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Life insurance: If there is someone is relying on your income, you need life insurance.
Your wife should also be insured, even if she doesn't work.  The need to insure her comes from the expenses of replacing her for childcare and housework. And if she does work (or is the breadwinner), then you need to insure her for income replacement - don’t be too macho to insure her.

How much to get?
First figure out how much you live on for real.

One school of thought is to get enough life insurance that you don't use up that payout, only live on the income that money generates.  So to make $80,000 of income at 5%, you need an initial investment (insurance amount) of $1,600,000 or over 1.5 million dollars! This piece of advice makes very little sense in today's low interest rate environment - since to chase a 5% return you need to risk the principal.

A better plan would be to estimate how many years of income replacement or expense coverage you need for each spouse. A big part of the need for income comes from child related expenses, which will end after the children reach a certain age. Or, at younger ages it is reasonable to expect that a widow/widower could get remarried, and therefore won't need as many years. Take all this into consideration and consult a financial adviser if you can afford it.

Another plan.  She'll be able to go to school, or otherwise get set up for a high paying job with a few years of full support.  So you only need a few years’ worth of income.  Let's say $80,000 X 5 years = $400,000.  Realize that her expenses without a husband might be higher than now as a couple.  (babysitter, tutors, etc) 


Term insurance vs Whole life
Term insurance is the cheapest and simplest.  You pay a premium and  if chv”sh the insured person dies, the beneficiary gets the insurance amount. The higher the risk a person is, the higher the premium.  So people with worse health  will pay more than healthy people for the same amount of insurance, and older people will pay more than younger people.
Level term.  One popular type of term insurance has a level premium for a fixed number of years. Many people prefer this to the traditional type of term insurance where the premium each each year pays for coverage only in that year (and as a result the premiums increase every year, because you are aging). In contrast, a level premium term insurance policy has an unchanging premium amount that is guaranteed for a specific number of years. As a result of the design you are overpaying in the early years of the policy to subsidize your cost in the later years. Popular guarantee periods are 10, 20 or 30 years.  As with any insurance, it pays to get one while you are healthy to lock in the lowest rate possible (in general, health only declines, you rarely hear of people getting healthier with age).
Whole life has a level premium that is guaranteed not to increase for as long as you live. Because of insurance laws in the US, this type of insurance policy must always have a "cash value", which is the amount of money you get back if you cancel the policy. That makes Whole Life a much more expensive choice relative to pure insurance coverage (where you'd get nothing back if you cancel) and therefore a bad choice for most people who are not rich (this is complicated to explain in great detail, but it is an effective summary of who is most likely to see good value in buying Whole Life). One fringe benefit of having a cash value in Whole Life is that you have saved money which can be used for your retirement or any other purpose if you are still alive.  For most people though, other savings vehicles will be better.
Universal life is very similar to whole life, in that it is meant to provide insurance coverage for as long as you live (as opposed to Term, which is meant to for a short to medium period of time). The most important difference is that the premium rates for Universal Life are not guaranteed, unlike Whole Life which is completely guaranteed. The concept behind Universal Life is that the insurance company tells you all the charges you are paying for and lets you pay as much or as little as you want for the coverage. Anything extra that you pay goes into an account that can earn interest, and as long as that account doesn't run out of money you stay insured.
Variable Life is an offshoot of Universal Life. The difference is that instead of the extra money going into an account that earns interest, you can choose to invest the extra money in mutual funds. Take my word as an expert in insurance that Variable Universal Life is only for the most investment oriented people (meaning that they barely care at all about the insurance part of the policy). If you are trying to decide on Term or Variable, the answer is always Term.

How long a Term Insurance companies make tons of money on people who buy 30 year terms and then let it lapse after 10 years, since they paid 30 year rates for those 10 years.  Consider a long term Term the equivalent of insuring against the possibility you will be uninsurable in 10 years.  Consider also that you would be able to convert the short term Term into a whole life policy at that time regardless of insurability.

