Lets talk Insurance (Life, Critical Illness, Disability)

[Language]

Not sure if there was a thread already on this, but figured can pick the CP brain trust.

I’m currently the sole bread winner in our household while my wife is stay at home for the foreseeable future with two young kids. Decent income and fairly large mortgage still remaining.

As I’m self employed, I don’t have benefits through an employer and essentially need to find private insurance as I deem necessary. Due to a recent health scare (minor), and now that I have kids, have started to realize potential importance of having insurance so my family and kids are protected in the future.

Up until a few days ago, I literally knew nothing about these insurances, but from my understanding, here’s what I’ve gathered.

1) Life Insurance - should be a minimum, and should cover the mortgage. Seems like it makes sense to go longer term (term 20).

2) Critical Illness vs. Disability - I’ve been reading that disability should come next and critical illness is nice to have, but have also read counter views.

For those that are self employed, which did you choose?

And for those that are not self employed and have disability insurance through work, did anyone also get critical illness or is this overkill?


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[MoneyGuy]

Talk to Slava.

[Paulie Walnuts]

Originally Posted by Language

Not sure if there was a thread already on this, but figured can pick the CP brain trust.

I’m currently the sole bread winner in our household while my wife is stay at home for the foreseeable future with two young kids. Decent income and fairly large mortgage still remaining.

As I’m self employed, I don’t have benefits through an employer and essentially need to find private insurance as I deem necessary. Due to a recent health scare (minor), and now that I have kids, have started to realize potential importance of having insurance so my family and kids are protected in the future.

Up until a few days ago, I literally knew nothing about these insurances, but from my understanding, here’s what I’ve gathered.

1) Life Insurance - should be a minimum, and should cover the mortgage. Seems like it makes sense to go longer term (term 20).

2) Critical Illness vs. Disability - I’ve been reading that disability should come next and critical illness is nice to have, but have also read counter views.

For those that are self employed, which did you choose?

And for those that are not self employed and have disability insurance through work, did anyone also get critical illness or is this overkill?


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1. Life depends on your situation, if you debt and a mortgage you probably want term in that case, usually with a conversion feature.

Critical illness is usually more important for women, and it makes sense in your case to take it out on your wife since you bring in the income and she stays at home. If something happens to her and you have to take time off to take care of her, you wont get anything if a policy is on you.

[DoubleF]

Assuming that whole life insurance is a little too expensive now because you're not young (Have kids) then yeah, you're going for term life insurance which you pay each year as a just in case for peace of mind. Enough to cover mortgage is good, but I'd recommend enough to cover all debt (ie: credit card, LOC, vehicle loan etc.) plus a float of around $25-50K.

Whole life you're basically betting on yourself to live a long time and thus you'll pay far less for a multiples rate of return over a longer period of time because you get to keep a bunch of the value you're paying.

Term life you're basically betting against yourself, but in the sense that in case you're wrong and you do not live past the next calendar year, your family doesn't both you and a source of income. But everything you pay expires after a year has passed.

Do not put a child under age of 18 as beneficiary to an insurance payout. Most insurance places will do this by default. But even in this day and age, the stories of someone having their young kids as beneficiaries locking up the pay out is inexplicably high. (Basically it won't pay out until they're of age, and the surviving spouse doesn't have the ability to get access to it to raise the family before or after they reach the appropriate age).

Critical illness and disability is a nice to have, but not as a standalone product IMO. It's worth it if it's heavily discounted, which you typically can get if you get multiple products from an insurance provider. (ie: Life insurance, travel insurance, disability/critical illness, health insurance/health spending etc.). This obviously makes a little more sense if there are multiple individuals in a company, but I do not know if it's good "value" if you are the sole employee of a company.

If you truly want stand alone critical illness and disability though, I think some banks or credit cards offer this, but I don't think it typically exceeds a potential 30-60 days of lost wages payout.


IIRC, I remember a presentation where it said a lot of people who are self employed will only go for term life insurance during their years with the highest debt load and irreplaceable levels of earnings vs life stage situation. That's usually around 8-15 years of time. This often also meant that there was some discussion about funding your own rainy day fund/whole life insurance in tandem with term life insurance vs doing all self funded rainy day fund or full whole life insurance. It was also mentioned about temporarily "topping up" your term life insurance if you debt went up from what it was previously (ie: Bigger home, bigger mortgage, starting a business and taking out loans etc.) until you felt comfortable you had the assets necessary to not need as much life insurance.

But yeah, talk to a broker and figure out the best options and mixture for your specific situation.

[Ozy_Flame]

Critical Illness would take an act of God to actually use. Spouse is in medicine/healthcare, this is a waste of money unless there is a bulletproof reason to actually make a claim and all the health-related details line up. Unless it's super cheap, not worth it.

As for life insurance, term all the way.

[Doctorfever]

Get life insurance, enough for what you need plus enough to cover mortgage, and cancel your life insurance coverage on your mortgage from the bank. Probably save a few bucks, and from what I’ve heard, banks do not want to pay out on life insurance so they will do what they can to find a loop hole not to pay out.

Not my information, just things I have heard from people I believe to be reputable.