Insured

Wednesday, October 12, 2011

There are things that I don't like to pay for. Well, honestly, is anything really fun to pay for?

I won't lie; I get a certain satisfaction out of knocking off bills every month--but it would make the process infinitely better if, you know, there was an endless supply of money in the ol' bank account. But, like most people, I have resigned to the fact that the very reason we work in the first place is to be able to pay for things, so unless it's an especially "tight" month, I don't find paying bills to be particularly horrible or stressful. Still, there is one particular bill that has been weighing heavily on my mind, and really bothers me.

Life insurance.

Up until last month, the only life insurance policies Michael and I had were through our employers, given to us as part of our benefits packages. We always figured that at least we had some kind of life insurance and left it at that. But once we bought our new house, with more expensive bills, it dawned on me that if something were to happen to one of us, it would be really difficult for the other person to continue to carry the house and its expenses on their own. And, of course, we have Nora, so we have to consider her financial well-being, too.

In August, we were shopping around for homeowner's insurance for our new house, and to keep things easier (and get a discount), we moved our auto insurance over to the new carrier as well. At the time we signed on the dotted line for all of that, the insurance agent (of course) mentioned that we should consider life insurance policies. We were a bit overwhelmed by all of the changes and preparing for the closing on the house, so we said that we would revisit it once we were moved in and (somewhat) settled.

In September, the insurance agent came to our house and discussed our life insurance options with us. We were really unsure of what to expect in terms of cost--but I will say that I was a bit shocked at how pricey life insurance policies are. Even so, we knew it was important to have, so we signed on the dotted lines and put ourselves through the screening process.

But now, I just can't shake the feeling of how much I hate to see that money go out the door every month. I mean, paying for any kind of insurance is no picnic--but at least with health, dental, and car insurance, you actually USE it. Or have a pretty good chance of using it. It's disturbing to know that with life insurance, the only time anyone will ever benefit from it is if one of us dies. How pleasant is THAT to think about?

I question the need for it, honestly. We took out policies that would allow the widowed spouse to pay off the mortgage, and leave some extra money for Nora. We figured that the policies through our employers (which disappear if we leave our jobs, obviously) would be more than enough to cover funeral expenses, and provide a little extra cushion should we actually find ourselves in the worst situation ever. But now I'm thinking, do we really need THAT MUCH insurance? I still maintain that it's smart and responsible to have it, but how much life insurance do we really need? Because seriously, that money that is being deducted from our bank account every month? We could use it for a lot of other things.

I don't want to fall into the "it could never happen to us" trap, because let's face it--at our age, no one expects to lose their lives. It's better to be somewhat prepared for it, right? To protect our little family, and our precious little girl?

What say you, friends? I'm interested in hearing from those with kids AND those without. Do you pay for life insurance? Stick with "free" policies given to you through work? Roll the dice without any at all? What are your reasons for going the route you've chosen? And if you do pay, are there any tricks to turning off that little voice inside that says "this is such a waste of money"?

In retrospect, maybe our mistake in all of this is that we just didn't shop around enough. We figured we'd be getting a good deal through our insurance carrier, but we really don't have anything to compare it to. I find myself wondering if what we're paying is actually a decent rate. Maybe I should put some inquiries out there to see what we could get somewhere else.

And now that I have sufficiently depressed everyone by talking about morbid life events... I apologize. :)

36 comments:

Anonymous,  October 12, 2011 at 2:29 PM  

As a new mom, I take my life insurance very seriously. I want to have my policy up to the amount that my husband wouldn't have to sell our house, and my daughter could be put through college. So both my husband and I will end up with sizeable policies.
Think about this - suppose something happened to both you an Michael. You would want to provide significantly more money than just funeral expenses to whoever was taking care of Nora. You want to provide for her until she can provide for herself. It's morbid, but knowing that in this one way, my daughter would suffer less, makes me feel better about it.
PS - I don't think there's any way to write about this without it being crazy depressing.

