Life Insurance

sunday, our life insurance is sadly inappropriate today (on my list of things to do, but first i need to find a good T&E attorney. anyone have any to recommend?)

BUT back when we initially made our decisions, when our daughter was born, we chose the following:

As I was a stay-at-home mother we took out a $500k term policy on me so that the costs of child-care and additional household help would be covered for the first however many years. We could have lowered this, but i was in my early thirties and term was thus very cheap for that amount.

For the husband we took out a policy that would pay the mortgage off and leave me with an income stream (although we were wrong because interest rates later plummeted) that would pay not just enough for current living and educational expenses, but enough assuming moderate inflation. this was also term, and also fairly inexpensive at the time (it's getting more pricey as he gets older, but we have no intentions of dropping coverage until we have saved most of the value of the policy).

most term policies can be converted to whole-life at certain points.

we also decided to get a $75k whole-life policy for our daughter.

find a very good life insurance person, they can run all sorts of scenarios for you. we use someone from northwestern mutual who is great.

i personally would be very uncomfortable without a good ltd policy. it isn't cheap but we pay for a policy which pays $25k/month in the event of ltd. i agree, the amount of benefit seems small compared to price.

Sunday: bear in mind that I'm a perpetual worrier (and also think there is some likelihood insurance cos. won't pay - may go bust, etc.)

I got 1m when I got pg with first child. Then with 2nd child, upped to 3m. My partner has a 5m policy. We got the "best" rates - early 30s, good weights, physicals were perfect. $900/million with Prudential.

My brother is an actuary with an insurance co. - term life is the way to go unless you have some $ that you need tax-sheltered (you can arguably do this with a whole life policy).

Why those #s? Term was inexpensive, and we also got the policies separately (so 3 1m policies, if we need to drop coverage later). Another issue is if you have a terminal disease, you can negotiate with some policies to pay out sooner.

LTD - absolutely do this and max. out if you can - I always joke that if you're going to get in a serious car accident, just die so I get the big payout and not have to worry about medical bills.

10023, we have the same sick joke here.

you may also want to see a good T&E person. in my case i need one because i don't know the current law on insurance trusts, law firms provide life insurance policies at good rates, and we're being offerred new coverage and i need to figure out the benefit (or not) of putting one or two new policies in a trust (our NW Mutual policies are not in an insurance trust).

also, as 10023 said, depending on your other assets, who in the family owns them, whether or not you have children, whether or not both people are employed, how much total insurance you are getting, you may want the policies to be in more than one name. for example, as soon as we pay off the mortgage we are transferring the property to my name. an estate attorney can help you with such things.

anyone have a good T&E attorney? i didn't have a great experience with the last one i used.

I use Phillips Nizer.

You can use insurance trust to shield insurance proceeds from estate tax, if non-spouse/children are beneficiaries. Downside is that the beneficiaries can't be changed.

Thank you both for your comments.

ar, I know how it feels regarding this being one of the things on the to-do list. I really don't like these grown-up topics, but necessary especially since kids are involved. I have term life insurance now, but with just one company. Like nyc10023, I'll probably get some additional coverage with another company. Insurance for insurance! I also like the potential flexibility mentioned.

LTD's feels like such a rip-off, especially when you start reading the fine prints. Not very confident that they would actually pay or continue to pay after you're a little better. On top of that, like most insurance, I just hate the idea that much of the premium is being used to pay fraudulent claims. With that said, I still buy it and of course I can't drop it because, well, you know what will happen if I do...

I am a big-time worrier and forced my husband to buy whole life insurance when he was 34 years old. We also have a 20 year term life insurance policy on his life.

I recently sat down to calculate what my monthly expenses would be if something should happen to my husband. Before we bought an apartment, I wanted to make sure that I could afford to remain in the apartment on my own based on monthly income coming in along with personal savings and life insurance proceeds (but not including any retirement accounts). Even as an individual, it costs quite a bit to live in NYC.

Term insurance is much more affordable than whole life insurance. However, we've done very well with the annual rate of return on our whole life policy from Northwestern Mutual. Whole life policies have cash surrender value.

