Please help me figure out how much Life and LT Disability Insurance to buy
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Please help me figure out how much Life and LT Disability Insurance to buy
Last edited by lomiras285 on Sat Dec 23, 2023 12:59 am, edited 1 time in total.
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
It’s relatively straightforward. Figure out how much income you need to replace and that’s the answer.
The only hiccup is that neither policy is typically adjusted for inflation, so you’re insuring against a future event using nominal dollars. But you’re also going to need less income replacement the older you get.
Also, it’s insurance, so the bad event is very unlikely to happen, but if it does, the harm is great. It’s a fat tail risk.
The only hiccup is that neither policy is typically adjusted for inflation, so you’re insuring against a future event using nominal dollars. But you’re also going to need less income replacement the older you get.
Also, it’s insurance, so the bad event is very unlikely to happen, but if it does, the harm is great. It’s a fat tail risk.
Re: Please help me figure out how much Life and LT Disability Insurance to buy
To replace the income stream lost due to a passing 20 year level premium term insurance with a face value of 10 times annual earnings might be a good ballpark number.
The closest helping hand is at the end of your own arm.
Re: Please help me figure out how much Life and LT Disability Insurance to buy
I agree that starting with a principal amount of life insurance of 10X income is reasonable. Maybe trim that a bit given that the household could run with the income from one spouse. But a surviving spouse might not want to work, temporarily or for an extended period, if there is a young child. And I would not count on the employer-provided life insurance, because of the possibility of job and benefit changes.
Are the student loans federal? You may not need to pay them off with life insurance; they are usually discharged if the borrower is deceased.
I also might go to 30 year level term, given that you are insuring for the benefit of a child as yet unborn. Not uncommon these days for a kid to be on the payroll into early 20s, to finish college, do graduate school, or whatever.
Are the student loans federal? You may not need to pay them off with life insurance; they are usually discharged if the borrower is deceased.
I also might go to 30 year level term, given that you are insuring for the benefit of a child as yet unborn. Not uncommon these days for a kid to be on the payroll into early 20s, to finish college, do graduate school, or whatever.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
Some multiple of income is a simple answer, 5-20x.
If income and spending are discordant, ie high savings rate or future swings in income/child expenses, better to be more granular.
I think you want enough money so that the surviving spouse can go part time, that the house and all debt is paid, and college is paid.
goal financial independence # ie 30x expenses plus debt plus college minus growth/principal of current nest egg plus insurance payout until spouse desired retirement plus subsidizing expenses for the lower part time spouse salary until retirement
That way surviving spouse is responsible for some expenses, not for growing the nest egg
Practical answer is some round number in between the two methods. Don’t spend more than a couple of days on this, tops.
If income and spending are discordant, ie high savings rate or future swings in income/child expenses, better to be more granular.
I think you want enough money so that the surviving spouse can go part time, that the house and all debt is paid, and college is paid.
goal financial independence # ie 30x expenses plus debt plus college minus growth/principal of current nest egg plus insurance payout until spouse desired retirement plus subsidizing expenses for the lower part time spouse salary until retirement
That way surviving spouse is responsible for some expenses, not for growing the nest egg
Practical answer is some round number in between the two methods. Don’t spend more than a couple of days on this, tops.
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
Take the free employer group coverage for life insurance, if any. But don’t buy more through work unless you/spouse have an issue that makes a private policy cost-prohibitive or not available. Premiums for employer group life usually increase in 5-year age bands and the portability options if terminated are usually expensive in my experience.
Try an online broker such as selectquote.com to obtain quotes for level-premium term life for 20- or 30-years.
When deciding on our policies:
1) we chose the policy term that at least matched when we expected our kids to be self-sufficient.
2) we chose policy values that covered:
- lost income of deceased spouse
- paid off mortgage and other loans
- funded college costs
- any additional expenses for the single spouse not covered by above, such as adequate retirement savings, additional child-rearing expenses or a period of time for the single spouse to take a leave from work to grieve, to settle estate matters and to get all other areas of life/family on track.
Try an online broker such as selectquote.com to obtain quotes for level-premium term life for 20- or 30-years.
When deciding on our policies:
1) we chose the policy term that at least matched when we expected our kids to be self-sufficient.
2) we chose policy values that covered:
- lost income of deceased spouse
- paid off mortgage and other loans
- funded college costs
- any additional expenses for the single spouse not covered by above, such as adequate retirement savings, additional child-rearing expenses or a period of time for the single spouse to take a leave from work to grieve, to settle estate matters and to get all other areas of life/family on track.
