Life Insurance Questions

[Katigre]

When I was pregnant with DS1 both DH and I got 20 year term life insurance policies. At the time each insurance agent we talked to said it was the most common type and would serve us well. The purpose of the policy is to cover us while we have kids at home so that a surviving spouse would not face financial difficulty in taking care of our family/paying bills.

Ever since we've gotten it I've wished that we had gotten a 30 year term instead At the time I think the expense was quite a bit more and the 20 year seemed sufficient, and the agents we talked to all said that it was the best choice.

But now we have DS2 and to be honest I don't know if we're done having kids - so we could potentially have a fourth child down the road as well. At that point we would be halfway through our 20 year term and would clearly want more coverage. The thought of being widowed/widower with kids who are 20/17/14/11 and no life insurance does NOT appeal to me. That is the ages they would be when our term expires.

What are my options? When our 20 year term expires, how easy is it to get a much smaller 5-10 year policy instead? At that point we would not need as much money as we do now,though likely at that point premiums would be higher since we would be older and at higher risk of health issues. I think I've seen options for no medical exam coverage for life insurance that is for an amount we'd want - I don't think we'd need more than 250,000 per person and possibly less than that.

Thoughts? How long do other people have their life insurance for?

[belovedgandp]

We did a similar thing when I was pregnant with our first. At the time we thought we were only have one maybe two kids close together and that I would be returning to work.

Well life doesn't go as expected and I had three kids that are over 6 years apart and am now a SAHM.

We kept the original policies in place (a 15 year term) and bought separate smaller polices 5 years later for 20 years. So we have "double" coverage that gets us until my kids are 15, 12, and 9 and then still some coverage for an additional 10 years after that getting the kids to 25, 22, and 19.

[oneontheway]

Term rates often get cheaper as the life expectancy increases. I would look at replacing your term coverage now by getting a quote for a new 20 year term and see which is less expensive. If you wait till the 20 year term is almost up then you risk getting rated from common health issues such as high blood pressure, etc. and then the premiums will be very expensive.
A few years ago we replaced our 20 year term policies with new 20 year term policies, increased our coverage and now have the ability to convert to whole life should we need coverage past the 20 years and/or end up with a medical condition that would rate us or make us uninsurable. The cost wasn't much more and we got a lot more coverage. With term policies there should not be any penalties/fees for replacement. HTH

[AnnieW625]

We are looking at replacing our term life policy as well in the next year so will be covered longer as well. I always thought rates are cheaper based on age for term life insurance as well.

[Binkandabee]

Something else to check on is whether your term policy can be converted into a whole life policy and what the cost of doing that now vs. waiting to get a new term in the future would be.

[o_mom]

I think there are many ways to get what you are after. I would start by looking at your policy and see if there is a renewal option and how it works (guaranteed, premiums, etc.). It may be that you have an option to renew it at the end of 20 yrs.

Another option would be to replace your policy with a new 20 yr term which starts now. If you go this route, make sure the new policy is in effect before you cancel the old one.

You could also compare adding a smaller 20 or 30 year policy to what you have - see how the premiums compare. You would then have overlapping coverage. For example, say you have a $500k policy now, with 14 years left. You get another 250k 20 yr policy now, so for 14 years you have $750k and then it drops down to $250k for another 6 years. At that point your (potential) youngest would be 17. If you think you need longer, get a 30 year which will last through age 27.

Much of this also depends on the rest of your financial situation, as well. Remember to consider retirement, college funds, etc. as well as what your mortgage balance may be at that point.

[Katigre]

Thanks for the ideas everyone. I don't know why it hadn't occurred to me to take out a smaller policy to supplement our current coverage Especially for DH this is what we're going to do.