Quote:
Originally Posted by Ace
This may sound excessive, but in your situation I'd go for 2,000,000 in life insurance.
Basically having a young child indicates that you're likely 20's or 30's and life insurance is quite cheap at that age. Secondly interest rates are very low and assuming you want you/your spouse to have all the available options in the event of something tragic. This amount could be deposited in some no risk interest paying account at approx. 2.5% giving you about $50,000 per year in income.
This would likely be enough to allow one of you to stay at home with your kid in their younger years if you so choose, or cover child care costs and living expenses giving you flexibility.
After looking at insurance costs this makes sense to me, however you'll also need to decide what you are comfortable paying in premiums per month. Any broker will likely tell you that 1,000,000 is enough and it probably is, but do concider that while you are young extra insurance is not that much, and you will need more coverage the younger you are...
Look at 'Joint First to die' options if you go for a bigger number, this will lower your premium since your young kid won't need the value of two large policies if something happened to both of you...
Just some thoughts
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That's not entirely true. A lot of joint first to die policies are
maybe a tiny bit lower. We're talking like a buck a month here though, not tens of dollars. There are a number of reasons that I usually recommend people get their own policy, and cost is not a factor for the most part. In all honesty if a couple bucks a month (literally) is a huge deal there are other budgetary concerns for you to examine before or along with life insurance.
The $2M route sounds sensible, and I design plans for people where they are looking to preserve that capital and live off the interest/revenue. Most people with young kids aren't in that position though, simply because the plan is to pay the debts, and have some money leftover, but not to generate a lifetime worth of income starting the day after the policy comes into force.
Ultimately, the plan is to never use the coverage of course!