Newby looking for advice

[kpanghmc]

Hi all,

I'm completely new to the insurance world and was hoping I could find some direction here. Some background info: I'm a 24 year old male and have a squeaky clean record (no health problems, no driving accidents, no smoking, no drugs, etc). I'm engaged to be married in a year and am the primary breadwinner in the house (I live with my fiance and her parents). I make $60,000 / year gross and my fiance and I are hoping to have children within the next 5 years or so.

I work at a very low-risk job (software development), but since my future in-laws do not have money (they lost it all to the communists during the Vietnam war) and I have to provide for the family, I want to get both term life insurance and long term disability insurance. My fiance is also interested in term life insurance. Here are a few questions I have:

1. Do insurance companies offer discounts if you get coverage along with a fiance? Or do you have to apply with a wife?
2. Do insurance companies offer discounts if you get both life and disability through them?
3. Any recommendations on some good insurance companies to check out?
4. How long of a term do I need on my life insurance plan? How much should I be covered for?
5. Are the ROP term life insurance plans a good purchase?

Any other advice is perfectly welcome. As you can probably tell, my insurance knowledge is lacking. Thank you in advance for your responses.

 

[Sam]

Welcome. It is always nice to see a well thought out request from someone who is being fiscally prudent.

1. There are no term discounts for having 2 term policies, heather with a wife, or otherwise. (If there are, they are not with competitive companies)
2.There are a few such programs, but those companies are not the bet priced for either one, so you will be better off with separate companies.
3.For term, AIG, Banner, West Coast Life, First Colony, Lincoln and a few others will always be stacked pretty close together. Someone else will have to help with the disability companies.
4. This can vary very significantly, depending on whom you ask. My personal recommendation is to get at least $750,000 and to make it a 30 year term. You are young and healthy, but you may not always be so.
5. They are a good purchase if you are not a good saver, or even if it's just your fiance who isn't. Look at it as a forced savings paying a couple %. Not the best investment in the world, but many people wish they had done something like that with discipline many years ago.

 

[kpanghmc]

Thanks!

That's exactly what I was looking for!

Saving and investing are a few of the things I'm reasonably good at, so I think I'll avoid the ROP coverages and invest the saved difference in premiums into a higher-interest-earning account.

Any opinions on New York Life? A family member recommended I check them out.

Also, esurance and other online instant quote websites I've found all have a pretty good opinion on AIG, but when I do a search for "AIG reviews" on google the ratings given by some reviewers are pretty bad. They complain about poor response times and difficulty in getting the money owed to them. Then again, these are mainly auto insurance settlements (probably more difficult to convince them you're injured than to convince them you're dead). Should I be concerned at all about this?

 

[Sam]

New York Life is an excellent company, but they do not have a competitive term product, and they do not even have a 30 year term product. (They have a term to 90, or something like that)
Every insurance company out there has people who don't like them. If you want to find complaints just run some searches for NYL complains, NWM complaints, AIG complaints, Statefarm complaints etc... At the end of the day, they are rated A++, the best there is.
They also have a good permanent UL product, should you ever need to convert.

 

[James]

A ten year term policy at your age for $750 grand from Ohio National is about $170 yearly, a little cheaper for you future wife I imagine since she will likely need less depending of course. Now for a 30 yr term, cost is around $550 or higher depending upon who you go with. Buying the ten year term will save enough to buy a small UL or W/L, a UL for $100 grand is about $350 from AXA and about $500 from a solid company like John Hancock now rated triple A! Now the idea of the UL is that you can raise the coverage or basically double it on a scheldule years such as 3,5,10. The idea is that you don't know where you'll be in ten, twenty or thirty years but with Term only even a 30 year term will leave you at age 54 uncovered and with no Insurance and seeking insurance at 54 which isn't where you want to be, IMHO.

Now about the DI, a good DI will cost on average about 1-3% of your income. Or about $1,000-1,800 yearly, go with a solid company such as Berkley (Guardian) or Union Central, you want a company that'll be around for a while and has a history of paying out claims unlike one I won't mention! Look for a "Own Occupation" policy but in your field that may be difficult or more costly. Plus other ryders, you'll likely pay $1,800 yearly for a solid policy.

Now since you have DI what about LTC? A good LTC that starts at $100 a day benefit with 5% compound interest on the daily benefit on you and your wife is right at $750 yearly. That includes all the whistles and bells from John Hancock with a 5 year benefit period.