Anonymous,  October 12, 2011 at 2:31 PM  

Be glad you got your insurance now before you develop any health problems or get any older. I suspect my husband and I are at least 10-15 years older than you and since we also just had our first child we shopped around for life insurance last year. My husband had some issue with blood pressure testing high or something so the cost to insure him was astronomical (though further medical evaluations found no problem). So, we have a big policy on me and no policy for him as he wanted to re-test and go with another company. After a recent health scare where he thought he was dying (thankfully he is fine -- it was a benign cyst) we are going to re-vist this topic. We also just moved to a new house and with the cost of day care I could not get by on my salary alone if something happened.

Rachel October 12, 2011 at 2:34 PM  

My life insurance policy is through my employer. They pay a portion and then we can elect to take a much larger amount (up to $500,000) for VERY little cost to us. So, that's what I do. My husband's is very similar and also through his employer.

amybyrd October 12, 2011 at 2:42 PM  

I have a couple things. A basic policy through work which is basically a couple years salary--its not going to cover very much. I added a whole life insurance policy at work--for 100K with a long term care insurance rider. I pay less than $20 a month for that. In addition, I have an investment based whole policy that starts at 200K and that we can draw from the additional money to live on in retirement, since my state pension disappears with death--no survivor benefits. I pay 100 a month for that.I could use the extra 100, especially since we are buying a house. But I don't want to leave my hubby and family behind scraping by if I die. My hubby doesn't have much insurance--we need to talk about that.

Katie P October 12, 2011 at 2:44 PM  

My husband and I each have $500k policies, in addition to our employer paid plans. It runs us about $30/month. I would not pay it if we had sufficient savings to cover costs associated with our house and life. If something happens to both of us I want our expenses covered plus our son to be covered through college. You are better off in the long run saving the money and investing it yourself, but in the mean time it's an easy solution.

Heather October 12, 2011 at 2:54 PM  

Several comments already today--Glad to see that we're not the only ones thinking/making decisions about this issue.

The policy we got is a 20-year policy, meaning essentially that the premium will be the same for the next 20 years, I believe. Once that 20 years is up, we will have to reapply for another policy, at which point it will be more expensive since we will be older and possibly with more health problems. We would have preferred to get some kind of "forever" policy, but the premiums were astronomical.

@Rachel--We were told that having policies just through our employer (including supplemental policies with added coverage) were not a good idea, because what if we lose our jobs? But I don't know if that's true, or just something insurance salespeople say! Have you heard/read anything about that? Though, now I'm wondering if supplemental insurance is a decent option because if we DID lose our jobs or leave the companies we're at, we could always take out independent policies at that time. Hmmm.

@Amy--Sounds like you are knowledgeable and well-covered. Definitely get your husband on board, you want to be protected, too! :)

@KatieP--Wow, $500k policies for less than $30/month? Is that $30 each, or combined? Either way, that's a steal--do you mind sharing your carrier? If you'd prefer to e-mail instead of posting, I can be reached at heatherdriveblog at yahoo dot com. We pay around that amount (each), for significantly less coverage.

Leanne October 12, 2011 at 3:11 PM  

We're in the midst of this as well - our first child is expected in January. Prior to getting pregnant, we both had relatively small ($100K) policies on each of us and paid less than $20/month total for those. It was basically play money because we wouldn't have any debt (only student loans left, which die with you) and no kids to support. Now that we have a baby on the way, we're looking at 10xs our income on each of us. This way if one of us dies, the spouse can invest the money and essentially take out a replacement salary without ever touching the principle. We only have term life insurance as it's not beneficial to invest in your life insurance policy.

Our insurance is through Xander Insurance. They shop a lot of providers and give you the best quotes/coverage. They also take care of everything for you, making it so easy. They have answered a lot of our questions and are very helpful. And less expensive than anything else we've found. My husband just got 400/500K (I can't remember!) for $175/year. Not a bad deal! Hopefully in 20 years when it expires, we'll have money in the bank to be self-insured and won't need to reapply.

