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[US] Dual Income Life Insurance Question (self.personalfinance)

submitted 1 year ago by Copernican to c/[email protected]

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My partner recently started a new job. Prior to her employment I had been paying into my employer personal supplemental insurance as well as spousal insurance. Now that my partner has employer provided and options for employer supplemental life insurance, what should we be looking at doing? Do I stop my spousal life insurance? Or for dual income is it not bad to have both partners have self and spousal life insurance in case of things like lay offs? Also any general life insurance advice is welcome. I've never understood if it is wise to have supplemental life insurance provided by the employer or found in the open market. Thanks.

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[–] Copernican 2 points 1 year ago* (last edited 1 year ago) (1 children)

Thanks. For us, our incomes are relatively equal. Currently I make more, but I think my partner has longer term higher earning potential. I am not really looking at it as a wealth generating or retirement investment vehicle. Mostly looking into it as part of benefit elections and modifications since the rates seemed low. The main use for life insurance is really just for risk of untimely death. There are things like student loans, and we live in a high cost of living area as non renters so want the security for each other if something were to happen to not have immediate impact on life style. Both of our default work policies offer 1x to 1.5x annual salary. The supplemental coverage we were looking for each was to add an extra 2x or 3x salary. Child care is something we also think about in the event we have children in the next year or 2 as well.

When it comes to supplemental long term disability... What is considered a decent amount of coverage. If the included employer offers 40% salary, with supplemental up to 60%, how do I evaluate what is right for me? It's about 700 bucks year for the supplemental through my employer.

[–] Changetheview 2 points 1 year ago

Without knowing the costs, it sounds like you’re good candidates for the supplemental life or even an additional life policy. A year of salary can go quite quickly, as can the time and the costs of taking it off work. Term can be fine to start with, then later in life as it becomes a larger concern (especially with kids) you may consider whole life. But if you have substantial liquid savings, then you might just be fine with the 1-1.5x coverage for now. Once again, just all about your risk tolerance and savings.

Disability is very difficult to plan for and make a purely rational decision about. There are so many moving factors with the medical costs and length of the problem. For people who want total security, that $700 can be well worth it to sleep soundly. For others with more savings and a little room in their finances to cut back expenses, it might not be worthwhile. The more savings and the more you can rely on your partner for income, the less important it is.

But tackling it from a quantitative perspective may help. For $700, you’re getting 20% of your income. It’s a low-cost premium because the risk is usually low (unless you have reason to believe you’re likely to become disabled). You can also shop for separate plans to see how the premium lines up against competitors. It’s also important to understand the elimination period (how long you have to wait before you can claim benefits) and if it will pay out if you can perform ANY job vs your actual profession.

This is a pretty decent article on an approach to disability coverage: https://www.usbank.com/financialiq/plan-your-future/health-and-wellness/is-your-employer-long-term-disability-insurance-enough.html