Recent Divine Discussions

Wednesday, August 15, 2007

Life Insurance - Do I have enough??

Single Ma did a post on life insurance last week. It wasn't until I read it that I realized that I was short changing my daughter with my current life insurance policy. It's kind of scary actually. To think that if something happened to me (God forbid), my daughter would most likely get NOTHING even though I have life insurance.

I currently have a 5-year term life insurance policy for $50K. I got the policy a couple of months after my daughter was born. I didn't plan on getting it. I was in the midst of getting car insurance for a used car I just bought and the insurance agent said I would save a lot of money on my car insurance if I had multiple lines. So I took out some renter's insurance and an insurance policy. Only thing I was worried about was getting a policy with a low payment and high payout. And for some reason $50K was huge to me.

Needless to say my whole approach on life insurance was sadly misguided. Looking at the debt I had, that policy wouldn't even cover my credit card debt and student loans and my baby would get nothing. My policy ends this December. I am researching information on life insurance and looking into alternate companies. Depending what I find, I may stick with my insurance company or switch to someone else. I have my life insurance through Statefarm and I only pay $12 a month for my policy.

A lot of websites offer life insurance calculators to calculate how much life insurance you need based on all your financial information such as total debt, savings, retirement, and income. I used 3 different life insurance calculators from different websites and the amount of life insurance I need ranged from $287K to $345K. I'll use these numbers to shop for an affordable policy. My only question is how much of a term should I be looking at? My daughter's 5. She should be down with college by age 23, depending on what she majors in. I'll give her a 2 year buffer. So I am thinking at least a 20 year term policy. That way I can reevaluate everything after she is done with college and is on her own.

What happens when I buy my home? My calculations were done based on my current financial standing. Can I revise my policy when my financial status changes? I'll research that tomorrow.

*yawns* I'm sleepy.

Nite all


Wooly Woman said...

It may be different where you are but we have life insurance on all our loans and on our mortgage. So if the loan holder dies it is automatically paid for. This is the same with the mortgage- if one of us dies, the insurance covers the mortgage. It can be a bit expensive, since it is based on the amount owing, but so far I think worth our peace of mind. And then Mr Wooly has life insurance through his union as well. This I don't know anything about, but I think you post is going to prompt me to ask!

Velvet Jones said...

Great post. I'm SINK, so life insurance isn't something for me to think about much. The only thing I'm concerned about at this point is having enough money to bury me. :) I'm recently in the black so I won't have any debt for my parents to worry about.

I still found your post valuable because it got me thinking about what would happen with to my assets and how would it effect my parents should I die before them. Hmm...

SavingDiva said...

You may want to look through life insurance through your employer. I currently have an inexpensive policy through my employer that is deducted pre-tax, which is nice....even if it only saves me a few dollars a year :)

Dimples said...

@ wooly woman

I have never heard of life insurance on loans or mortgages. That's a very good idea. I'll have to look into that.

@ velvet jones

Thanks. What do you mean by SINK? I'm lost. I don't know about life insurance since you don't have any dependents or a husband but definitely look into a will. That way your assets go to your parents.

@ Saving Diva

My employer is too small to offer life insurance. Maybe when they get bigger.

Jerry said...

Ok, I've definitely got to do this. I still haven't gotten life insurance and my daughter's 3. I should talk to our agent about adding it to our currently homeowners policy. We ended up selling one of our cars so that frees up a little more money for a new policy.