Life Insurance Help

[SJay88]

Ok, know little to nothing about life insurance, but I keep hearing that term life insurance is the best.

Here is my situation:
I'm 24
I'm married
I'm the bread winner of my family.
I have 1 child age 3
My wife is a stay at home mom / doesn't work
Do not pay a mortgage

I work in carpentry which is somewhat dangerous. We have had a few deaths on the job site and it's got me thinking how in the world are my wife and daughter going to survive if I accidentally die at work or something. I do have a few thousand dollars saved, but it won't really be enough should they need to buy an apartment/house/college-university tuition etc etc.

So, if I purchase term life insurance for 25 years, and lets say I accidentally die at work in 1 year or even before the 25 years. My wife and child will receive however much dollars the policy is for, or how does it work? and lets say in 25 years I'm still alive would the monthly payments I made for the 25 years go to waste?

[Carlotta]

You do need to have life insurance if you are married with a child. You can buy a 25 year term policy, although most are 10 or 20 year terms.
You can buy a 10 year term very cheaply, but you are betting that, in 10 years you will still be insurable. Or you can pay a bit more now and know that you are covered for the full 20 years.
Your largest insurance need is when you are younger and your child(ren) are younger. This is because you have more years to protect them for. If something were to happen to you when you are 26, your child would still only be 5 years old. They have at LEAST another 13 years of full time care and full time expenses left. Not to mention college or university to get through.
However, in 20 years when you are 43, your child will be 23 and hopefully off your payroll. So if you were to die then, your "insurance needs" would be much less.

To answer your question, the face value of the policy will stay the same for the full term of your policy. So whether you died at 24 or 34 or 40, if the policy was for $500,000, your beneficiaries would get $500,000. If the policy expires at the end of 20 years and you are still alive, then you do not get any money back. But hey.... you're still alive and you still protected your family. The only way you can remain covered is to buy a permanent policy. These can be paid off in 15 years and then you never have to pay premiums again for the rest of your life, or, can be paid monthly for the rest of your life.... depends on how they are set up. But you would still be wise to have a term policy to cover expenses that will occur in the next 20 years and, if you wanted permanent insurance, have it with a much smaller face value as it is much more expensive than term. (Because it covers you for life and not just a specified term). You can also buy term policies that can be converted into permanent policies when the term expires.
This is all really general info, because I don't know your circumstances fully. You need to find a reputable agent and discuss all of your needs and what your goals and concerns are so that they can advise you what would be the best fit for you. There are so many different scenarios and different coverages, but ultimately you are the only one who knows what works best for you. Just find someone you trust and let them guide you.

[Gsxrboy]

Awesome questions and I am glad you are thinking ahead. When anyone is buying insurance you have to think about what would happen tomorrow and not 25 years from now. If tomorrow there would be a financial devastation for your family, then getting term life insurance is a must right away. Especially when you are young and healthy, the younger you are, the cheaper it is. Check out www.kanetix.ca for life insurance quotes from different companies. There are numerous types available but for your situation, term is the best bet. It is cheap, offers a tax free payout upon death (protected from creditors) and has a set date when it ends, eg 25 or 30 years.
The money that you put into the life insurance does not go to waste, it is protection for your family and for the unforeseeable future. There are however, some life insurance products that return all of the money you put in, minus fees etc, if nothing happens during the time you have the policy in place. They are slightly more expensive of course, but it may be something to think about if you are looking for money back from your life insurance. However, term life is the cheapest and you can get a large payout for a minimal amount. I do suggest you speak to several financial advisers to figure out which products you like and meet your needs.
Also don't forget to have your wife covered as well, in the event that something happens to her, who will take care of the kids? Daycare costs, live in nanny costs etc.

Good Luck and if you need help, simply post your questions on here.

[SJay88]

Thanks for the help guys!
So, I guess I will definatley set up term insurance for at least 20 yrs. I looked at Kanetix and for $300,000 it's only $281 a year from Transamerica (cheapest). How much do financial advisers typically cost and do I just find one from the yellow pages or are there specific places to seek them?

[bobbiegirl2010]

Insurance advisors/brokers are paid a commission from the insurance company you purchase the product from so you do not have to pay anything for their advice etc... This is a cost that is built into the premiums you pay. Look for an advisor/broker in the yellowpages or ask your friends or family to recommend someone.

