Money Matters

Life Insurance Amount - What Say You?

We're trying to figure out if we have enough life insurance coverage, and it's turning into a game of "Well, you can NEVER possibly have enough!" so I'm feeling overwhelmed here.

Of course this is different for everyone, but what do you need yours to cover?

We still have a mortgage, so we'd want that paid off. Funeral expenses estimated at $20k per person. What am I forgetting? How much does it change if only you vs you and dh kick the bucket?

I don't think I can afford to die - such an odd feeling.

Re: Life Insurance Amount - What Say You?

  • Suze Orman says something like 8x annual salary. We just chose a bit less, not by much, but less, to cover the mortgage, other misc costs.
  • the recommendation is actually 10x your salary.


    :)
  • $20K seems insane to me for funeral costs. We buried both DH's dad and his stepmom in the last 6 years and neither one came anywhere near $20K.

     

    We accounted for funeral expenses, time off work for the surviving spouse, childcare, mortgage, medical bills....I think what we have is more than sufficient.

    We have more on DH than we do me because it would take me awhile to be able to go back to work to support our family. With DH, we have enough on me that he could stay home for awhile but would have a job to return to.

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  • I've also heard the 8 to 10 times your annual salary amounts.  

    I'm a bit odd, I'm single with no dependant and have a $500,000 policy.  My parents took out a policy on me as an infant and its been accruing  value ever since.  When I get married, I'll likely increae it. And I'll increase it again when I have kids.  

  • Things will differ based on location and options, but my dad's funeral expenses were around $20k.

    I've done those calculator things, wanting to cover final expenses, mortgage, college for 2 kids and replacement income. The estimated amount usually comes out to close to 10x my annual income.

  • image IheartCosmos:

    the recommendation is actually 10x your salary.


    This is what we're doing, it's enough to pay the mortgage off and leaves 5 years of the deceased's salary for the surviving spouse.

  • for us... since both of us make enough to live our current lifestyle without any changes just on 1 income (including continued retirement & college investments for our son) we have enough that will cover nanny cost for an additional 10 years + 2 times are salary.   This was what we determined was right for us after meeting with our financial planner.

    I would recomend to go see one, look at your budgets, expenses (both current and expected) and then make a decision.  What is right for one situation is not right for another.

  • We have about 20x DH's salary and 3x mine (not including policies through work).  I have medical issues that make any more than that cost prohibitive.  My policy would be enough to pay off the house. DH's would be enough for me to do that and retire young, which I might have to do becasue of my health.  Together it's wnough that if we both were to die, DS could be well taken care of and his guradian would not have ot pay for anything.

  • If i had children, I would want my life insurance to be enough to cover a substantial amount of their college expenses, pay off the mortgage for my surviving spouse, and still have some extra in there for final expenses and so that they could take some time off while grieving. 
    imageimage
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  • You may also want to consider the morbid possibility that both you and DH die at the same time, and someone else becomes responsible for your children. Make sure your policy not only covers your current debts and final expenses, and also provides for the child's upcoming expenses (including college) to take pressure off whomever becomes their guardian.
    ~Mary & Mike~
    August 18, 2007

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  • We calculated how much it would cost to pay off the house, hire a nanny and housekeeper, pay for a "typical" (don't ask me what that is, I think we just looked at a few local universities and rounded up) 4-year college education plus 5 years' salary for each of us (I was a sahm but planned to return and used my salary history for the calculations).

    We had no debt other than the mortgage.

    A fact not everyone knows: life insurance payouts are not taxed. Ever. Interest income is, obviously, but the payout itself is tax free.

    10x and 20x salary seems like a crazy lot to me, but that is a very personal decision, I know.

     

    Regarding funeral expenses, $20k doesn't seem too far off the mark for a modest service. We had an extremely-low-key service for my husband, who was cremated, and that still came to maybe $7k after all was said and done. Oh, and another little detail that not everyone knows (at least, this is how it worked for me): the funeral home wouldn't take one penny from me until the life insurance came through. He seemed to imply that that was an industry standard, at least if life insurance is coming into play. He certainly wasn't a family friend or anything, and had no reason to cut me any special deals or provide special treatment. 

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  • image MixedBerryJam:

    We calculated how much it would cost to pay off the house, hire a nanny and housekeeper, pay for a "typical" (don't ask me what that is, I think we just looked at a few local universities and rounded up) 4-year college education plus 5 years' salary for each of us (I was a sahm but planned to return and used my salary history for the calculations).

    We had no debt other than the mortgage.

    A fact not everyone knows: life insurance payouts are not taxed. Ever. Interest income is, obviously, but the payout itself is tax free.

    10x and 20x salary seems like a crazy lot to me, but that is a very personal decision, I know.

     

    Regarding funeral expenses, $20k doesn't seem too far off the mark for a modest service. We had an extremely-low-key service for my husband, who was cremated, and that still came to maybe $7k after all was said and done. Oh, and another little detail that not everyone knows (at least, this is how it worked for me): the funeral home wouldn't take one penny from me until the life insurance came through. He seemed to imply that that was an industry standard, at least if life insurance is coming into play. He certainly wasn't a family friend or anything, and had no reason to cut me any special deals or provide special treatment. 

    This was my experience as well when DH's dad and stepmom passed away. The funeral home got paid after the life insurance checks came in.

    Baby Birthday Ticker Ticker
  • Our biggest thing is making sure we can still live the same kind of life style if one of us were to go.  Luckily we don't own a home yet but if we ever did, we wouldn't want to end up selling it because one of our incomes alone isnt' enough to support our current life style and still put money into savings. 

  • I think $20k is a substantial amount for funeral costs. Just secure your kid's future up to college through insurance coverage and paid off your mortgage and I believe you'll be retiring without or less problem.
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