I know I've written a book, but please don't hesitate to e-mail with any questions. I'm not selling anything, just in a similar boat!

Kate October 12, 2011 at 3:25 PM  

We pay $60 total for each of us to carry a $750,000 policy. It is term insurance, but we have the option to convert it to whole before we're 59. We wanted enough to ensure that we could pay off a mortgage and put 2 kids through college.

PhaseThreeOfLife October 12, 2011 at 3:38 PM  

Thanks for posting this. I think about this every darn month. We have enough insurance on each of us to pay off our condo and any other small loans we might have at the time (a car loan, etc), and funeral costs, with a small amount left over. I hate to spend the money on this huuuuge "what if" scenario. But I'm also sort of superstitious and part of me worries that if I cancel it, the worst will happen. Crazy, I know.

We figure we'll probably just ride this policy out and by the time the policy ends, we probably won't need to re-apply for a new one because our condo and/or house will be much closer to being paid off, the kids will be through college and finances won't be as scary if one of us dies.

Samantha October 12, 2011 at 4:30 PM  

We have life insurance on my husband through his work. He is the main bread winner and can pay all of the bills on his own without my salary. (No kids yet, but he would still be able to then..)

If HE were to die though, I'd be screwed. He used to just have the minimum that his work paid for, but when we bought the house he upped it a little (but it is still not too much out of pocket)- mostly to the point where I could pay off the mortgage. I can definitely handle all of the other bills on my salary alone.

We may re-look at this all when we have kids (and I SAH) and up his a bit more to take into consideration the costs of kids/college too.

Elyse October 12, 2011 at 4:43 PM  

We have Life insurance through my husband's work. His work actually provides it for both of us, for about 10 bucks a month. It's not a huge amount, but we don't have kids so it would be enough to get one buy. Early next year we plan to up that amount since we plan to start a family soon and would obviously need/want more in the event that something happened to one of us, especially him since he is the one who makes more and once we have children, will be the only one working. I think that his is through a separate account so if he loses his job, he has the option to keep it, we would just not get the discount anymore. I specifically checked that so that we would be prepared if he lost his job or switched jobs to a company that didn't offer it.

I know it seems like a bit of a hefty spend, but I think the best way I get around it is to think of all the people who have had to use it and how they probably didn't expect to either. So I just blindly let the money go each month and hope we never have to use it and at the age of 80 I can complain how much we spent on it :)

Heather October 12, 2011 at 4:48 PM  

New rule: Please share your carriers/resources if you are willing. :) If you are uncomfortable posting here, I would appreciate if you could e-mail me: heatherdriveblog at yahoo dot com.

I am amazed at how little some of you are paying for such big policies! We are currently with State Farm, and the premiums are like $30-35/month for $200-250k policies.

Kimberley October 12, 2011 at 4:53 PM  

wow, reading some of the comments and the amounts people pay for, sounds like we may need to revisit ours. we each have a little over a $300k policy and pay $88 a month. sounds like we could do better elsewhere?

Heather October 12, 2011 at 5:07 PM  

@Kimberley--I know, right?? I'm thinking we need to do some shopping as well. $175/year for $400/500k??

These comments have been REALLY helpful so far.

Tricia October 12, 2011 at 5:24 PM  

Thank you for posting about this! I have been thinking about this alot lately as we are expecting our first any day now. We each have policies through work (that we don't pay anything for) that cover the employer $150K & spouse for only $10K. I don't think we have the option of getting more coverage through our employers. I definitely want to look for additional coverage because neither of us could afford our mortgage and day care on one salary.

Lauren October 12, 2011 at 7:07 PM  

We just have through H's employer. Once we have children we plan on taking out a policy outside of work.

K Hirsch October 12, 2011 at 7:49 PM  

My husband I also just signed on the dotted line. I get two times my salary at work for free but he only gets about $50,000 from work.