If you mean that when determining how much life insurance you need that you are assuming your spouse as a single parent will take on more hours to make up some lost income if you died, reconsider that assumption. It’s more likely a single parent will decrease their hours/income due to the family grieving process and to single-handedly deal with home/family responsibilities. Or that the single spouse will have to hire more paid help.lomiras285 wrote: ↑Thu Feb 02, 2023 3:01 pm Current income:
- her 200 (could go higher by a 100 if needed; obviously it will mean working more hours)
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
Thank you all for the suggestions!! We contacted select quote and an insurance agent took lots of information from us. She then connected us with a nurse with AIG who is scheduled to come and take health information.HomeStretch wrote: ↑Sat Feb 04, 2023 6:57 am Try an online broker such as selectquote.com to obtain quotes for level-premium term life for 20- or 30-years.
Anything we should be doing for next steps??
Re: Please help me figure out how much Life and LT Disability Insurance to buy
OP,
A) What is your annual savings/investment?
B) You may want to re-verify your annual expense. If the number is correct, your portfolio is kind of small unless you only started making good money over the last few years.
KlangFool
A) What is your annual savings/investment?
B) You may want to re-verify your annual expense. If the number is correct, your portfolio is kind of small unless you only started making good money over the last few years.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Please help me figure out how much Life and LT Disability Insurance to buy
OP,
"Liabilities:
- 350k mortgage loan at 4.5%
- 120k student loan"
"Annual expense
- with faster mortgage payment is $165k (we are trying to pay it off in 5 years)
- with slower mortgage payment is $120k"
Why would you pay off your mortgage before paying off the student loan?
KlangFool
"Liabilities:
- 350k mortgage loan at 4.5%
- 120k student loan"
"Annual expense
- with faster mortgage payment is $165k (we are trying to pay it off in 5 years)
- with slower mortgage payment is $120k"
Why would you pay off your mortgage before paying off the student loan?
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
A/ it varies. Last was higher than this year -- in the 200s vs mid 100s.
B/ one of us has been working for about 9 years. The other finished school only recently. Going forward, we want to live a balanced life -- roughly 1/3rd in each bucket of savings, spending and taxes.
The interest rate on the school loan is lower than the mortgage.KlangFool wrote: ↑Tue Feb 07, 2023 11:47 am OP,
"Liabilities:
- 350k mortgage loan at 4.5%
- 120k student loan"
"Annual expense
- with faster mortgage payment is $165k (we are trying to pay it off in 5 years)
- with slower mortgage payment is $120k"
Why would you pay off your mortgage before paying off the student loan?
KlangFool
Re: Please help me figure out how much Life and LT Disability Insurance to buy
Yes, but you can refinance/recast your mortgage easier. And, you can pay off your student loan totally.lomiras285 wrote: ↑Tue Feb 07, 2023 12:27 pmThe interest rate on the school loan is lower than the mortgage.KlangFool wrote: ↑Tue Feb 07, 2023 11:47 am OP,
"Liabilities:
- 350k mortgage loan at 4.5%
- 120k student loan"
"Annual expense
- with faster mortgage payment is $165k (we are trying to pay it off in 5 years)
- with slower mortgage payment is $120k"
Why would you pay off your mortgage before paying off the student loan?
KlangFool
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: Please help me figure out how much Life and LT Disability Insurance to buy
Good point.KlangFool wrote: ↑Tue Feb 07, 2023 12:30 pmYes, but you can refinance/recast your mortgage easier. And, you can pay off your student loan totally.lomiras285 wrote: ↑Tue Feb 07, 2023 12:27 pmThe interest rate on the school loan is lower than the mortgage.KlangFool wrote: ↑Tue Feb 07, 2023 11:47 am OP,
"Liabilities:
- 350k mortgage loan at 4.5%
- 120k student loan"
"Annual expense
- with faster mortgage payment is $165k (we are trying to pay it off in 5 years)
- with slower mortgage payment is $120k"
Why would you pay off your mortgage before paying off the student loan?
KlangFool
KlangFool
Re: Please help me figure out how much Life and LT Disability Insurance to buy
does LTD that you buy from your current company continue if one gets disabled and quit the current company!?
in this case do you get paid until death the Ltd benefit
in this case do you get paid until death the Ltd benefit