So total coverage you are looking at about $2,350 dollars for a good DI policy and 30 yr term or about the same for a Term and UL mix if not cheaper if you pick the ten year term, look for a Renewable contract but that will rise the cost and have fallen out of favor by some. Add in the LTCi for you and your wife and add $750 bringing up your cost to 3 grand or 5% of your salary.

 

[NHB_MMA]

You've gotten some really good advice here on the life end from James and Melmunch. I can't speak for DI.

I think 750K coverage seems reasonable in terms of amount. One of the problems is you really need 40 year-term to take you to retirement age. Most companies don't offer 40 year-term and I've heard it's so freakin' expensive for term coverage that, given the low probability of death before 65 (thank God) and high probability that you'll never see a return on that term premium, you'd be better off getting a reduced death benefit of WL or UL and letting it compound, along with some supplement term while the perm grows. Seems like one of the pitfalls of buying insurance at your age, but that's when it's cheapest and you definitely need it.

Permanent would be nice, because it would serve you for that 41 years till retirement and beyond, but you probably don't feel like buying 750K or permanent insurance and I can understand that. Of course it's stating the obvious, but the only disadvantage (and I mean only) to permanent insurance is the cost, but it is a very real disadvantage. If term and perm policies had exactly the same features they have now but cost exactly the same, only a fool would buy term. But that's not the reality of the situation. Since you are good at savings and investing, you would be better off to look for actual investment vehicles to provide you with wealth down the road.

That being said, I think you should consider buying a portion of your life insurance needs in a permanent policy, with term making up the difference. The reality is that if you buy 30 or 40 year term when the policy period ends, you're done. At some point, it will be more expensive to renew it than permanent coverage would have been to begin with. You might renew it for 5 or 10 years, but figure it's pretty much done.

One of the potential pitfalls with a rigid "buy term, invest the difference" mentality (as in being completely closed to the idea of any permanent coverage) is that it assumes a number of perfect scenarios. It assumes that your investments have performed well AND that it will be an ideal time to liquidate them at your death. It assumes that your need for life insurance will end around the time of your retirement. But will it? Yes if things go well, and no if they do not. No doubt there are people out there that no longer have any life insurance coverage that have lost their job to outsourcing or maybe some of what they hoped would be their retirement nestegg got "Enroned" by some crook. Such folks that have to dip into whatever they have saved undoubtedly worry about what would happen to their family in the event of their death. If you bought 500K in term and 250K in WL, the WL should be worth about 425K or so in death benefit at age 65 and it goes considerably more in the next years. Although your term is no longer around, you would have some death benefit. Some here have actually argued that being underinsured is worse than no insurance and I find that line of reasoning to be ridiculous. It's like saying because there is no cure for cancer, there is no sense in fighting it. Yes, the whole 750K death benefit is not there anymore and the entirely list of financial needs you noted when you did your planning will not be met, but the reality is that the reduced death benefit will buy some time for your family to figure out where they go from that point on. Obviously, with some UL products you can expect a faster growth on the death benefit in that age bracket and a VUL will absolutely snowball into a monster if adequately funded. Take a look at illustrations of each and see what you feel comfortable with.

Last, I strongly recommend you only buy permanent coverage from a very large, financially stable, top-rated, company that has been in business for many, many years. I represent one, but there are many others out there too. These factors are not as important with term, but matter more when you have permanent equity tied into the equation. Basically my rule would be it should run TV commercials, sponsor a golf tournament or bowl game, etc. If I haven't heard of it, I would be hesitant to buy permanent coverage. Another important factor is a mutual company, IMHO. I have seen insurance companies get bought out and deteriorate. Some companies like Conseco and Kemper tried to buy too much and expand too quickly and lost their top ratings. With a mutual company, the policyholders own it and the only thing that can change that is a vote by policyholders, so you don't have to worry as much about someone looking to come in, manipulate the stock, and cash out. The focus of management should be geared more towards the long-term picture, not quarterly profit.

You have several ideas now from different people. I hope they've been helpful.

 

[arnguy]

James, the DI policies sold by Guardian's wholly owned subsidiary are sold under the name Berkshire, not Berkely or Berkeley. :roll:

 

[arnguy]

P.S. Not even Berkley!

 

[Guest]

Melmunch3:

1. You stated that NYL made a great UL product. May I ask you to elabotrate as to why it distinguishes itself.

2. What are your reasons for prefering UL to WL.

Thanks.

 

[Sam]

Sorry I wasn't so clear. I was refering to my earlier post, and I meant to be discussing AIG's UL, when I said that. They too, are rated A++