Help Setting up Term Life

[JSA]

Currently in training, married no children but planning on trying in the near future.  Wife works in a low paying job and will likely be stay-at-home for a few years after giving birth, if not more.  Ideally if something were to happen to me I'd like my family to still live comfortably and my wife to have the option of not having to work.  Having said that, I've used term4sale, played around with spreadsheets, run various scenarios and I'm having a difficult time honing in on the best term-life strategy, there are just so many unknowns (future expenses/salary, market performance, etc.).  We have savings in the low six-figures and no debts, but I'm not sure how much insurance to get, for how long or what type of ladder I should setup if I decide to go that route.  Right now I'm thinking $3M at the max, with the most conservative strategy being $3m for 30 years, but I think (and would hope) I'd be overinsured in 15+ years with even a moderate savings rate (even accounting for inflation), and it would also be a heftier premium.  On the other end of the spectrum, an aggressive savings rate and good market performance, I could do something like three $1M policies at 10, 15 and 20 year lengths.  However, that could also leave the possibility of being underinsured.    Then there's any combination in-between.

How would you suggest I setup my policies?  What suggestions do you have as far as estimating future expenses/salary, especially for someone still in training?  Right now I'm making estimates with renting in mind, I'm not sure if $3M would necessarily cover homeownership, would it make sense to account for that now or setup a new policy if/when that time comes if I feel underinsured as a homeowner?

Right now, I'm thinking along the lines of $1M 30-year(hope I wouldn't need for full 30 years, but just in case), $1m 20-year and $1m at either 10, 15 or 20-year.

[Scott at MD Financial Services]

There are a lot of ways to do it but the fact is as time goes along the need for coverage dissipates as you build assets and reduce debt.  Now depending upon your age the difference between a 10, 15, or 20 year contract might be a few dollars a month so sometimes gaining the best efficiency in the world is not a great deal if everything needs to work perfectly to make sure the plan is stable.  In our practice we discuss the pros and cons of buying all coverage in one lock duration vs. laddering term policies to fit certain time markers.

Term4sale technology is actually powered by Compulife which is the quote system we use to make sure we are always providing the best quotes out there, it is a great system.  Now don't get me wrong there are a number of carriers that show up as competitive quotes on that system that have great rates but it really does come down to what the carrier you apply to approves you at.  Not all carriers have the same appetite for every gender, age, duration, benefit amount and personal health aliments so keep that in mind.

[scott]

Get what you think you need now and maybe for the next few years.  After you build a house/have kids, get some more. You don't need to get a 3 million 30 year policy right now...or maybe ever. Determine how much you need based on your student loan debt and how much you'd like your wife to have in the event of your untimely demise and get that amount now.  The insurance companies will be happy to take your money in the future when you want to increase your policy.

[VagabondMD]

Rex wrote:

id just get a 2million 20 year policy and call it a day.  If you are concerned about serious change in health over 20 years then look for one with better conversion options.  Usually only good to convert IF you have a very serious change in health over the term.  Pay yearly to avoid additional charges.

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I generally agree with this but might consider staggering amounts and terms so that you can peel off policies as you no longer need/want them. Maybe a $500k ten year term, a $1.5M twenty year term, and a $500k twenty five or thirty year term. I did not plan it that way, but I ended up with something similar and dropped the two $500k plan at various points in time, when I no longer needed them. More recently, I dropped the $1.5M plan (with five years left) and replaced it with a $500k term for ten years.

[JSA]

Thanks for your input.  I'd likely stick with the $3M, I don't think I'd be comfortable at $2M.  However, I'd likely ladder it in $1m increments,

Vagabond MD wrote:

Rex wrote:

id just get a 2million 20 year policy and call it a day.  If you are concerned about serious change in health over 20 years then look for one with better conversion options.  Usually only good to convert IF you have a very serious change in health over the term.  Pay yearly to avoid additional charges.

Click to expand…

I generally agree with this but might consider staggering amounts and terms so that you can peel off policies as you no longer need/want them. Maybe a $500k ten year term, a $1.5M twenty year term, and a $500k twenty five or thirty year term. I did not plan it that way, but I ended up with something similar and dropped the two $500k plan at various points in time, when I no longer needed them. More recently, I dropped the $1.5M plan (with five years left) and replaced it with a $500k term for ten years.

Click to expand...

I like this idea, but I'd have to run the numbers and see how it works out.