As far as disability insurance, it costs a fortune but IMO is very worth it. My husband has a policy from his workplace which pays in the event that he can no longer perform his job as an attorney as opposed to policies which pay only if you can no longer be employed in any capacity.

Aboutready, have you bought term life insurance through your husband's law firm? Where my husband works, a partner is required to purchase a very nominal life insurance policy but can increase the amount except that the rates are more expensive than purchasing a policy outside of his work.

Sunday, I wouldn't put off purchasing additional insurance forever. Insurance companies scrutinize applications much more carefully as you enter your 40's and 50's. Even if you are a thin non-smoker who regularly exercises and has no serious health problems, it becomes more difficult and much more expensive to get life insurance than if you had applied in your 30's.

Best of luck with your decisions.

we have term through the law firm, now we have the option of purchasing a new policy (we can keep or get rid of the old one) and i may find it worth my while to put the new one in an insurance trust. our nw mutual policy is cheaper, but not by much. the partner composition at his firm is on the young side, and the claims history is good, so the insurance rates aren't bad.

also, my husband suffers from "white-coat syndrome." his blood pressure goes through the roof at the doctor's office, and this only started about 10 years ago. he had to wear a heart monitor intermittently for a couple of months to rule out high blood pressure. i presume a good life insurance company could deal with it, but it might be a pain to get more coverage independently now, as he's over 45. this is just easy, and not much more.

Aboutready, thanks for answering my question. Where my husband works, many of the partners are older and the claims history isn't as favorable. I've been thinking of getting insurance through his law firm because he is also over 45 years old and I'm afraid of his being rejected on applications elsewhere although his health is pretty good.

The insurance companies don't believe in the concept that 40 is the new 30???

With another kid on the way, I'll definitely be getting more life insurance coverage soon. Still trying to figure out how much more and with which company.

My current LTD will pay 60% as long as I cannot earn more than 80% of pre-disability earnings at the same occupation in this area. I wonder how people had to fight with the insurance company to prove they can't earn 80% of pre-disability. I don't think that's enough coverage, but again, it is so expensive for the amount of coverage.

Also, to be seriously / permanently injured and have to deal with the idea that you're worth more dead than alive... It makes my head hurts just thinking about it.

lobster, did you get life insurance for yourself as well?

sunday, 60% isn't bad. and yes, it's just sick. we'd be ok with ltd but only because our rent is so low and we have savings. i'd likely go back to work to get health insurance.

getting life insurance for yourself is a very good idea, at least initially, especially if you have more than one child. we only have one, so the $5-7mm (depending on what i decide) in policies should be sufficient, and not trigger any serious tax consequences.

sorry alan. i know the system isn't fair, and i'd vote to change it, but while it is what it is i'd be a fool not to take advantage of it.

60% is actually pretty bad considering it will be reduced by any other income including any social security disability and dependent social security benefits. That means, it's NOT 60% of pre-disability plus other disability income; it's just 60% of pre-disability income. i.e. If I make 10K a month, and social security (incl. dependent benefits) would have paid 3.5K in monthly disability benefits, that means LTD would only pay 2.5K a month, for a total of 6K (60% of pre-disability earnings).

Our monthly expenses is less than 60% of current earnings, but in the event of LTD, expenses would probably go up for various reasons. ar, if you had to go back to work, you won't be able to take care of your hubby when he needs you the most.

Sunday, since I don't have children, I didn't really need to get life insurance myself. I didn't need to leave my husband extra money to spend on a new girlfriend. :)

A very good resource for general information on insurance is the Insurance Information Institute in lower Manhattan which has an extensive insurance library. www.iii.org

Sunday I meant 60 percent wasn't bad relatively. I'm maxed out and I don't have close to 60 percent.

buy disability insurance. you are much more likely to get sick than to die.

