So I'll be turning 26 shortly and getting married in September and I'm getting notices from my insurance company (vehicle) that I should get life insurance and the fiance thinks I should too. There is so many options and terms etc. that it is confusing!
Does anyone have any insight into this? I got a letter from State Farm that says I can get a 250k policy for 23.50 a month.. Select term - 20, provides term life protection to age 95 (
). I'm sure price quote is for someone who is as healthy as Superman.. which isn't me. I quit smoking a few years ago and I'm not overweight or anything like that so its not like I'm one foot in the grave, but you know how it is. The thing that makes me concerned is the fine print..
premiums are level for 20 years. After 20 years premiums increase significantly and go up annually. This policy may be converted while in force to any whole life policy State Farm offers until the later of the Policy Anniversary when the insured is age 75 or the 5th Policy Anniversary
Currently I'm about to graduate college and don't have much debt besides student loan debt and I owe like 5000 on my car and maybe 1000 on various credit cards. People are telling me to get it before I get any older while I still have decent health and to lock in a price, but it seems like they can change my price in 20 years. I remember them trying to sell this to me a year or two ago and saying that my payments would go into an account and accrue interest and after a certain time I would have access to that money or they would start sending me a check when I'm much much older and that it would be a way to supplement my income when I'm retired. That sounds pretty good, but I dont really understand how it works. Would other companies have better rates etc. or is it all pretty much the same?
There are a couple different kinds of life insurance, but the main ones are term life and whole life.
Term life is like your car insurance. It's cheaper, you pay into it, and if you don't die, you don't get the money you paid in out. My wife and I each have policies in case something happens to the other. Rates are based on your overall health, and they usually quote State Farm (who we have) on "Super Preferred" rates, which you have to qualify for. I don't think it's hard to get that unless you have cholesterol or BP issues.
Whole life sounds like the one you discussed 2 years ago. Significantly more expensive, but you get out some of what you paid in. The only issue being that it's based on current rates (which suck), and it takes a long time to mature.
My wife and I just went over all this again for us (I'm 30, she's 32). Based on the crappy interest rates, I determined I was better off keeping the term life instead of whole life and just putting more money into my 401(k).
There is a 3rd option, which I forget the name, but it's offered by State Farm. You get back everything you pay in when it matures... so if you do a 20 year term, and you didn't use it, you get it all back at the end of it, if you choose. This cost was higher than term but lower than whole. Again, my determination was that I was better off doing more into my 401k.
If you have a job, or if you are getting one soon, most employers offer life insurance you can take out pre tax from your pay check. It's very cheap, usually. I have 3x my salary for roughly $16/mo, and provides me just under $200k in life insurance to supplement my State Farm life insurance. Obvious issue is that if you leave your job, it doesn't go with you.