We ended up going through AAA. If you are a member the rates seem to be pretty good. I pay $20 a month for an extra $250,000 for myself and we pay about $35 a month for him to have $400,000. It is 20 year term life insurance. This gives us both roughly $450,000 to $500,000 in life insurance.

When we started shopping around we were told to look at options where you are in a large group because they can get better rates (union, AAA, etc...).

I hope that it ends up being a waste of money. In the case that it doesn't we wanted to make sure that our daughter would be taken care of.

Alina October 12, 2011 at 8:47 PM  

Very interesting post. Although we don't have kids yet, we are seriously house shopping and my law school debt is MASSIVE. Contrary to what Leane said, your student loan debt is NOT forgiven when you pass, unless it is federal loans. Private loans do NOT die with you, nor do loans that got co-signed. That is something to keep in mind too if like me, you have well over 100k in graduate school debt, more than half of which is private :(. That being said, definitely shop around, AAA has amazing rates!

Andrea October 12, 2011 at 9:07 PM  

I grew up around a grandmother who loved insurance (seriously! she had multiple policies for herself, her husband, and all 7 of her kids...I think she bought some every chance she got). With that being said, my mom takes insurance very seriously and passed that on to all of her kids as well.

My H and I each have policies at work (2x our salaries) that are part of our benefits package; when we bought our house a few years ago we took out policies to cover funeral expenses, the remainder of the mortgage, and any other debt we might have; and recently after the birth of our daughter we each took out term policies that are each 1 million dollars.

We chose the amount based on being able to pay for college and also to give the surviving parent or caregiver (if something were to happen to both of us) to be able to SAH or go part-time if they wish.

We pay $50 a month per person for 1,000,000. I hate seeing it leave the account too, but it makes me feel so much better knowing that my family will be taken care of and no one will be burdened if something were to happen. Again, my perspective on it may come from my insurance loving family, but I think it is something extremely important that many people overlook and if you can afford it you should definitely do it.

You are much better off taking out the policies now. Our age and health helped us to get he best preferred rate...had we waited a couple years I'm sure we'd be paying a lot more for the same amount of money.

Do you have a term policy or is it whole life? Do you have the chance to convert it later in life? Do either of your employers offer programs to purchase insurance at a discounted rate? I know some people who have gotten better rates that way.

Anonymous,  October 12, 2011 at 9:56 PM  

I think it's great you got it now. You never know what will happen. I know you both have life insurance through your employers, but even jobs aren't a guarantee.
My husband passed away unexpectedly this year at the age of 26. He had just lost his job about a week before his death. The only life insurance he had was through his work (we also didn't know if anything else was necessary). He was still eligible for life insurance since he died within the same month of him being laid off. If it had been just a few weeks later, I would have had nothing to pay all the funeral costs and medical bills.
I know this all seems very morbid and depressing, but it is something you have to be prepared for. You shouldn't stress the money (easier said than done). Just rest easy knowing that your loved ones are taken care of no matter what life throws at you.

Heather October 12, 2011 at 10:51 PM  

Wow, wow, wow. All of the comments here have been truly enlightening. First, you've all made me feel much better about the "investment" in life insurance. Secondly, you've all convinced me that we need to shop around a bit more and see what we can get. Because seriously, $50/month for a $1 MILLION policy?!

To this most recent Anonymous poster--I am so sorry to hear of your loss. It is stories like yours (and others' whose blogs I follow) that are the reason I wanted to start looking into additional life insurance in the first place. Because, yes, bad things CAN happen, to any of us, at any time. I wish you strength and healing!

Claudia,  October 13, 2011 at 4:04 AM  

I see you've already gotten plenty of comments from people in similar situations incl. their rates & policy coverage numbers.... I just want to add something, to back you up on "justifyng spening that money on a worst case scenario"... I'm 26, single, no kids, and I live in Switzerland (yap, you have fans over here!)... the latest is the reason why I'm not posting what I pay etc since it makes no sense, it's not exactly comparable...

