Oppopinions solicited.

"Dr. Zoidberg - RIP Oppo" (thetomselleck)
05/27/2018 at 20:27 • Filed to: Financialopnik

My wife and I are 30-ish and are now looking at getting life insurance. This is mostly spawned on by the fact that should one of us die, the other party may have difficulties affording the new mortgage payment comfortably. As such, I’m looking at 20- or 30-year term life insurance for each person, for the amount of the outstanding loan balance on the house. What say thee, good Oppo?

DISCUSSION (31)

just-a-scratch > Dr. Zoidberg - RIP Oppo
05/27/2018 at 20:39

It’s a reasonable idea. My wife and i did similar last year, but 120% of loan value.

Wacko > Dr. Zoidberg - RIP Oppo
05/27/2018 at 20:39

I have 100 000 $ at work and i got a 20 year 100 000$ on my own

I owe about 140 000 on the house

Dr. Zoidberg - RIP Oppo > Wacko
05/27/2018 at 20:43

On the current house, I owe 120,000. I will soon owe some number that is larger 120,000 with the new house.

Dr. Zoidberg - RIP Oppo > just-a-scratch
05/27/2018 at 20:49

I’m wondering if I should do half the value of the loan, and the surviving partner could always sell the house if needed when that dries up. I consider this because the price jumps a notable amount going from 20 years to 30, and certainly from going half the value to all the value. This is a concern because our mortgage is going from small to less small. I’m not gonna cry over an extra 12 bucks a months, but adding 100 bucks will be a noteworthy factor. Adding bills is a whole thing.

Phyrxes once again has a wagon! > Dr. Zoidberg - RIP Oppo
05/27/2018 at 21:02

Assuming your agent doesn’t suck they will help you with how much you need. Term is usually cheaper than whole life and can be converted later. This is helpful if you are actively working to be healthier and want to lock in whole life later.

Our agents guidelines were pay off the house and then portions of salaries.

Ssfancyfresh > Dr. Zoidberg - RIP Oppo
05/27/2018 at 21:45

Term is good. Especially when you are young and are in good health. It’s not terribly expensive.

The nice thing is that you can layer policies. So let’s say you want to cover $500k now so that your spouse doesn’t have to worry about a mortgage. Maybe you have a couple kids in a few years, so you add another $500k policy to cover (some, maybe) college tuition.

It’s relatively inexpensive and pretty easy to qualify for... Assuming you’re young and in good health.

blacktruck18 > Dr. Zoidberg - RIP Oppo
05/27/2018 at 21:48

If you are just worried about the mortgage you could look into credit insurance it will usually pay off the mortgage if anyone on the mortgage dies. Your lender will probably offer it when you close if not you can probably get it from whoever your other insurance is through.

KingT- 60% of the time, it works every time > Dr. Zoidberg - RIP Oppo
05/27/2018 at 21:53

Are you me? We did exactly this 6 months back. Term is recommended. 30 year policy for the value of our mortgage. Took it from Statefarm with whom we have Auto and Homr already.

Both our employers provide life insurance as well.

CarsofFortLangley - Oppo Forever > Dr. Zoidberg - RIP Oppo
05/27/2018 at 21:53

I did half. If I die, why should my wife get a free ride? Lol

TheRealBicycleBuck > Dr. Zoidberg - RIP Oppo
05/27/2018 at 22:24

Term insurance is pretty cheap. If you plan to have any kiddos, think about going bigger than just the mortgage. If one of you goes, the other will be a single parent and will incur a lot more expense with a lot less income. Think about all the expenses that come with kids - child care, more clothing, more food, higher bills, college, etc. The younger you are when you buy it, the lower the rates will be. Lock in low rates while you can.

When you talk to an insurance agent, they will try to steer you toward whole life policies. You are usually better off spending the premium on a term life policy and putting the difference in long-term investments.

Eric @ opposite-lock.com > Dr. Zoidberg - RIP Oppo
05/28/2018 at 00:18

I’m curious about this as well. My wife and I decided we need it, too, but we haven’t set it up yet. I assumed I’d do a 10-20 year term on myself and a similar term on my wife, then switch to a smaller amount over time as we pay down the mortgage. Like 20 years from now our child will be an adult and the remainder on the house should be pretty small. Sadly, amortization sucks, so we need more than we would otherwise. I also have to consider for the needs of the child, so that will probably increase the amount we take out.

We’re goig to consult my insurance guy on it. I’m sure he’s done it a lot and could get it set up right to keep the cost to a minimum while ensuring it’s enough...

Eric @ opposite-lock.com > CarsofFortLangley - Oppo Forever
05/28/2018 at 00:35

I figure that as long as it’s not crazy expensive, they should be able to afford a similar life to what they have now. I’m not sure how disparate your incomes are, but in my case it’d be a 75% reduction in income and there’s no way she could afford the house or most expenses. If she died it would suck, but I could probably get by. Still, I’d prefer to not worry about such a big house payment and additional child care expenses...

Eric @ opposite-lock.com > Dr. Zoidberg - RIP Oppo
05/28/2018 at 00:38

I bet it’s a much bigger number knowing house prices around here. Even with the equity you were able to roll over...