For someone your age term insurance is the way to go. There are lots of other features to term insurance, depending on the insurance company, such as being able to renew your coverage without a medical. So even if you are terminally ill 20 years from now you will still be able to renew your policy no questions asked. An insurance advisor/broker will be able to explain all the choices to you so you can make an informed decision of what product to buy and which company to buy it from.

[ashedfc]

Thanks for the help guys!
So, I guess I will definatley set up term insurance for at least 20 yrs. I looked at Kanetix and for $300,000 it's only $281 a year from Transamerica (cheapest). How much do financial advisers typically cost and do I just find one from the yellow pages or are there specific places to seek them?

There are price bands in the insurance amount, like for example $500k might be lesser price than $450k, depending upon your health (& medical examination). Since you are going for a term insurance, its suggested you get a larger face amount of coverage, so in future, you don't have to worry about insurability.
They are very inexpensive (if you are healthy ?) a $500k might cost only $15-$20 per month.
And yes, you don't pay anything to the advisor, as its paid by the insurance company (either as a salary or commissions depending on the advisor's contract.)..
But make sure you get an insurance which has the features of guaranteed convertibility.

[SJay88]

Thanks!
I will look to book an appointment w/ an adviser this weekend.

So, the things that should be a must are renew ability, convertibility, and fixed monthly payment rate...anything else?

Lets say I purchase a 20yr $500 000 plan and I decide to cancel it after a few yrs. Will that be allowed or is it like a contract where I have to stick with it for 20yrs?

Also any recommendations on what the best companies are and/or what companies to steer clear from?

[Gsxrboy]

Excellent question sjay88 and I am glad you are taking the time to research the information before hand.

There is no contract for life insurance, you can cancel at anytime. However, it is better like everyone else says to get lets say $500,000 in coverage, then as time goes on, you can reduce the face amount, which will reduce the monthly payments. So, after 10 years, you decide that $500,000 is too much, you can easily reduce the amount to $300,00 or any amount you see fit. If you decide to increase it, there may be medical questions to answer and possibly a visit by a nurse for a blood sample. This is dependent on the amount you are increasing it by and each company is different.
From personal experience, if you are able to purchase the coverage on a yearly basis, it works out to be cheaper. Usually companies give you a discount if you pay all the yearly price instead of the monthly.
Things to ask when purchasing your insurance
1. How long is the contestability period - The amount of time, usually two years that if anything happens within that time, the insurance company can contest it and perform a more detailed inquest on the death. Eg, if you passed away due to cancer, did you know you had cancer prior to receiving your insurance coverage.
2. Renewablility - Can the insurance be renewed once it has expired and what are the costs of the monthly or yearly costs. Usually this information is visible once you get your insurance document.
3. Available Riders - Most insurance companies allow you to add what are called riders, extra coverage on the insurance form. As an example, some insurance companies offer a payout if you are diagnosed with a terminal illness. Depending on the company, they usually payout a percentage of your coverage. They also offer child riders as well, usually covering up to a certain amount of children without an increase in payments.
4. I still suggest you get coverage for your wife as well. Nothing as high as yours, but something to cover the expenses of hiring a live in nanny as an example.

Once you have your set coverage in place, I suggest you look into two more coverages that may be beneficial to you.

Critical illness coverage - This covers you in the event that you are diagnosed with an illness that is covered in the policy, as an example Cancer. There are restrictions on what diseases are covered, so make sure you find out what is covered. Usually they do not cover colon cancer etc. This coverage might be beneficial if there is a history of cancer or any other terminal disease in your family.

Disability Insurance - This might be beneficial to you in the event that you cannot work. These policies are very expensive and have different levels of coverage. Coverage can begin the next day, after a month, or after 3 months. This covers you in the event you are injured and cannot work in your field.

The above two are the coles notes of what they are, please speak to a adviser and find out more about those coverages.

In terms of companies, they are all bond by the same rules, just like your car insurance. Some companies are great, some are not. Asking friends and family who they are with can help you decide.

Good Luck and I am glad you are taking the necessary steps to protect your family.

