I just got the life insurance bill for my wife’s annual premium today and it reminded me of our overall insurance situation. Â Her bill is $250 for a 20 year term $250,000 coverage. Â I bought term instead of life because I figure after 20 years, the kids will be through college, I’ll be close to retirement, and in the event of her death, it wouldn’t be nearly the same financial hit that it would be now. Â Even though she’s home with the kids, I’d certainly have to lay out funds for childcare, funeral expenses, pay for many of the things she handles now, and it would help account for some of her future income. Â Some might suggest a lower or higher amount, but $250K is where we landed recently. Â But this got me thinking about other types of insurance as well.
My Life Insurance
I have a 10X salary option through my employer which is a pretty good amount. Â Some people (especially insurance salesmen) recommend higher, like 15-20X salary, but I believe this to be a rule of thumb and people really need to assess their situations individually. Â See, we have a relatively low mortgage/tax situation and our kids aren’t in private school, nor do we have any debt besides the mortgage. Â So, obviously this picture is different than someone with $30K/year in private school costs, thousands per year in credit card interest payments and a larger mortgage. Â Aside from that, I have plenty of funds set aside in traditional and retirement accounts. Â And finally, the kids’ college accounts have a decent start. Â So, I’m able to sleep at night with 10X.
Auto/Homeowners Insurance
We have all our insurance through State Farm Insurance. Â I don’t know that they’re the best company in the world, but the longer we’ve been with them, the discounts keep improving, and we’ve bundled everything up. Â I compared them to USAA once and even with the dividends or whatever those annual paybacks are, we were even by just staying with State Farm. Â Anyway, we have pretty standard auto and homeowner’s – nothing crazy. Â Although I did get a water damage rider for the basement after we had a flood in the basement a few years back from a failed sump pump.
Other Types of Insurance
Through my employer, I have various other types of insurance like disability, a small policy on each child and more.  Some people opt to get everything from funeral insurance to pet insurance to Lifebroker.  I suppose much depends on your personal preference a realistic assessment of the likelihood of ever requiring a file a claim and your capability to weather an event if going uninsured.
I’d like to think we’re in the “adequately insured” bucket, but some may beg to differ. Â I’m curious where you think you fall.
Are You Over, Under Insured or Just Right?
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My auto, property and life insurance are just right. I review my needs every couple of years. I lowered my mileage with my auto policy because of my shorter commute and saved $250-300 a year. I replaced my homeowner’s policy with a more comprehensive one covering earthquake, loss assessment etc which added a little bit to the cost. I am continuing my life insurance for 5 more years.
We have term life insurance that covers out current mortgage, plus 5 years worth of my salary which should last approximately 15 years without having to pay a mortgage.
I’m always wary of employer provided insurance when it isn’t portable or otherwise locked-in for the long-term. Heard a story last year about a guy who had all his life insurance at work and lost it when he was laid off. During his extended period of unemployment, he contracted a serious condition that rendered him uninsurable. Long story short, at the time of his death his widow was essentially bankrupt.
Scared the bejesus out of me, so much so that I let my (super cheap) employer subsidized life insurance expire in 2012 and took out a 30-yr policy with State Farm. Yeah, the premium is real money (well over a grand per year). But, it’s locked-in until I’m almost 70 regardless of how either my health or employment status changes over the years.