Term Life Insurance Amount

[u500_insulin]

Glad to see this forum!

I have a question regarding how much a newly minted doctor should aim to get if has a family (spouse and child).

I know there are calculators that can tell you how much to expect to get over a given time but I was curious on the amounts that people typically get that are doctors.

I am contemplating getting 1.5 M for 30 year term

 

[Peds]

enough to raise your child, put them through college, and pay off the mortgage if your spouse was not to work. if you can get 2M, may as well.

[toothcarpenter]

This podcast on term insurance was great.

http://radicalpersonalfinance.com/189-term-life-insurance/

I have one 30 yr term policy for 3 million and an annual renewable for another 2.  I plan to drop it once my net worth is higher.  I want my wife to have the house paid off, debt free, college paid for kids and 4% rule of 200K a year.

Once I have more debt paid off and my practice paid off - I'll drop the annual renewable term.  Probably in 5 years. I didn't want to lock in another 20 year policy that I might or might not keep or a 10 year policy and then get sick and regret not having a 20 yr policy.

 

Noone talks about annual renewable term and layering it, but it can be a great tool.  The commisions are crap for the salesman, so maybe that's why they aren't popular.

 

 

[dragonfruit]

The best way to plan is to sit down and figure out exactly what you want to happen when you pass.  I laddered my husband's policy for $1 MIL for 10 years, $1 MIL for 20 years, and $1 MIL for 30 years.  It's designed so that when the kids are super young, they get $3 MIL; middle school $2 MIL; college $1 MIL.

Don't forget to have a policy for your spouse even if they are a stay-at-home parent.  You need some money to pay for housekeeping, babysitting, eating out, and all their unpaid work.

[Quan]

I agree with Peds post.  Enough to cover kids and spouse.  I looked into the annual renewable, but didn't see much of an upside to it since the price goes up yearly.  But to each their own.  I did get a term 30 year for 2 million for a reasonable price.  My kids are 3yo, 2yo, and 6 months so I assume they will be self sufficient at 30 years.

[LBKCLU]

If you have young children, 30-Year Term works very well. If you have children that are a little older, then the laddering approach is great as you don't need to pay for something in terms of a guarantee that you might not need - especially as you create wealth and pay down debt.

A good rule of thumb is 7-10 gross income. Obviously, more than this for residents and fellows that have significant earning potential.

[Twood]

For an additional data point:

33yo M married with one young child

500k 30yr term (pay off mortgage) ~420 yearly

2 mill 20 yr term (should hopefully be self insured by then) ~840 yearly

[SaintClive]

I'm about 1.5 years away from purchasing as I'll be married and a resident at that time.  No plans for children just yet, but since we aren't opposed I anticipate it'll happen in the next 10 years.  Currently I think once I start residency I'll look at purchasing 1Mil at 30 years, 1 at 20 years, and 1 at 10 years.  30 years from residency I should be self insured for my death and my need for insurance should drop as the years go on.  Hopefully not needing any kind of renewal should let me get the best deal available from the market.

What I am less sure about is how much I should insure for a minimally earning or stay-at-home spouse.  1Mil at 30 years?  Maybe a shorter term since anticipated wealth growth should insure me against spousal loss before 30 years?  I'm curious what other high income and low/no income spouses like to insure the second spouse.

[nyu04]

SaintClive wrote:

I’m about 1.5 years away from purchasing as I’ll be married and a resident at that time.  No plans for children just yet, but since we aren’t opposed I anticipate it’ll happen in the next 10 years.  Currently I think once I start residency I’ll look at purchasing 1Mil at 30 years, 1 at 20 years, and 1 at 10 years.  30 years from residency I should be self insured for my death and my need for insurance should drop as the years go on.  Hopefully not needing any kind of renewal should let me get the best deal available from the market.

What I am less sure about is how much I should insure for a minimally earning or stay-at-home spouse.  1Mil at 30 years?  Maybe a shorter term since anticipated wealth growth should insure me against spousal loss before 30 years?  I’m curious what other high income and low/no income spouses like to insure the second spouse.

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I am the worker bee while my wife is the SAHM.  She has a 300k term life policy

[SaintClive]

Thank you for sharing!  If you don't mind me asking, at roughly what age and for how long did you buy the policy?

[The White Coat Investor]

We currently carry $1.75M. Used to carry $400K more but let it go when I left the military (and had acquired more assets.) I figure that plus what we already have saved is more than "enough."

Not carrying anything on my wife, but figure I could take many months off if something happened to her, and make a dramatic reduction in how much I work and still have plenty of income and savings. Still might be nice to have a nice liquid few hundred thousand to burn for a year or two, but don't think it would really change our lifestyle in that event.

[Alan10km]

This may sound a little harsh but I opted to not buy a large term life policy on my wife. With all the other bills and insurance I was sick of paying for everything and I weighted the options and talked to my wife about it. We are both in our early 30s with 3 kids under five. She stays at home and I am a hospital employee. I have a 3 million 30 year policy and has a small policy for $125000 that we have had for a while. My rational was if she dies then eventually I am out a free babysitter and would have to put my kids in daycare. Next year one will be in school. So what am I replacing that I need a 1 million dollar policy on her for. I was told I may need time to grieve and get my affairs in order but to me that's my emergency fund. I would rather keep the monthly payment even if it is small and invest it. Just my experience.

[SaintClive]

nyu04 wrote:

SaintClive wrote:

I’m about 1.5 years away from purchasing as I’ll be married and a resident at that time.  No plans for children just yet, but since we aren’t opposed I anticipate it’ll happen in the next 10 years.  Currently I think once I start residency I’ll look at purchasing 1Mil at 30 years, 1 at 20 years, and 1 at 10 years.  30 years from residency I should be self insured for my death and my need for insurance should drop as the years go on.  Hopefully not needing any kind of renewal should let me get the best deal available from the market.

What I am less sure about is how much I should insure for a minimally earning or stay-at-home spouse.  1Mil at 30 years?  Maybe a shorter term since anticipated wealth growth should insure me against spousal loss before 30 years?  I’m curious what other high income and low/no income spouses like to insure the second spouse.

Click to expand…

I am the worker bee while my wife is the SAHM.  She has a 300k term life policy

Click to expand...

Thank you for sharing!  If you don't mind me asking, at roughly what age and for what length of time did you get the term policy?

[The White Coat Investor]

Alan10km wrote:

This may sound a little harsh but I opted to not buy a large term life policy on my wife. With all the other bills and insurance I was sick of paying for everything and I weighted the options and talked to my wife about it. We are both in our early 30s with 3 kids under five. She stays at home and I am a hospital employee. I have a 3 million 30 year policy and has a small policy for $125000 that we have had for a while. My rational was if she dies then eventually I am out a free babysitter and would have to put my kids in daycare. Next year one will be in school. So what am I replacing that I need a 1 million dollar policy on her for. I was told I may need time to grieve and get my affairs in order but to me that’s my emergency fund. I would rather keep the monthly payment even if it is small and invest it. Just my experience.

Click to expand...

I think that's very reasonable. It is also reasonable to buy a policy on a stay at home spouse. Insurance agents will almost always recommend you do so. But here's the way I look at it. If my wife dies, I could stop working until the youngest is out of high school and be the stay at home spouse. Living way below your means provides lots of options. I could pretty easily take a few months off or go to half-time. My family could probably live for quite a while just off residual WCI income.

When buying insurance, you need to think about the plan if something bad happens. If the outcome of the plan without insurance is unacceptable to you, then buy insurance. Otherwise, save the premium.