What type of Life Insurance should my husband and I get. We are both 23 and just purchased a home.?

Question

My husband and I are both 23 years old and we just purchased a home. We have been under pressure from our Insurance Agent and our Mortgage broker to obtain Life Insurance in case something happens to one of us.

We would like to have coverage in case something happens. We are pretty much clueless when it comes to Insurance policies. I ALREADY LOOKED UP THE INFO ON WIKIPEDIA, SO PLEASE DON'T GIVE ME MORE OF THAT. I want opinions on what the best kind of Life Insurance is for us. GIVE ME DETAILS OF POLICIES AND WHAT THEY MEAN. WHAT CAN I DO WITH THEM? HOW DO THEY WORK? HOW DO WE BENEFIT? PROS & CONS? PRICES?

I KNOW NOTHING! HELP!

Term (but if it is a 30 year term, does that mean when we are for example 54 and something happens after the 30 years, we aren't covered?) or Permanant (whole life). We didn't like the decreasing term policy our agent showed us. We have gotten 2 quotes for Term Life, BUT I DON'T UNDERSTAND INSURANCE!

Help us make an informed decision!!! Please!

Answer 1

Personally, I own a 30-year term insurance with $500,000 coverage and only pay about $48/month for it. I'm 24 right now and bought it when I was 23. So when I become 53, I hoping that most or all my financial obligations are paid off and that I have accumulated lots of money in my Roth IRA. If I still need life insurance at age 53, I can decrease my coverage amount to my family needs. At age 53, I shouldn't be thinking about life insurance. I should be thinking about whether I have enough saved toward retirement? I don't want to back to work when I retire. That's why I buy term and invest the difference.

When you buy term, you are also suppose to have extra money left over to save toward retirement. When you buy whole life, you don't have any extra money because whole life is very expensive. In whole life policies, rate of return on savings is very low and if you want to use it, you have to BORROW it. Do you like to borrow your own money and pay it back?

That's why I choose term insurance. Why should insurance have a savings plan attached to it and that when you die, your family only has access to the face amount and not the savings? So, if you want your family to have the best of both worlds, buy term and invest away each month.

Answer 2

Well to begin with.....you are asking for a ton of information to make your decision. Lets stick with simple. At your age, you are just starting out in life. If you and your husband have a professional job then you may be making more money than most. Average median income per family is 45k. If you are making more then that great but if not then money can be tight. I am a financial advisor and insurance consultant so I do this for a living. I suggest you purchase two seperate term life policies for you and your husband. Normally, you should be looking at about 10 years worth of income but if the debt is more than that choose the greater of the two. A 30 year policy is ideal for a 30 year mortgage. Do not get mortgage insurance at all. Only level term. If you are blessed enough to be able to pay the house off earlier then that is great because if kids come into the picture (if they haven't already), then the extra money can pay for college if one of you passes away. With term insurance you pay a relatively small amount of money for alot of insurance. ie $25/month for $500,000.00 depending on age/sex/health. Where as you may pay 200.00 for whole life for the same coverage. (rates are different with each company). so you could cover each other for 50 or 400.00. The great thing about term insurance is that it can convert (with the option added) to whole life without guarantee insurability later on. (no health questions) you just pay the higher premium. So if health becomes a problem then just convert. It will save you a ton of money in the long run. Within 30 years you should have saved enough money and paid off all of your debt to where at that time you should be self insured and don't need further coverage. Hope this helps.

Answer 3

How did you purchase your home? This is kind of important because some Credit Unions and Credit agencies offer/provide insurance in the sale if you die the mortgage will be covered. Check all of your home purchase paperwork.

Alright some terms for insurance:

Whole life-This policy is the oldest 'pure' insurance you pay a monthly fee and you are insured for xxxxxx amount of dollars, this policy does build cash value that you could borrow against in times of need-If you borrow the pay-out is reduced by the amount of the loan. This type of insurance is usually more expensive than term, and you can customize it with various riders. All whole life policies pay out at age 100.

Term-is exactly that you buy insurance at a set premium for a set term-in your scenario 30 years. This is usually way cheaper because it has no cash value, pay it and forget it. Then as you both get older the amount of terms decrease and premium increases-The Insurer will guarentee to insure you less years and it costs more. For example at age 23 for 500K each you could get term for probably $23.00 bucks for female and 32.00 for a male both non-smoker, then at say 54 the female would be say 79.00 and the male would be 65.00 for the same coverage, but they may only give that term for 5 years now.

All males are more expensive when younger and then females get more expensive when they get older.

You could really do a whole lot with insurance like annuities that pay a term, some stuff is way out there. Even the payout options need to be studied like joint tennens with survivorship. It is important to find a financial planner that will not make a commission to give you advice.

Hope all this helps and congrats on the house.

Answer 4

BOTTOM LINE You should go talk to as many financial advisors as you need to until you find one with whom you feel comfortable. No one on this message board can give you an exact or even a good answer unless you post all of your personal financial information (savings, debts, income) and personal information (age, health, children etc) on this board.

I find that most people need BOTH term insurance and a permanent policy (there are other permanent policies than whole life). Way too many people try to get by with a term policy only to discover later in life that the amount of coverage was too little and they still need coverage after the term expires. They may have a health issue that prevents obtaining any more coverage.

Aside from the TYPE of policy that you need, the AMOUNT of coverage also varies from person to person.

Go talk to a financial advisor. Plan to reveal all of your finances to him/her. Expect to pay a fee.

Good Luck.