As a fairly standard rule, insurance companies won't replace more than 2/3rd of your income (at the time you apply) with disability insurance. Sunday, is your policy with the SS carve out a voluntary policy, or one your employer pays for? If you get an individual policy, usually you get one without the SS carve out, so you would get both (assuming you qualify for the much more stringent SS disability). Also, an individual policy is paid for with after-tax $s, so the benefit is tax-free. Obviously makes a large difference, especially if your spouse works while you are disabled so your marginal rate would be very high. As a general rule, for non-medical, white collar types of jobs, a maxed-out disability policy from a good carrier should cost around 1% or so of your gross salary.

glamma - you are 100% likely to die.... I know you mean during a 20 or 30yr term. Yes having a disability at some point over your working life is a much higher probability than dying over that same time period.

Sunday, your analysis of what would happen in the most unlikely event of LTD seems accurate. But remember that getting 60% of your current earnings is much better than just receiving social security disability benefits (individual and dependent). And sometimes you have to deal with government bureaucracy and may even have to litigate in federal district court before you're awarded social security disability benefits. Personally, I'd rather fight an insurance company than the federal government, although people unfortunately sometimes have to fight both.

I understand that disability insurance is incredibly expensive, but having that extra insurance money would probably make a difference in the life of your family in the unlikely event that you needed it. If you can afford LTD insurance, I would buy it.

printer, my current LTD insurance is through the company, but I pay for it with after-tax money. Good point about the benefits being tax free. The other good news I found so far is that, pre-disability earnings includes base salary and bonus (at least for the plan I'm on). 60% pre-disability earnings tax free would be about the same as current take home. I feel a little better. Thanks printer!

lobster, like health insurance, regardless of how expensive I think ltd insurance is, I will continue to buy it. The insurance companies know that you're very unlikely to drop coverage because you're afraid that you'll need it the day after you drop coverage. The cost of ltd insurance really bugs me because I know one of the main reason it's so costly is because of the number of fraudulent claims. Same thing with car insurance I'm sure, but good thing I don't need a car in the city.

sunday, ltd insurance underwriting is based on experience by your company and like companies, not the world at large.

insurance companies will not let fraudulent LTD claims go. short-term, absolutely, it costs much more to prosecute than to pay. ltd, no.

it's just that heart attacks and strokes and cancer are very common in the fifty-year-old range, death much less so. take a look (if you have term with increasing premiums) at how much life insurance rates increase past 55. then death gets its groove on.

ar, fair points. Maybe I just have a thing against insurance in general because of amount of fraud / lawsuits that goes along with it. I don't have the same feeling against life insurance because it's much harder to fake a death.

I guess I should just be happy that I'm one of the payers as oppose to being a benefits recipient.

sunday, i spent years working in insurance/reinsurance law. the companies, surprise, surprise, are doing quite well on your needs. much better, actually, than they were 30, 20, 10 years ago.

there's not that much fraud, in private ltd insurance claims. by the claimants at least. AIG? who knows?

Sunday, given that your insurance is contributory, have you shopped around for an individual plan? If you are in good health, it could likely be cheaper, and is completely portable, whereas the group plan may have restrictions on portability if you change employers. One caveat is your gender - I'm not sure whether you are male or female, but for individual plans it is substantially more expensive for women.

printer, do you have any idea why it would be more expensive for women? i'm just curious, it seems like the disabilities that would allow you to remain alive and yet unable to work largely hit men, at least before 50 (stroke, etc.). maybe i'm wrong?

2 things that I'm aware of: 1) pregnancy - not itself a disability, but can lead to them (back pain, for example). and 2) Women are more likely to get treatment, leading to a claim. Men more likely to think they can work through it and not reach out. I know it sounds like a ridiculous stereotype, but claims experience bears it out.
The difference in premiums is huge - can be double the cost. But in group plans, or group-like plans the premiums are gender-neutral.

Printer: is it possible that women's LTD is more $ because of the likelihood that they are a 2nd income earner, whereas men are primary - so they'd rather work than claim because more $ than with payout?

could be, and also the fact that men's 'ceiling' is higher would make them more likely pursue future income rather than settling for 2/3rds of what they're at when they become disabled. that said, if the woman is truly a secondary, unneeded income, i think they'd be very unlikely to pay for disability insurance in the 1st place - at least that has been my experience.

Thanks printer. I will be shopping around soon. I'm just beginning to understand the variables behind the cost.

Thanks again to all posters for your comments.