Life insurance has some very favorable tax treatment on the cash value (or account value), which is a big selling point, especially for people in certain tax brackets who have all but run out of tax advantaged places to save money. The exact details are very technical and could not be fairly explained without making this wiki extremely long.

Reevaluate your situation and the amount of insurance periodically.  As things change- income, spending, family additions-  the amount of coverage you need will need tweaking.

In addition to buying insurance, don't forget to set up plans for how your beneficiaries can use the insurance money to live with their needs taken care of. Providing for your family in case of a tragic event is perhaps as selfless an act as a person can do, don't do it halfway! Make sure there will be money AND a plan for how to live on it. In my experience I have seen all types of unqualified people get involved with "helping" a family live off huge amounts of money and getting it wrong 10 times out of 10.

Plan for guardians to care for your children if cv"sh both parents are unavailable.


« Last edited by henche on July 09, 2014, 10:40:28 PM »

Author Topic: Do you have life insurance?  (Read 71307 times)

Offline AJK

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Re: Do you have life insurance?
« Reply #120 on: January 31, 2014, 03:03:18 PM »
$0.00.

and

$0.00.
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Re: Do you have life insurance?
« Reply #121 on: February 01, 2014, 12:59:59 PM »
$0.00.

and

$0.00.
Thats cuz ur firm pays. :)
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Offline henche

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Re: Do you have life insurance?
« Reply #122 on: February 01, 2014, 06:52:17 PM »
It does? How much do they pay? I'm only covered for 200k

Offline yitzf

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Re: Do you have life insurance?
« Reply #123 on: February 01, 2014, 06:53:33 PM »
It does? How much do they pay? I'm only covered for 200k
Because they only give you coverage for 10x your salary.

Offline AJK

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Re: Do you have life insurance?
« Reply #124 on: February 01, 2014, 06:58:15 PM »
MUahahah.

In his case, it'd be >1MM.
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Offline skyguy918

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Re: Do you have life insurance?
« Reply #125 on: February 01, 2014, 07:49:02 PM »
Be very careful about relying on life insurance from your employer. If you change jobs, or worse, get laid off, coverage is terminated immediately. Then you have to scramble to buy a policy asap, at your current age and risk class prices, whatever they are at that time.

Offline DP7

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Do you have life insurance?
« Reply #126 on: February 02, 2014, 12:47:29 AM »
Please explain

How does one determine whether they are worthy to live or not?
« Last Edit: February 02, 2014, 12:58:18 AM by DP7 »

Offline ckmk47

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Re: Do you have life insurance?
« Reply #127 on: February 02, 2014, 12:53:25 AM »
How does one determine whether they are worthy of life or not?
Worthy of life, or needs life insurance?

All people are born because Hashem gives them a purpose here on this earth.  Everyone is worthy of life.

Life insurance: If there is someone is relying on your income, you need life insurance.
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Offline DP7

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Do you have life insurance?
« Reply #128 on: February 02, 2014, 12:57:32 AM »
Worthy of life, or needs life insurance?

All people are born because Hashem gives them a purpose here on this earth.  Everyone is worthy of life.

Life insurance: If there is someone is relying on your income, you need life insurance.

Post was for Ergel as it was a response to his question. Your comment is not viewing mine in context. Changed my wording if that helps you.

Offline ckmk47

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Re: Do you have life insurance?
« Reply #129 on: February 02, 2014, 01:11:09 AM »
Post was for Ergel as it was a response to his question. Your comment is not viewing mine in context. Changed my wording if that helps you.
I'll let my statement stand as is.  Even if it's gratuitous in the conversation.
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Online Barryg

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Re: Do you have life insurance?
« Reply #130 on: February 02, 2014, 01:42:30 AM »
I guess both!
Just had a kid, and just started thinking about it.
My wife doesn't like thinking about it:)

I was also just told by a family member who is a broker that living primarily in Israel, and not having a real job can both be an issue in getting well priced life insurance...
(And since we don't have jobs- don't know if we can afford it right now)
So I have to decide if worth it to wait a year or two till we move back to the states and get jobs .

primarily = it will add .005% difficulty...
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Offline Yordai Dooma

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Re: Do you have life insurance?
« Reply #131 on: February 02, 2014, 06:34:33 AM »
Not sure if it was mentioned here, but if your employer pays your life insurance you may want to make sure the premiums are paid with post-tax dollars.