[poppleton]

We are in a similar situation (I am a SAHM and my DH is the breadwinner), and we have nearly as much insurance on me as we do for him. The reason I stay home is that we feel it's extremely important to not have someone else raising our kids, and should something happen to me, my husband doesn't want to stick them in daycare while he works. With my insurance, he'd be able to stay home at least until all the kids were in school (or longer). Just something to consider

[ashedfc]

We are in a similar situation (I am a SAHM and my DH is the breadwinner), and we have nearly as much insurance on me as we do for him. The reason I stay home is that we feel it's extremely important to not have someone else raising our kids, and should something happen to me, my husband doesn't want to stick them in daycare while he works. With my insurance, he'd be able to stay home at least until all the kids were in school (or longer). Just something to consider

True,
First 18yrs (or 22yrs in some cases 18+4yrs university) of kids life is very crucial & requires a lot of attention (which only parents can give).
Olden days, there used to be one parent working & it was enough for the whole family; now, things have changed & even both parents working isn't enough to cover the cost of living.. in several cases (either the wages are too low, or the cost of living has gone high due to whatever reasons)..
So its very important to ensure substantial coverage of risk (life insurance), should something happen.
I am personally in favor of Term 10, as it provides large enough coverage at a very negligible cost. so, one can focus on taking care of kids & not spending too much on insurance....
Once the kids are grown up, than you will have enough time & resources to plan for.. & by that time the need for insurance also changes (in most cases its reduced).

[SJay88]

Excellent question sjay88 and I am glad you are taking the time to research the information before hand.

There is no contract for life insurance, you can cancel at anytime. However, it is better like everyone else says to get lets say $500,000 in coverage, then as time goes on, you can reduce the face amount, which will reduce the monthly payments. So, after 10 years, you decide that $500,000 is too much, you can easily reduce the amount to $300,00 or any amount you see fit. If you decide to increase it, there may be medical questions to answer and possibly a visit by a nurse for a blood sample. This is dependent on the amount you are increasing it by and each company is different.
From personal experience, if you are able to purchase the coverage on a yearly basis, it works out to be cheaper. Usually companies give you a discount if you pay all the yearly price instead of the monthly.
Things to ask when purchasing your insurance
1. How long is the contestability period - The amount of time, usually two years that if anything happens within that time, the insurance company can contest it and perform a more detailed inquest on the death. Eg, if you passed away due to cancer, did you know you had cancer prior to receiving your insurance coverage.
2. Renewablility - Can the insurance be renewed once it has expired and what are the costs of the monthly or yearly costs. Usually this information is visible once you get your insurance document.
3. Available Riders - Most insurance companies allow you to add what are called riders, extra coverage on the insurance form. As an example, some insurance companies offer a payout if you are diagnosed with a terminal illness. Depending on the company, they usually payout a percentage of your coverage. They also offer child riders as well, usually covering up to a certain amount of children without an increase in payments.
4. I still suggest you get coverage for your wife as well. Nothing as high as yours, but something to cover the expenses of hiring a live in nanny as an example.

Once you have your set coverage in place, I suggest you look into two more coverages that may be beneficial to you.

Critical illness coverage - This covers you in the event that you are diagnosed with an illness that is covered in the policy, as an example Cancer. There are restrictions on what diseases are covered, so make sure you find out what is covered. Usually they do not cover colon cancer etc. This coverage might be beneficial if there is a history of cancer or any other terminal disease in your family.

Disability Insurance - This might be beneficial to you in the event that you cannot work. These policies are very expensive and have different levels of coverage. Coverage can begin the next day, after a month, or after 3 months. This covers you in the event you are injured and cannot work in your field.

The above two are the coles notes of what they are, please speak to a adviser and find out more about those coverages.

In terms of companies, they are all bond by the same rules, just like your car insurance. Some companies are great, some are not. Asking friends and family who they are with can help you decide.

Good Luck and I am glad you are taking the necessary steps to protect your family.

This was extremely helpful. Thank you!

[SJay88]

We are in a similar situation (I am a SAHM and my DH is the breadwinner), and we have nearly as much insurance on me as we do for him. The reason I stay home is that we feel it's extremely important to not have someone else raising our kids, and should something happen to me, my husband doesn't want to stick them in daycare while he works. With my insurance, he'd be able to stay home at least until all the kids were in school (or longer). Just something to consider

Same way we feel. We don't like anyone else raising the kids...I will def. get it for the both us