Use them for two reasons only, that is if you care about the ones you leave behind.

1 & 2:

1) Tax and estate planning

2) Early death, leaving enough for the family to sustain for at least 10-years

But as part of your overal life plan, watch the cost of doing this.

I know folks that have purchased huge sums, both term and universal life, joint, first to die last to die, term 100 etc.

I have universal & term

Inside the universal I have investments tax free

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That’s a real good point about the car accident scenario. If both spouses die in a car accident, what then would happen to their minor children if there was no insurance?

Good call FT on the family plan insurance. That way you’re both protected as well as your estate and any children/dependants in the unfortunate event of the death of both you and your spouse.

Telly: that depends on the type of policy and the purpose of the insurance. if it’s there for mortgage than a join first to die policy equal to the amount of your mortgage would be sufficient. If it is in terms of estate planning or equalization than obviously different aspects need to be taken into account.

Actually death or disability from car accident is only a very small portion, like someone mentioned CI has become a very big issue. Before working as a financial planner I used to work with a collection agency and well over 75% default accounts were due to some critical illness.

I will get into the numbers in Mondays post (hopefully).

Any thoughts on this?

I guess my situation is different then a lot of other people. I don’t really believe in having consumer debt, we just save up to buy things instead of borrowing.

Our family’s bare living costs are about $40,000/year, we don’t current have a mortgage, but either way the monthly payment would be taken care of for those 5-7 years. By starting our kid’s education funds from birth, even in the worst case scenario they will still have a significant portion of it paid for.

I’m not rich, but according to the life insurance estimator’s online, with the needs I’ve put in it says I don’t need any insurance at all.

To answer your question I absolutely think the best decision my hypothetical widow could make would be to find another husband. Primarily because I wouldn’t want my children to be raised without a father, I think single parenthood is an extreme burden, I think it would make her happy to share her life with someone, and I think in our generation it is nearly essential to have a partner to be financially secure.

Even if she doesn’t she should be able to support the kids, no she won’t be retiring young like we’re currently working towards, but that’s ok. Everyone will still have a normal life.

It is a bet and more people should be aware of the real odds, and the costs of living in debt which includes paying higher premiums for a bigger safety net.

CI wasnt invented by an insurance company but rather by a surgeon, so it shows you the importance of the coverage.

Insurance isn’t meant to be a windfall or a lottery type deal. It’s not a “bet” against yourself with the insurance company. It’s about preserving your estate, providing you with comfort and providing for your family after you’re gone. A reputable insurance agent won’t sell you more insurance than you “need” but will ensure that you have the right amount for your needs and your families needs. In your situation, that might be less than another person in your position.

Let me ask you one more question regarding your response…if you did pass away, would you want your wife to have to rely on another man providing for her? Would you want her to feel that she HAD to remarry in order to live? What if she decided not to remarry for whatever reason? These are some of the tough questions you have to face in estate planning and unfortunately, a lot of clients are afraid to even go there and so they avoid insurance all together.

Just my 2 cents. Incidentally, I’m a big fan of critical illness insurance. If only my Dad had it, it could perhaps have helped him find treatment but unfortunately he didn’t necessarily have access to liquid cash and didn’t want to withdraw money from RRSP’s etc. or take out loans that would put his family’s future in jeopardy…that’s just the way he was. He thought that he would get better and didn’t, and by the time he realized that it was more serious than he thought, it was too late…

Disclaimer: *I am NOT a licensed insurance salesperson or financial planner*

Personally I have 2 kids and a stay at home wife. So I too feel the need to provide to them as much as possible, but if I die I think life insurance is only there to cover needs, not wants. So for us that need is to give my partner say 5-7 years to get back on her feet. We live a frugal life style so this shouldn’t be hard to continue. Our large non-retirement savings plus some term insurance should only need to cover housing, living expenses and enough so she can complete her degree or other training so she can begin supporting the family. It’s very reasonable to assume she won’t live the next 60 years alone, I expect she would find someone else and re-marry. I don’t see why people associate dying with paying off the mortgage. Why can’t it just pay the mortgage for 5-7 years? Then the widow will continue on with life like everyone else, continue to save for retirement and the kid’s education, and paying the rest of the mortgage over time.

I agree there are SOME uses for it. Tax shelterring inheritances is one good use. But the minimal tax savings that whole life can provide is far outweighed by the fact that it is a poor investment.

Whole life, for most younger adults, is liek the bastard child of term life and ‘real’ investments. It tries to be an investment (and is poor at that). It tries to be life insurance and its poor at that because most will pay a lot more money than a term policy and get a lot less coverage.

You probably paid a lot for that $250k policy. If you are like me – the only income and married with young children – $250k is nothing. I very strongly believe that a more adaquate term policy coupled with strong short and long term investments is the key to financial security. I have a 10 year $1mm policy for a measly $180 a year and I heavily invest.

what people seem to frequently forget/minimize is that in 10, 15, 20 years you may no longer qualify for life insurance, as marcia stehouwer’s _child_ is experiencing.
i had a neighbor who was 23 years old, and i told her, you should consider getting life insurance now while it’s super cheap. she scoffed at the idea, “i don’t have kids, a home, what do i need it for?” six months later, she was in the hospital with type 2 diabetes; she’ll never qualify for life insurance, at least not at affordable rates.

typically, i would recommend a combination of term and whole life (oh. yeah, i use to sell it. i have securities licenses etc for selling investment vehicles such as universal whole life w/ separate accounts). there are a gazillion tricks for “reducing” taxes (i.e. not paying them) by leveraging the tax statuses of life insurance.
to put this in perspective, i have $250k in coverage (not a lot) but i’m also only carrying a student loan in debt. that being said, i’ve been considering getting more! there’s plenty of reasons for getting life insurance and waiting until the children pop out isn’t the best time to evaluate it. that’s when it should already be in place.
get as much coverage on your kids, make it a whole life and do it as fast as possible. the whole life, if properly funded, could be come the college funding vehicle you’ve been looking for. as for you yourself (an adult), life insurance w/ a separate account is simply another way of increasing your retirement funds since after year 7 (at least in the US) you can start pumping as much money as you want into the policy and then withdraw the gains at later date without incurring capital gains taxes…at least until the amount withdrawn equals the total premiums paid. if you’ve been paying in on premiums for 40 years (25 to 65), that’s quite a bit of tax-free money. OR, you could simply stop paying on the policy since it’s cash reserves will continue to pay the premium for you. essentially, it’s a lack of understanding the in’s and out’s of a policy that prevent many people from buying into the idea.

another part of the problem, imho, is that everyone assumes that insurance salesmen are all about making commissions. if you don’t trust the person, go somewhere else. there are plenty of honest sales people who really do just want to help you and your family.
good luck. :)