Free online life insurance underwriting advice

[Rich Schroeder]

there is a post from a kind physical therapist offering free advice to BP members. I think this is a great idea and willing to do something similar.

I've been a life insurance underwriter for over 13 years, dealing mostly with high face amount ($5-$40 million) business and estate tax type of policies. I'd be happy to answer anything from face amount justification to medical questions (in relation to life insurance...I'm not a doctor). Of course, you should be warned that I cannot give tax advice, medical advice, or recommend products as I am not a licensed broker.

This is kind of a "pay it forward" approach as BP has done so many good things for me.

Thanks,
Rich

[Jon Holdman]

Life insurance is to protect those you leave behind. If you're 18 and single, at most, you need enough life insurance to pay for your funeral. I have to disagree, Rich, that a person in that situation needs any significant amount of insurance. Why? Who needs that money? Nobody.

Now if you're the breadwinner for your young family, and they will have no source of income if you die, you have a different situation. In that case, I think you want to do two things. If you're very altrusitic you would want to give your surviving spouse a big enough wad of cash to replace your income. If you follow the retirement guideline that you should take only 4% of your nest egg out each year, and you want to fully replace your income, you do indeed need 25x your annual income.

OTOH, is it realistic that your surviving spouse would expect to just live off the life insurance? IMHO, no. You want to give them enough money to live on for some period of time to let them adjust to the new reality. That might mean enough to replace your income for a few years while they get a good skill or a college degree and enter the work place.

Now, when you hit your 40's or 50's, and have kids in college and a big mortgage to pay off, you may need more insurance. The equation is rougly the same, though. You want to ask "what is the impact if me and my paycheck are gone". At this time, you probably want to have enough cash to get the kids through college, pay off your debts, and give your surviving spouse the ability to pay his or her living expenses. Something to consider is that by this time you should have a pretty good retirement nest egg. You may have a pension or social security coming fairly soon. That needs to be considered, too. It may well be that if you paid off your debts and obligations (e.g., the kids college), your spouse could live off the retirement money.

Once you hit retirement, the need for life insurance, IMHO, goes away. There's no paycheck to replace. You have your retirement plan, whatever that is. At worst, you go back to the single 18 year old and want enough money to pay for a funeral without using up the savings. At some point in this cycle, there are other kinds of insurance - medical and long term care in particular - that become much more important than life insurance.