I recently decided that I need to get life insurance. I know I’m not going to get the best answers without giving out my entire life story, but I’m looking for general opinions about how much I should gamble. I have the standard $400k SGLI policy, so this is additional coverage to maintain my family’s lifestyle.
I’ve been placed in a high risk group due to my auto racing hobby. I objected to this characterization, since I participate in (relatively) low-speed and extremely safe forms of motorsports, but I was shot down on appeal. Perhaps they just decided that any form of motorsports indicates a risk-taking personality.
The policy is for $550k, 20 year term, and it would be $176 a month. $2,112 a year. $42,240 for the entire policy. Without taking into account overhead and/or fancy inflation math, that represents a 13% chance that I will die in the next 20 years.
I’m 33 in excellent health, so that seems pretty high to me. If it helps, my wife has a graduate degree and would have no problem finding middle-class income (she currently doesn’t work). When I gave her the quote, she looked at me and said, “Maybe we should just chance it.”
I haven’t yet gotten a quote for a lesser amount of coverage. I’d initially requested more coverage, but they capped me at $550k because their guidelines say that’s all that an E-6 is worth. I told them that I’m a reservist and it’s ridiculous to judge my worth based on a job I do 39 days a year, but thems the rules.
You left out the most important part, do you have kids and how old are they? I wouldn’t worry too much about your wife in particular especially since she can get a decent paying job if she needs to. Minor children are a different story however. You should have enough insurance so that your wife would have time to find a job as well as keep the house plus enough to cover what you would have contributed to college expenses. The exact number depends on how much you make now.
Your existing 400K policy is more than enough for just your wife IMHO. It is supposed to be financial buffer, not a lottery win. If you have kids, it depends on their ages but I would feel more comfortable with closer to $1 million like you are looking at.
I have 3 kids under 7. I did a couple of “how much insurance do I need” calculators and they both came up with numbers in the 1 to 1.2 million range. My insurance company asked me the same questions and told me to get 1.25 million, less the SGLI amount, but then refused to offer me that much.
The $400k would pay off the house and cover daycare until the kids were old enough for school, but nothing else. They’d survive, but it’s far from an ideal situation. My original quote was $70/month, which I would happily pay. I’m getting dinged an extra $100/mo for my risk category.
That is a tough one. $176 a month is a lot if it is never needed but 400K isn’t enough to do what it needs to for three young kids either. If you have the money, I would get it unless there are any other companies you still haven’t gotten a quote from. Don’t think the unthinkable can’t happen. I am in my 30’s as well and I have lost of bunch of people in that age range and came within a hair of it myself a few years ago.
You aren’t the only person in their 30’s who has that problem. I fly small planes AND have a catastrophic medical event on my record so I am basically uninsurable for any type of reasonable non-group life insurance. The actuaries tend to be really good at statistics however so I learned they are trying to tell you something if they put you in a high-risk category.
I don’t think you should just chance it, but a million dollar policy hardly seems like a necessity either. Maybe you should find the most economical policy that will provide a few hundred thousand and invest into savings for your children on top of that. Since your wife is capable of making a living, your real necessity is to make sure you don’t leave her in debt, plus some cash to tide over while she gets a career started, and money for your children’s education.
Remember you are betting against “the house” and they have millions of deaths to work with as part of their edge. They know exactly what percentage of race car drivers - even low speed racers - are going to die as a result of their hobbies.