Tristan > Dr. Zoidberg - RIP Oppo
05/28/2018 at 00:43

I’ve had $400k worth of coverage since I was 22. Back then it seemed like so much money... Now I own $425k worth of mortgage debt and I’m under contract for another $380k worth. *gulp*

Once the current 2 houses are gone, my policy would give the Mrs. enough to pay off the new house and kick my corpse into a ditch somewhere.

Tristan > Tristan
05/28/2018 at 00:44

I should mention it runs me about $40/month.

Dr. Zoidberg - RIP Oppo > Eric @ opposite-lock.com
05/28/2018 at 00:51

Gotta pay to play, as you well know

Eric @ opposite-lock.com > Dr. Zoidberg - RIP Oppo
05/28/2018 at 01:02

The number just feels insurmountable and almost imaginary. It’s an insane amount. I still can’t figure out how most people buy houses on so much less income.

Eric @ opposite-lock.com > Tristan
05/28/2018 at 01:04

I wish I had thought to do something like that when I was that young, but I had nobody that would financially suffer without me...

Dr. Zoidberg - RIP Oppo > Tristan
05/28/2018 at 01:05

For the two of you, or just you

Eric @ opposite-lock.com > blacktruck18
05/28/2018 at 01:05

That might be the best option for me, plus a smaller amount of life insurance...

Dr. Zoidberg - RIP Oppo > Eric @ opposite-lock.com
05/28/2018 at 01:08

I don’t make zero dollars and I have no idea how anyone who isn’t deep in blood money or has rich parents is affording any of this. My friend who used to process loans - and now works for the assessor’s office - said she was seeing the craziest loans over the last four years. People with 4% down, a declared bankruptcy, and got a 500k house. That being a less terrifying example

GLiddy > Dr. Zoidberg - RIP Oppo
05/28/2018 at 01:26

A rule of thumb is to have 10x the income of the insured spouse in term life. It sounded a bit like that you were looking at a Mortgage Life plan that would pay the house off, if so don’t do that. That primarily protects the mortgage holder and not your family per se. Provide enough insurance coverage so your spouse could conceivably invest the proceeds and live on that. Paying off the house would be her choice. For all you know, she may want to get out of the house.

I’ve not priced insurance lately, but when I was 40 I bought a 20 year level term policy for $500,000 with a $500 yearly premium. My wife has the same coverage for $250/yr. While that was 17 years ago, I see no reason why prices should have changed greatly.

Eric @ opposite-lock.com > Dr. Zoidberg - RIP Oppo
05/28/2018 at 01:28

Gah. No wonder we were “A paper”. What I can’t figure out isn’t how they’re getting these loans, but how they’re paying them. What kind of financial voodoo is going on there?

The most financially stable 30-ish couple I know here (that I know enough about their finances to compare) is up to their eyeballs in debt and they make our situation look reasonable...

Tristan > Dr. Zoidberg - RIP Oppo
05/28/2018 at 01:34

That was just for me. I recently saw there was an option to add her on with only an option for $100k for something like $8/month. She has her own policy through her work. I believe it’s in the $200-$300k range with a pretty small premium.

Does your work offer any company-subsidized policies? Both of ours are through work.

Tristan > Eric @ opposite-lock.com
05/28/2018 at 01:38

I figured it would be a nice “thanks for raising me” gift to my parents. It’s through my work and was offered to me when I started under the pretense that it’s easy to drop it later if I decide I don’t want it, but a lot harder to add it if I decided I did want it later. I was in no way financially intelligent at 22... or at 34.

CarsofFortLangley - Oppo Forever > Eric @ opposite-lock.com
05/28/2018 at 10:05

I did half for the term of the mortgage because

a) it was all we could afford at the time. We bought the place at 22 and it took every last cent from us to make the down payment and mortgage payments.

b) I have coverage through work for a few times my salary, which has increased since buying the home.

It should take care of her if I died. She makes about half what I do, maybe less. Both the CX-3 and Fiesta ST are paid off and no child care costs.

NKato > Dr. Zoidberg - RIP Oppo
05/28/2018 at 12:18

Way I see it, when you both go into senior age, having no home to live independently in becomes a major drag, as it leaves you with no assets to fund a move into an assisted/independent living home like my grandmother did (she sold her house and moved into an independent assisted living home in her 90s).

On the other hand, having no home for the family to come back to in the event of a financial disaster can also bite you in the ass. Family safety nets are always a good idea - I speak from experience. My uncle built a nice house on some land south of Coeur d’Alene, and has placed it into a trust to ensure the future of his family’s welfare.

I plan to do the same, if I manage to start a family.

DipodomysDeserti > Eric @ opposite-lock.com
05/28/2018 at 12:19

They shouldn’t be, which is why we are going to have another housing market collapse.

Eric @ opposite-lock.com > DipodomysDeserti
05/28/2018 at 12:40

But when?

It’ll be epic when it does, though. I do wonder how we’ll respond, since last time we just bailed everyone out and made them even more willing to hand out insane loans.

DipodomysDeserti > Eric @ opposite-lock.com
05/28/2018 at 12:49

No idea. I’m just glad I bought my house in the midst of the last one so I don’thave to worry about dealing with an underwater mortgage.

That’s how we always respond because the banks are the ones running the show.

66671 - 200 [METRIC] my dash > Dr. Zoidberg - RIP Oppo
05/28/2018 at 21:09

I have no idea how it works really, but how much could you be paying per month, and if you dont cash in, do you get any sort of return at the end?