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How much term-life insurance should I get?

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  • How much term-life insurance should I get?

    Hi,
    I'm trying to purchase a term-life insurance for both me and my spouse?
    We are both 38 years old and both PCPs.
    We are each making approximately 180K (360K total).
    We have a child who is almost 9 years old.
    We are not financially savvy, but we started educating ourselves and are making plans.
    How much should we each get for life insurance? Thank you so much in advance.

  • #2
    How much of that $360k do you save each year?

    Comment


    • #3
      so many questions. what are your goals? do you want this to cover college? cover retirement for your spouse if you die and she doesn't want to work anymore? how much have you already saved? do you want tth money to pay off your house?

      Comment


      • #4
        Given that you have a minor child, it would be a good idea for both you and your spouse to have some disability coverage and some term life insurance. There are ways to calculate what amount of coverage you might want, paying the monthly bills for food, housing, etc., and covering the cost of college for your child might be things to factor in.

        If you want to make it simple, a level term policy in the amount of 2M on each of you might be a reasonable place to start.

        Comment


        • #5
          Thank you all for your thoughtful questions. I didn't know so many factors need to be considered..
          We don't have any savings yet, since we paid off our student loans. I just opened a disability insurance and 529 plan this month. We also started maxing on 401k as well. I am planning to open a IRA (I heard of back door roth IRA, but have to research more on this). If one of us dies, I guess we would still want to work but very minimally (just to keep us sane). Thank you.
          Last edited by PCPdoc; 02-17-2021, 02:04 PM.

          Comment


          • #6
            One way to look at this is to buy the amount of death benefit you need to create the cash flow you would want for the surviving spouse. We typically use $1 million of death benefit creates $30-$40k of cash flow per year without eating into the capital to much so if you want $100k or so of supplemental income to the surviving spouse then buy 2-3 million of coverage. If you do that it will probably cost about $60 for $3 million or about $20 per month per $1 million and $50 for $3 million or about $17 per month per $1 million of coverage on your wife, assuming of course that you are both in excellent health.
            Scott Nelson-Archer, CLU, ChFC
            281-770-8080 Direct / [email protected]

            Comment


            • #7
              Knowing nothing else about your situations, I would buy $2M 20 year policies for each of you.

              Comment


              • #8
                More information:
                I did some calculation according to the White coat investor book and course.

                A. Yearly expenses: $70,000
                x 25 years: $1,750,000
                B. Mortgage left at this moment (2/2021): $842,000
                C. Money we need for my child's college: $3 million
                A+B+C= 5.59 million.

                ----------

                How long it will take for FI:
                I did the NPER calculation with the Excel sheet: 22.7 years.

                ---------------

                Updated question: Should I open $2M or $3M each for 20 or 25 years?

                Comment


                • #9
                  Originally posted by PCPdoc View Post
                  More information:
                  I did some calculation according to the White coat investor book and course.

                  A. Yearly expenses: $70,000
                  x 25 years: $1,750,000
                  B. Mortgage left at this moment (2/2021): $842,000
                  C. Money we need for my child's college: $3 million
                  A+B+C= 5.59 million.

                  ----------

                  How long it will take for FI:
                  I did the NPER calculation with the Excel sheet: 22.7 years.

                  ---------------

                  Updated question: Should I open $2M or $3M each for 20 or 25 years?
                  Can you please explain how you determined that you need $3 million for your child’s college???

                  Comment


                  • #10
                    If you died today , could your wife live a nice life and take care of your child (from and economic standpoint) on her salary of 180K. From the average income data , that number is well above , so I would think she could , but I dont know your exact situation.

                    The goal life insurance is not to make your spose richer , it is to take care of her needs and your childs needs. That being said, life insurance at your age is relatively inexpensive . If your child is 10 , I would think you would want at least 10 years of coverage to get through college age. Since you have limited savings, a longer policy might be more beneficial.

                    Though you are more likely to become disabled than die, so I would make sure your disability policy is up to date.

                    Comment


                    • #11
                      Originally posted by Random1 View Post
                      If you died today , could your wife live a nice life and take care of your child (from and economic standpoint) on her salary of 180K. From the average income data , that number is well above , so I would think she could , but I dont know your exact situation.

                      The goal life insurance is not to make your spose richer , it is to take care of her needs and your childs needs. That being said, life insurance at your age is relatively inexpensive . If your child is 10 , I would think you would want at least 10 years of coverage to get through college age. Since you have limited savings, a longer policy might be more beneficial.

                      Though you are more likely to become disabled than die, so I would make sure your disability policy is up to date.
                      I tend to agree for a two doc couple like us as well. We have 1M each 20 year. If one of us dies 1M extra would allow part-time work if needed for a while. If we both die then current expenses are less relevant have to think about what costs for minor child would be etc.

                      Comment


                      • #12
                        Originally posted by PCPdoc View Post
                        More information:
                        I did some calculation according to the White coat investor book and course.

                        A. Yearly expenses: $70,000
                        x 25 years: $1,750,000
                        B. Mortgage left at this moment (2/2021): $842,000
                        C. Money we need for my child's college: $3 million
                        A+B+C= 5.59 million.

                        ----------

                        How long it will take for FI:
                        I did the NPER calculation with the Excel sheet: 22.7 years.

                        ---------------

                        Updated question: Should I open $2M or $3M each for 20 or 25 years?
                        If FI is in 22.7 years then why don't you buy $2 million for 20 and $500k for 25. By doing this you get $2.5 million for years 1-20 and $500k for years 21-25
                        Scott Nelson-Archer, CLU, ChFC
                        281-770-8080 Direct / [email protected]

                        Comment


                        • #13
                          Originally posted by Anne View Post

                          Can you please explain how you determined that you need $3 million for your child’s college???
                          We live in a city with very high cost of living. I looked up some private universities and also thought my child may need money for graduate school. Is $3M too high? (Please give guidance if it doesn’t seem right)

                          Comment


                          • #14
                            My wife and I are both physicians (she works part time). We did $1M each 20 year term starting at about age 32. We are almost 1/2 way through the term (not dead yet). We are happy with the term life policy. We are nearing FI and will not renew the life insurance.

                            FWIW we have never had disability. We figure with 2 physicians that is not likely. We have a low cost of living and will put disability money towards wealth. Again, almost FI and happy to go bare. [you mileage may vary...calculate the risk first with disability insurance first].

                            Comment


                            • #15
                              Originally posted by PCPdoc View Post

                              We live in a city with very high cost of living. I looked up some private universities and also thought my child may need money for graduate school. Is $3M too high? (Please give guidance if it doesn’t seem right)
                              3 million seems like a ridiculous number for college education even with graduate school. Let’s say they did 4 years of undergrad and 4 years of med school and all private. Let’s say it was 100K per year x 8 years = 800K. If it was 120K per year x8 years = 960K. I just made up random numbers so do your own calculations.

                              I’d say if you had 500K for education that would be more than generous. If you died tomorrow and the 500k was invested. It becomes 1 million in 9 years with 8% rate of return.

                              Comment

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