Answer 5

I am a financial advisor and I can offer my advice.
Let's just look at the current situation. You have purchased a home. Obviously, you need mortgage insurance.

Mortgage insurance will cover you for the loan term in the event of Death and Total Permanent Disability(loss of both limbs or eyes) and Terminal Illness(leading to certain death in the next 12 months). In the event of Death/TPD, the full sum assured will be paid out so the surviving partner gets to keep the house without having to bear further instalments.

Mortgage insurance is cheap and affordable. However, you will not get your money back if nothing happens.

I do not want to make this too complicated for you so mortgage insurance is all I will advise you to buy at this moment in time as I do not know your available budget and whether you have other insurance policies in force.

Answer 6

Wow too much information and opinions for someone who knows nothing about insurance to understand.

Simple. What type of premiums are affordable, and how much coverage do you need to pay off your home, credit card debt, and possibly replace income if one of you die for the other to live as they are accustomed to.

Usually, I recommend Term because of the cost, and the fact that most young people usually need any where 100K to 300K To cover all the bases so that the living spouse doesnt face hardship.

Whole life is great if used as a tax free investment. With the market and interest rates as poor as they are, even Susie Orman does not recommend whole life. Expensive, and the cash value is not growing like it did in years past.

The decreasing death benefit is not a good idea! Oh ya, and if your insurance agent is pressuring you, find a new one! No one should pressure you into insurance, if you are going to have it for years to come, you should worry about succumbing to an agent that is looking for a quick commission.

Let me know if you need rates.

Answer 7

Term Life pays when you die only.

Whole Life also pays when you die, with the added benefit that it builds a cash value (you eventually - like 20 years or more from now eventually - would be able to exercise an option to get some cash).

Because Term Life pays off only when you die, it tends to be much less expensive. Since you just bought a house, you are probably strapped for cash, so Term Life might be the best option.

Many employers provide basic life insurance to their employees, and many also offer the option to buy extra life insurance. The rates for buying life insurance via an employer are generally very good.

My recommendation is that each of you (you and your husband) each talk to your human resource benefit person and ask about this. Even if you are not buying extra life insurance now, at open enrollment (for most people, this is coming up), you probably can change your mind and get more. Your HR benefit person should be able to help you with this.

Final note, I would also ask your employer about long term disability insurance. This would kick in if you or your husband were injured or ill and could not work for several months or longer.

Answer 8

Truthfully, neither of you need insurance if you both work.

However, you may desire insurance to help pay some fot hebills if one of you dies. But given your age and the absence of children - it depends alot on how much each of you earn and how much your monthly bils are. Also a little depends on the value of the house - but honestly get a new agent.

In a nutshell, a life policy pays money to the beneficiary when the covered person dies. For a term policy, it pays for a specific period of time (i.e. monthly) of risk. For a whole life, variable of universal policy, it pays the face value of the policy at any time, but you lose any and all of the cash value at death (unless you live to 100.

The people selling non-term justify (or rationalize) their selling of inferior financial products by citing statistics that report on the poor saving habits of people. In this day and age, the only people who buy non-term policies are those who don't understand them.

If you are both 23 you should expect, quite reasonably, to have no need for life insurance past the age of 53, if you avoid consumer debt, use the internet, and invest in low-load or no-load funds. Because, say you get a $200,000 whole life policy, and one of you dies in 29 years. That $200,000 payoff will only have the spending power of around $40,000 - $70,000 . Whereas if you invest the same amount that you WOULD HAVE paid in premiums for whole life/universal life/variable etc. you would have much MORE than the $200,000.

Also AVOID additional mortgage insurance. You don't NEED mortgage insurance because you have a mortgage payment.

Answer 9

bear with me while I describe what I believe you need (as I don't know the exact words for it). You need health insurance. Then there is an insurance that you can buy wherein if either of you pass then the home is paid off so the other person can live without the mortgage payment. Usually that's done if the woman is not working and there are several children involved, so the kids have a place to live. Also, there is an insurance for the breadwinner (the one of you both who earns the most), they are insured for a high amount, and then the lesser wage earner gets just basic insurance. There is also such a thing as business continuance insurance (if you own a buisness and you become disabled). Then there is an insurance wherein if the breadwinner becomes disabled (for if there are children involved). .Then of course there is flood insurance, and insurance for house contents and fire, catastrophic.

Most people get just basic insurances (since the divorce rate is high) such as flood and fire and in case someone gets hurt on your property.

As far as personal insurances, for all the years I was growing up my Dad paid insurance on me, and when I was out of college he gave me the policy and told me to cash it in because it would be paid up and there would be $5,000 for me. When I cashed it in I got only $450. So you need to invest wisely.

If you are 23 and just purchased a house then you need to choose wisely because you will have taxes to pay, insurances have doubled and trippled in some places, cost of electric and gas has increased. So I suggest you get the flood and fire insurances. And plan for the rest of the expenses very carefully as you may not have that much money to invest in a lot of things and you don't want to waste your money either.

Answer 10

I disagree with the advice to buy whole life. It costs a great deal for a small amount of death benefit. Most financial advisors who do not sell whole life (sarcasm intended) recommend term to get a lot of coverage at a modest annual cost.

They try to tell you Whole life is great because it accumulates savings. The problem is, the return is so small it takes forever to accumulate any savings. If you want savings, get in a 401K of something like that at work, where you regularly put amounts each month in a plan which uses income before taxes come out.

Whole life mostly benefits the salesperson who sells it to you.

You might need to spend some serious time googling or yahooing for tutors on life insurance, but beware of anyone who tells you to buy whole life.