my wife will receive half the police & fire pension that I currently receive. But of course, expenses will be more than cut in half; no more premium for Medicare supplement, no more life insurance premium, etc. So I only have $50k life insurance for her to collect. But we have already paid for our funerals, cremation, the niches in the columbarium, etc. And a little over a year ago, we changed to one of the "reverse mortgages" that you see advertised on TV so much. So if anything happens to either of us, the other one can stay here by paying the taxes and insurance. I think prepaid funerals are gaining in popularity.

 

[gladehound]

A friend back in CA passed away last week and I've been wondering how his wife is going to get by. He owned his own business, rented the building, and has a fair amount of inventory there all the time. If she doesn't have the cash to pay the rent, I don't know if she can move their inventory, or return it or what will happen to it. I know there will be some cash available to her, but I have no idea if she can deal with it, or how much went to medical bills before he passed away. From several friends who are in the area, they can't figure out what is happening. So far, no funeral, no returned phone calls and both the business and her home are locked up without any sign of life.

This has me thinking about my wife and how will she handle my passing. I'm 50, in decent shape. I don't smoke and all my doctor says I don't have any health issues or concerns. Of course, you never know when an accident will happen. If I passed away today, I would leave my wife with the land, home and equipment. My savings would probably cover my debt with enough left over for a simple ceremony. That depends on how long it takes her to be able to get my savings.

What do you guys recommend? How much should she receive to get through this if it happens? How do you find a good company to deal with? What type of policy is the most cost effective?

She has a very good job as a professor at the University with awesome benefits and retirement. The value of the land and houses, if she sold them should be significant, but of course she would have to deal with the animals and finding another place to leave if she sold the land. I doubt she could keep it up, so selling it would make the most sense. Having some money on hand that would last her a few years would make a huge difference in what she decides on doing.

Sit down with her an figure out how much money should would need to make any lifestyle changes that are necessary. Then figure out how much she needs to live on. Subtract her income and your combined savings. Get lift insurance for the rest. I would not count the land and equipment in your assessment because she may not be able to get that money out quickly and who knows what will happen with the buying market.

In the end it's a very personal decision.

 

[dmccarty]

We have been working through this issue again.

Check your Social Security statement to see the benefits your wife would receive. Check her statement to see what you would receive. There are also survivor ship benefits if children are involved.

Our main life insurance policy is from one of my employers and we are considering increasing our policy amount. I have checked a couple different companies for prices and coverage which is interesting. AAA is VERY high compared to other policies for instance. Another company was surprisingly high for extra coverage. I think our credit union has a cheaper policy but we have to check the insurance company that has the house, cars, etc policies.

The big question is how much money does the survivor need?

We look at our debt, current monthly bills, and guestimate future bills to try to figure out how my money should be in the policy. The later is hard due to health care costs. What does one do with the insurance payout? Pay off debt and live off the remaining money or invest the money and live off the investment? Both have good and bad points. Right now we are trying to figure out if we can afford a bit more on the policy to pay off the debt to provide more money to live on.

This gets down to how money can we afford to pay out NOW, for an event that may not, and we hope will not occur, until well in the future...

Tough decisions.

Later,
Dan

 

[Travelover]

I'd agree that you need to calculate what the monthly expenses would be and the monthly income would be if you died. It helps to look back over the last years spending to get a handle on it. As a rough guide, the insurance payout should be 25 times the yearly amount needed to plug the gap. (this is the 4% rule, assuming the money is invested in 50% stocks and 50% bonds).

In any case, buy term insurance not whole life and shop competitively on the internet.

 

[jerrybob]

Like Bird says.....everyone is different and has different requirements. My wife and I had a plan to retire early for many years. We live comfortably and moderately but always kept the plan in mind over 25 years. We both had good jobs......we both saved.....we put kids through college. We retired early.....do not owe a penny to anyone. I took my retirement investments with me when I left my company. They now sit in IRA's. I do not have any stocks. Our savings accounts are very healthy. We planned this out over years. We were very disciplined. We now live in paradise......with no debt (unlike our government and many people). If I die......the only problem my wife will have is what to do with all the stuff in my shop......hopefully her next husband is handy! BTW.....we do not have any life insurance......don't need it.

 

[Looking4new]

I am going to assume that the house, land, animals and bank accounts are joint owned. If the bank accounts are joint accounts then the wife would have no problem getting the money. Insurance companies do NOT pay out as quick as they claim.

 

[rtimgray]

As posters above have mentioned, I don't think there is any one "correct" answer. There are many, many variables to consider - what's paid for, what isn't, are there kids to put through school, etc.

I think simple term life insurance policies are typically available from 5 to 10 times your annual income with very little requirement to achieve that, and in your case, probably pretty reasonable. I'm a few years into a 20 year term policy right now, and I'm a few years younger than you. Our property and house is already paid for, we owe a little on a couple of vehicles, but savings could pay those out, and my wife has a decent job. However, we have two teenagers that we are expecting to help send to college, so if I check out early, I want them to at least have that opportunity.

Now, if we fastforward 15 years, kids are out of school and my wife and I are doing as well as we hope to be, then I will probably let my term insurance go because at that point, we will likely be done with expenses like those mentioned above, and I don't want to be worth so much dead that it's worth it for my wife to think how much she still likes having me around...

I do also have a whole-life policy (and it is probably a bad investment, strictly in dollar terms), but it will pay to bury me when its over and my wife/family won't have to worry about money at that time.

Good luck with whatever you choose, and I think the most important thing is that it's on your mind and I know that you will give it due consideration.

Take care.

 

[MossRoad]

First, do a net worth statement for you and your wife. Add up everything you own (land, cars, bank accounts, etc...) and then subtract everything you owe (mortgage, car payments, student loans, etc...) and that's how much you're worth.

See where everything you own is invested. Cash, stocks, land, etc...

Cash can be gotten to quickly. Stocks a bit longer. Land may not sell for years!

I have life insurance = to 4 years of my annual income (double that if its an accident). So does my wife. If either of us croak, we'll have 4 years to get things straightened out. We are debt free. College money is in the bank for the kids. Decent 401k and Roth IRA savings. Either of us will be able to continue living the lifestyle we currently live.

Look into term life insurance. Its cheap! Get enough for your spouse to get by for X years.

One other thing.... she should have life insurance too. Both of you are equal partners. Both of you should have insurance!

Also, a good tool for seeing where you money is, where its going, trends, budgets, etc... is free at mint.com.

Here's a link to a review of it...
Mint.com Review & Rating | PCMag.com

What's nice about Mint is it can't actually do anything with your money. It only reports. We've been using it for a couple years and it really helps see where every penny is.

 

[k0ua]

While I don't have a license to practice in TX, ( I do in Mo. and Ar.) so I won't offer any solid advice, other than this. The time to buy insurance is while you are still young and healthy. Not when you are old and sick. And pick a good independent agent that can choose from several A rated company's and that YOU trust to get your best deal. Don't deal with anything but an A rated company. But trust in your agent is very important. He/She can look out for you and value you as a client for many products in the future, such as when you are ready for a medicare supplement, or start your retirement income, legacy planning (life insurance and annuity's) and other products. This agent if you start a good relationship will value your business and have a vested interest in looking out for you long term, not just making a one time sale. At least this is how I view it, and how I treat my clients.