Anyway... I do have life insurance for myself, since if something happens to me... right now, I want to at least have my dad get some extra money for funeral, moving closer to his siblings (he won't do it because of me right now) etc... and for future husband/kids, well exactly what you already wrote yourself.
I also have an extra retirement payment plan, even though in Switzerland there's one included for everyone who's worked enough in their lifetime (and that point is easy to reach even for mothers that stayed home several years with kids and/or minimum wages)... my point is: anything that will provide for the future; or for left-behind loved ones in case of tragedy (my dad or future spouse/children; and yes they would get what already has been saved up in my two retirement payment plans, too), is money spent smarter than some of the money I might spend for shopping... ;)

So, IMO, you as a wife, mother and house owner are definitely not in the wrong for taking up extra insurances!
Cheers, Claudia

Vanessa October 13, 2011 at 5:24 AM  

We don't have life insurance yet. We don't have a very big mortgage (one of us could service it easily on their own) and no children yet.

We each have what we consider to be adequate policies with work, and those policies are free.
Whilst it would make sense that you would no longer be covered if you left your employer (because the premiums would no longer be paid), I can't really see how that is an issue if you assume that in your working life you will always be employed. I know that is an assumption, but if you don't assume this then you need another sort of insurance altogether, to deal with paying mortgages and the like in the event of unemployment. My husband and I are in the sorts of jobs that would always offer life insurance.

Another thing to look into is whether you have a Death in Service policy as part of your occupational pension scheme. This would normally pay out alump sum in event of death in service. That payment, in addition to a life insurance scheme which is free with work, may be enough for you.

Hope this helps!

Kelsey October 13, 2011 at 12:16 PM  

My husband and I got life insurance after we bought our first home, even though we didn't yet have children. Our reasoning was that if the worst happens and one of us died, we wanted to make sure the surviving spouse could at least remain in our home with a little extra to get by. I mean losing your spouse and best friend is bad enough, but to be uprooted from the home you shared at the same time? That's too much to imagine.

Anonymous,  October 13, 2011 at 12:49 PM  

It would be great if you would either post a list of the affordable providers, or be willing to share the list via email (upon request). Thanks!

Megan October 13, 2011 at 1:40 PM  

It totally sucks, but it's important. We pay ours in one (or two) chunks each year and...ouch. We work with a Financial Advisor for all our stuff and he still thinks we're under-insured but we feel like we're OK. It's just for the reasons you state - if J dies, allowing me to pay off the house, put Jane through College, etc. I'd still have to work though, clearly!

Megan October 13, 2011 at 1:41 PM  

Oh and yes we have some term and some whole. J figured the whole thing out it was way too overwhelming for me and I'm usually our 'researcher'.

Pamela October 14, 2011 at 4:09 AM  

Thank you so much Heather for bringIng up this topic and thank you so much to those that have responded. We've started talking about this recently and I kept putting it off, until now that is. I've gain some knowledge from the responses and I will be looking and comparing very soon to have something aside from just work.

I would really appreciate to get a hold of any companies and premiums if you happen to get any Heather or if anyone would be willing to share. Thanks

Helen October 14, 2011 at 10:59 AM  

Every year when I get the life insurance bills, I wonder what the heck we are paying for. We actually used our UBS financial advisor to broker ours. He compared some rates for us, and we ended up with AXA equitable. We both have the same coverage, but our policy pricing is so different (mine is half of my husband's ($450/year vs $880/year) we think because he got tested after being on the road for a couple weeks. One day I will get him retested after we come home from a vacation! ;)). I think we have way more coverage than we could have possibly need (we have a 30 year term, $1 Million policy for each of us), but the reasons our advisor told us to go so high made sense. I only work part time, so if my husband died, I would need the extra money (on top of paying off the house and college for our son) to cover me until I found full time employment, and I may never make what he does. My husband is our primary earner but he travels A TON so realistically, if I were to die, he would need to most likely hire a nanny in order to keep his job. Its such a morbid conversation to have. And it seems like so much money to spend on a 'what if' scenario. But if that 'what if' ever happened, I know the money will suddenly seem worth it. But ugh. So morbid.

