Intro to Life Insurance

Insurance
#1

Hello,

I am 23, recently married, in Graduate school and anticipate to be starting at ~$70k once I graduate. Currently, my wife isn’t necessarily dependent on me and my income as it is extremely low but once I get my big-boy job we will transition to starting a family and her being a stay at home mom. My understanding of life insurance is that it will be able to cover my spouse/family for a period of time in the event of me passing away and my income no longer being present.

Q1: If this is the case, should I at this time pursue a life-insurance policy that covers my anticipated income in a few years, or just one that covers cost of burial ($10k or so)?

Q2: How do I begin to calculate how much my life-insurance policy should be? For example, 10x my yearly salary (effectively covering my family for 10 years)?

Thank you!

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#2

Hi Tyler,

I’m not an insurance professional, so all of the normal disclaimers apply, but I think the life insurance strategy should be pretty simple. Buy term life insurance, for the period of time where your dependents will need to be covered.

For example, you could buy 20 year term insurance for 10X your future annual salary. It should be pretty cheap… like in the $50/month range or less. If they’re talking about hundreds of dollars per month, you’re likely getting sold “permanent” life insurance, which is profitable for the insurance company, but not a good deal for you. With the difference between those premiums, you invest that every month, then at the end of the 20 year term you have enough money where you don’t need life insurance… your nest egg is big enough to cover your dependents! (You can always buy more term/adjust as needed throughout this process).

After the 20 years is up, kids will be out of the home (in your case maybe we’re talking 30 year term), and your investments are strong enough to support your wife and then some.

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#3

Jeremy,

This is great info! I feel like I have a much better understanding of where I should start with this now. Thank you.

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