Benefit Increase for DI and Life Insurance questions

[feanor_07]

Hello WCI.

I am new to this DIY financing and starting from the insurance component on the WCI course.

In 2014 while in residency I purchased a DI through MM of 3900 monthly benefit for which I pay 144.25/ month with a future insurability rider up to 10,000.

I am attending for like 3 months (40 yo male, healthy, CV surgery, annual income roughly 700) and likely looking to get a total of 15.000 of DI coverage. On the current policy likely this will not be available so I will need a second one. Do I go with the same company?

Short term DI is also provided through employer if it makes any different up to 6 months.

Bells and whistles of the original policy are true own occupation, non cancellable, no changes in premiums, extended partial liability.

What would be a good price to negotiate for both the existing and a new policy?

On the LI side I have a 1M policy looking to increase it between 3M and 5M. Does this amount make sense?

Thanks in advance.

[Hoopoe]

I think you should increase your DI for sure. 15k minimum if you are the primary income in the family depending on 700k. Also in many cases there is a charge on your DI for the future purchase option so exercising that would make the most sense so you are paying for actual coverage and not potential future coverage. As far as rate you can't negotiate but you can get quotes from the "big 5" from an independent agent and then compare. You can pull a few levers to move the price such as waiting period (60 vs 90 vs 120 days), whether you want inflation increase or not, and 5 year, 10 year, to age 65, to age 67 coverage. The specifics would be up to you.

For life insurance stick with term. At your high income, if you save well you can likely have enough that a 20 year policy would be very cost efficient and would suit your needs. I would look into another 1-2MM on a 20 year policy as a starting point and only go for a 30 year if you are a big saver and plan to be dependent on work for a long time.

[Tim]

• “On the current policy likely”
• ”What would be a good price to negotiate for both the existing and a new policy?”

Just a note, your current policy has specific terms and conditions. Future increase option might be one. Each of the options costs money. Know what you own and are paying for the value.

Figure out how much DI monthly benefit you desire. If disabled, don’t forget that retirement savings, college and probably so additional costs will be needed.

Use one (or more) of the WCI independent vendors. Get quotes for both increasing the current with stacking a second policy on top and a separate policy.
LTDI is rather expensive, but some discounts where you did fellowship might be available.
Short version, decide what you need and shop for it. Tons of info on the blog.. Worth every penny, only if you need it.
A common misunderstanding, the inflation increase kicks in only once you begin benefits. Might be better to use that to raise amount of coverage..

[Scott at MD Financial Services]

Depending on the state you are in a new policy should cost about $30 per month per $1,000 of monthly benefit at age 40. Currently you are paying about $37 per month per $1,000 of benefit and that was bought back in 2014 so that was and is over priced on a cost per unit. As for $5 million of death benefit on a 20 year contract, assuming top health class, that should be $217, if it is a 30 year contract then $443 is your monthly.
Hope that helps.

[feanor_07]

Thanks all I appreciate the knowledge.

Just another insurance question. I quickly learned from WCI course that I should keep insurance and investment separate. Hence it make no sense to invest to a variable universal insurance policy and I should put the same amount of money into something else correct?

[jfoxcpacfp]

Thanks all I appreciate the knowledge.

Just another insurance question. I quickly learned from WCI course that I should keep insurance and investment separate. Hence it make no sense to invest to a variable universal insurance policy and I should put the same amount of money into something else correct?

How much you invest for the future depends on multiple factors - cash flow, goals, savings. In other words, your plan.