Life insurance - pls explain

amother

Tue, Mar 21 2023, 4:43 pm

I am purchasing a life insurance plan and honestly I'm just clueless.
I don't know what all the differences in plans are and I don't know what questions to ask.

I'm being offered term 30 yr policy for 1 million payout. Monthly cost is about $54 for DH and $30ish for me.

What does term mean? What happens when the plan is over? Do people renew (at that point we will be much older so the cost will be higher...)? Do you get some sort of pay out?

Why is it lower priced for me than for DH? He is only 3 years older than me.

mikayla18

Tue, Mar 21 2023, 4:50 pm

I'm not an insurance broker but I can try to help you understand. Term insurance only covers you for a period of time. (Like car insurance) so CvS if someone needs to utilize their policy within the frame, they can get the money. Typically, people get 30 year policies and then choose to reevaluate in 20 years (cuz then it's cheaper than waiting another 10 years to swap it out) so you'd get another 30 year policy in 20 years (to exchange for this one) but this way you're covered for the next 30 years and would only have to pay monthly or yearly (however you do it) and then in 30 years, pick again. Insurance takes in many statistics when giving a price. Age, gender, health history etc. My husband is younger than me but bcz I was never on meds BH, his is more expensive than mine etc. I hope this helped and was clear Smile

amother

Amaranthus

Tue, Mar 21 2023, 4:51 pm

Term means it ends after the specified term which in this case is 30 years.

You need to figure out the amount of coverage you want to have. Think about how much it would cost to raise each kid you have until they’re self supporting. I do 1 million dollars of coverage per kid and am thinking of upping that to 1.5 million because inflation is scaring me. I have 20 years of coverage from the time that each kid is born because I expect them to be self supporting by 20 year old.

When the plan is over, you are no longer covered. It would be too expensive to make sense to have term life insurance at that point. You do not get a payout.

There’s whole life insurance as an option. The monthly cost is significantly higher (upper hundreds every month for each of you) but you are covered for your whole life. It’s kind of like an investment account with very expensive fees but tax benefits because the proceeds are not taxed. It’s good for very rich people. Most people would be better off with maxing out their 401k, IRA and HSA each year - those don’t have the fees that whole life insurance has.

Men have a life expectancy 7 years less than women so their plans are more expensive.

NotInNJMommy

Tue, Mar 21 2023, 4:51 pm

Term insurance generally mean it has no inherent cash value, unless it has an investment feature as well. The basic premiums do not affects it's CASH value. It only pays out if an event (ie. cvs a death) occurs during the term you're paying for coverage. Typically term can be much more affordable, and does go up in costs with age. Following the philosophy of life insurance offsetting burial expenses and loss income of the deceased, typically that total goes down with age as an adult may be providing for fewer dependents, may already own their home, etc. so have fewer ongoing expenses for hte survivors that they'd have been responsible for. That means, as one ages, they could reduce the payout in renewal terms to (somewhat) offset the increase in premiums.

amother

Leaf

Tue, Mar 21 2023, 9:03 pm

Some term plans also have an option of converting it to whole life insurance later on. If someone develops an illness later on that would make them uninsurable or expensive to insure they can convert their plan to whole life insurance without having to go through another medical screening. It's worth it to see if that is an option if it's not a big price difference.

amother

Olive

Tue, Mar 21 2023, 11:43 pm

One cheshbon is that the amount you take (ie a $1 million dollar policy) if cvs in the event of a death would be invested and the beneficiaries would live off the dividends. They estimate 4% a year now iirc.

This is different than a pp wrote about getting 1million per child cuz that’s how much she thinks it would cost to raise each one/marry them off

Speak to your agent he can explain it all to you