Can some explain like I’m 5?

[trnubian]

I’ve had life insurance through my car insurance since 2010. I recently bought a house and switched car insurance when I started my homeowners policy. This made me take a look at my life insurance since it’s the only line of insurance I have with my old company now. I’ve had a 5 year term $50k policy since 2010. What does that mean and what should I have?

(I also have a policy through my work for one years salary, not sure of the terms but I can check with HR on Monday)

37 year old non-smoker female, married, 2 kids aged 1 and 6.

 

[wayned]

@trnubian Like you're 5:

Term insurance is like a lease. A 5-year term, is like a 5-year lease.

Yes, term renews; at the worst possible price.

Yes, term renews, but you shouldn't buy it with the intention of renewing it.

If you're buying term with the intention to renew it, you're buying it wrong.

Do a proper needs analysis and get a term with the length you need (e.g. 30 years).

 

[theologian]

@trnubian Get a level term policy and make sure you have enough cover to cover these things:.
Final expenses 15-20k
Pay off any outstanding mortgage or debt
Education for your kids if you have them
After all that's taken care of You also want to account for your income your family would lose if your financially supporting a spouse or kids. Take the amount of monthly income they would need to continue receiving that you were earning, and multiply that by 120.

Add all those up and that's about how much coverage you should have. A good rule of thumb is to get a term policy that stays level until your youngest child is out of college.

And I would highly advise you to never buy term insurance from a company that also sells cash value life insurance like whole life universal life etc because they build gotchas into their policies that will not be in your best interest in the end

 

[aatif]

@trnubian Your 5 year term is now in what is called "annual renewable term" phase. It goes up in cost every year until you reach the date where they will refuse to keep covering you. That is going to vary by carrier. But it's probably not for a long while.

This isn't a bad thing if you have a need for 50k of insurance, but that is sort of a weird amount.

Why do you have this insurance policy. That's the most important piece of information at the end of the day.

Is it to cover a debt (like a mortgage?) Is it to replace lost income if you die? Is it to pay to help raise your kids if you die?

If it is any of those... This is not nearly enough coverage. You need term life. Depending on things probably over $200k, but maybe as much as several million. Most people are massively under insured and at your are term is cheap. Get a lot.

Is it to pay for funeral costs? Is it to leave a legacy or gift of some sort when you die?

If yes, this is the wrong type of policy. You need whole life. Probably a much smaller one. Probably one that can be paid off in 10-20 years.

If you were planning to use it as an investment opportunity, I would assume you would be asking different questions so I won't even mention Universal Life. Basically, ignore anyone who talks to you about universal life (or an product called adjustable life, flexible life or IUL or VUL). There is nothing wrong with these products but they serve pretty specific purposes and get misused and inappropriately sold A LOT. Proceed with caution if anyone suggests them.

 

[aatif]

Oh, there is a possibility that instead of annual renewable you have an "age banded" five year term. Where instead of every year it goes up every 5 but makes larger jumps. It's also almost certainly not what you actually need.

 

[612to907]

@trnubian Term term term. You have kids and debts. Take your annual salary gross times 28 (65-37). Human life value.

 

[tannerking1]

@612to907 Nah. Chances are she will just outlive it and won't have any retirement savings.

You need to ask yourself what is most likely going to happen and go from there.

 

[612to907]

@tannerking1 Also you are on your 5th day of being an agent. It’s cute that you are pushing IUL, looking for those high premiums eh?

 

[tannerking1]

@612to907 AHAHAHAHAH! You're following my agent journey story! Day 6 will be pretty boring just studying the, but no honey I was captive like a bird before I realized how to set myself free.

 

[612to907]

@tannerking1 Term insurance isn’t meant to be carried your entire life….it’s for when you have a high need for insurance should something catastrophic happen. Term insurance = the lowest life insurance premium, how is she not going to have retirement savings?

 

[oanda]

@612to907 yeaaa but if you dont have a policy and wait till you need it and then something happens while youre waiting then you become uninsurable or have a higher premium

 

[tannerking1]

@612to907 She needs to put her savings towards something that can build wealth if she can afford it.

 

[612to907]

@tannerking1 You have no idea what you are talking about.

 

[612to907]

@tannerking1 You are truthfully the type of agent that A. Doesn’t last in this business B. Gives agents a bad name selling garbage products.

 

[sav3dbyhim]

@tannerking1 Thank you!!

 

[resjudicata]

@tannerking1 That’s pretty insulting to assume she won’t have retirement savings.

 

[tannerking1]

@resjudicata Yep. Most people aren't thinking about that and they run low/run out of money when they're older it's a good thing I'm here to persuade people to go on the right path.

 

[resjudicata]

@tannerking1 Again you’re being insulting and making a lot of assumptions to say the right path. So what licenses do you have?

 

[tannerking1]

@resjudicata life health medicare

 

[resjudicata]

@tannerking1 Yea you might want to learn a little more about investing before you make those insulting assumptions. Considering there’s 65 Trillion out there in the market.