ktmac32 October 14, 2011 at 3:36 PM  

I'm 14 weeks pregnant and just took out a life insurance policy on myself dince I don't have it offered through either of my twoo jobs. My husband has a policy through his employer, but it's not much and wouldn't cover the cost of paying off our mortgage in the event of losing him, which was fine before we had a third party to think about, so at open enrollment this year he's upping his coverage. I was actually pleasantly suprised by how cheap the insurance was on myself, I can afford the whole payment as a yearly installement instead of monthly, which thrilled me, but I may have a lower coverage amount. Anyway, it's a horrible thing to have to think about, but I think it's exrtemely important inthe long run.

Clint & Alicia McLaws October 14, 2011 at 11:53 PM  

I find myself in your exact same position. I have a 9 week old precious little girl. When she was 4 weeks old, my brother in law unexpectedly died. He was only 31 years old. He left behind his wife (my husbands older sister), and two young kids (5 & 3). There was no life insurance policy in place. Oy. We had to move the 3 of them in with us. Social security pays her a monthly sum, but its not enough to cover the costs of both living expenses and raising two very young children. So, my husband and I look at their situation and at our beautiful little girl, and we have to seriously consider taking out life insurance policies.

Anonymous,  October 15, 2011 at 12:02 AM  

I'm 34. My husband died suddenly last year. Our son was still an infant - under a year. We had a small insurance policy, but finances are now a huge struggle. Hope you never need it. But be thankful when you do. Trust me. As awful as it is to think about, things do happen, and lives are cut short. It doesn't just happen to other people. I know, because it happened to me.

Anonymous,  October 16, 2011 at 7:18 PM  

I have employer based life insurance (need to look into more for me) and my husband has $500K for $33 a month and my son (age 8) I bought life insurance for when he was 6 months old and it's whole life at $18 a month for $50K. I wanted to ensure if something ever happened to him when he was smaller or any age really, that we would be able to afford to take care of funeral expenses. An old coworker lost her daughter (18) and didn't have life insurance and was paying over $200 a month for YEARS to pay the funeral/burial expenses. I think we're pretty well coveredf or now... I need to look into more on myself.
There are definitely cheaper ways to go. My husband has Primerica, and my son is with Globe Life.

Pie October 17, 2011 at 4:52 PM  

Life Insurance is a sad topic, but a very important one! Didn't have time to read through comments at the moment, but do want to comment that we got a 30 year 'convertible' & 'refundable' policy through ING. Convertible means anytime during the term, we can convert to whole life if we want to based on CURRENT health condition; Refundable means if the policy holder does not die at the time the policy matures or being converted, the premium we paid will be fully refunded.

mrsbnf October 18, 2011 at 8:04 PM  

Life insurance is such a blessing. Its wonderful peace of mind. The recommended amount is about 10x your annual income. And it was explained to me not as life insurance but pay check replacement insurance-and that's the best way I've ever heard. Your spouse/family will have to continue paying the bills even if you are gone. This allows a spouse to survive (without changing their lifestyle) for 10 years. To me-if my husband didnt come home-getting the chance to continue raising my children without having to put them in daycare or pick up a second job is priceless.

We pay $46 per month for a 10 year term policy for about $420,000. The company we use is Primerica. They have amazing policies-like when our policy expires we can renew our policy for another term and just pay the rate of the age at renewal.

I fully believe in only buying term and investing money elsewhere to save for retirement. There are many things that can happen with whole life/universal life/variable life as the policy ages. I highly recomend doing serious research before going with a policy that has a savings account attached. Dave Ramsey & Suze Orman both have good information on those types of policies.
http://www.daveramsey.com/article/the-truth-about-life-insurance/

nikinikinine October 19, 2011 at 8:50 PM  

We didn't do separate policies until the twins were born. I want to say we paid $400 for me and $700 for Joe. For a $500K and $1M policies, respectively.

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