If it's paid with pre-tax dollars, if c"v it is paid out, it will be taxed. Assuming you have a large-ish policy, that would put the beneficiary in the highest tax bracket.

Online Barryg

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Re: Do you have life insurance?
« Reply #132 on: February 02, 2014, 11:00:24 AM »
Not sure if it was mentioned here, but if your employer pays your life insurance you may want to make sure the premiums are paid with post-tax dollars.

If it's paid with pre-tax dollars, if c"v it is paid out, it will be taxed. Assuming you have a large-ish policy, that would put the beneficiary in the highest tax bracket.
-1
AFAIK you are referring to a choice one has with disability insurance, as what you mentioned is difficult to do with life ins...

Offline Ergel

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Re: Do you have life insurance?
« Reply #133 on: February 02, 2014, 12:04:56 PM »
How does one determine whether they are worthy to live or not?
It's got nothing to do with whether you are worthy to live. It's whether you have the level of bitachon necessary that you don't have to worry about it. It's the same with figuring out whether you need to seek a parnassah
Life isn't about checking the boxes. Nobody cares.

Offline DP7

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Re: Do you have life insurance?
« Reply #134 on: February 02, 2014, 12:11:20 PM »
It's got nothing to do with whether you are worthy to live. It's whether you have the level of bitachon necessary that you don't have to worry about it. It's the same with figuring out whether you need to seek a parnassah

So your bitachon is that someone else will take care of your family after you die? Sorry I just don't get it. Don't think it is in our hands to make the determination of whether we are zoche to live another year, month, day or not and in that case I see no reason why someone wouldn't make sure their family is protected in case they die. I also didn't know it was a question whether a person needs to seek a parnassah or not. Think some things are pretty backwards here.
« Last Edit: February 02, 2014, 12:16:09 PM by DP7 »

Offline Ergel

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Re: Do you have life insurance?
« Reply #135 on: February 02, 2014, 12:21:03 PM »
So your bitachon is that someone else will take care of your family after you die? Sorry I just don't get it. Don't think it is in our hands to make the determination of whether we are zoche to live another year, month, day or not and in that case I see no reason why someone wouldn't make sure their family is protected in case they die. I also didn't know it was a question whether a person needs to seek a parnassah or not. Think some things are pretty backwards here.
Have you read the rambam sof hilchos shmita vyovel?
Life isn't about checking the boxes. Nobody cares.

Offline Yordai Dooma

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Re: Do you have life insurance?
« Reply #136 on: February 02, 2014, 12:21:33 PM »
-1
AFAIK you are referring to a choice one has with disability insurance, as what you mentioned is difficult to do with life ins...
-1
I'm referring to life ins. Its what my tax professional advised me

Offline DP7

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Re: Do you have life insurance?
« Reply #137 on: February 02, 2014, 12:37:10 PM »
Have you read the rambam sof hilchos shmita vyovel?

Well you ignored the first part of my comment and as to your response if I am not mistaken the Rambam was a physician. Pretty sure many tannaim and amoraim had jobs, pirkei avos talks about working. I also don't see any mention of bitachon there.

Offline Ergel

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Re: Do you have life insurance?
« Reply #138 on: February 02, 2014, 12:40:47 PM »
Have you read the rambam?
And I believe that that extends to that discussion as well
Life isn't about checking the boxes. Nobody cares.

Offline DP7

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Re: Do you have life insurance?
« Reply #139 on: February 02, 2014, 12:42:24 PM »
Have you read the rambam?
And I believe that that extends to that discussion as well

Yes, its open in front of me.