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Jim Said:

How much life insurance should we get?

We Answered:

You need to cover all your liabilities, final expenses, mortgage payment fund, emegency fund, and provide an income to keep the suviving spouse in his/her own world financially.

Life insurance proceeds are not taxed as ordinary income. They would only be taxed if the estate at death was $3,000,000 for 2009. Anything over that amount would be taxed at 45%. The Federal Death Tax is eliminated for 2010, but it will be reinstated in 2011, with the taxable estate being over $1,000,000. Any amount over that would be taxed at 55%. (This is the way it stands as of now. The Obama administration may possibly change it)

My recommendation is to call a LOCAL agent, and have him/her do a free Financial Need Analysis (FNA, or other Total Need Program, to help you determine in your own mind the amount, and type of life insurance you need to reach the goals you have set. You may start with the agent who has your home and auto coverage.

The FNA will also help you determine if you need Disability Income Protection, to provide an income should you become injured or ill and can't work. It will also help you determine if you need a tax shelter, such as an Individual Retirement Account (IRA).

According to statistics, disability is a greater risk than death prior to age 65.

Tiffany Said:

Is purchasing a small amount of whole life insurance ever a good idea?

We Answered:

Life insurance is NOT an investment. Suze Orman is correct. Take the term policy which will be cheap and provide you with more insurance for your dollar now when you need more insurance. Take level premiums for 30 years.

Whole life and universal life are more expensive policies that just put a lot of money in the agent and insurance companies pocket. That is why they want to sell it. Do the other investments you mention and you will be fine.
Why put money into a whole life policy and they you have to borrow your own money to get the money out? Put your money into something solid that later it will be your money to do whatever you want with it.

Listen to Suze Orman. She knows.

Universal Life is part term and part whole life. The life insurance premium called (mortality rates) go up every year so the customer never knows how much they are actually paying for the insurance cost.

This is the way it works. I explain it this way. It is like you have a savings account. You deposit money into that account every month. The insurance company takes out the cost of the insurance every month out of the money you have on deposit. So, you see you never know how much the insurance cost is unless you ask. That is because you just keep on making deposits. The deposits are not the cost of what the insurance company is charging you for insurance. Sounds confusing? Ask your insurance agent for an illustration of what the mortality costs are. If they have no clue what your asking for then find a new agent.

Most customers do not know this. Most life insurance agents do not know how universal life insurance policies work. So, be careful what people tell you.

Joann Said:

Increase the coverage for my wife's life insurance policy?

We Answered:

Any advice, huh. OK, here's my advice from a wife's point of view:

Bring her flowers, and court her again. Sounds like she's feeling insecure or unappreciated in the marriage. Take her on a date once in a while, with NO KIDS!!

Let her know exactly how IRREPLACABLE she is. I don't know if she works outside the home or not, but even if she "goes", you're going to want the kids in school, right? How about, are you going to want them FED? You'll need a housekeeper, likely, someone to come in and cook & clean and run errands and such. And as long as it's GROUP RATES, well, you won't be able to insure her for as much as you're insuring you, if she's the spouse, but you want to max her out as long as a company is picking up a portion of the tab. So it's kinda nuts NOT to max out the life insurance.

Heck, I know my husband is nuts about me, and I want him and the kids to have AT LEAST as good a lifestyle after I'm gone. And I want him to not be worrying about money stuff, and be able to spend extra time and attention on the kids.

So unless she's just joking about the death thing, I think there's a security issue underlying here . .. an EMOTIONAL one, not a financial one.

Arthur Said:

What type of life insurance would be best?

We Answered:

WHY? Who's going to be in the house after you?

You CAN buy a fixed rate life insurance policy. But, if you buy a 'mortgage life" policy, then they ONLY pay off the loan balance, and they pay the lender. That means, each year, you keep paying the same amount in on life insurance, but the PAYOUT amount goes down, as you build equity in your home.

Plus, it's more expensive than regular term life insurance.

SO. If the goal is wifey or kids should be able to live in the house paid off, buy a regular TERM LIFE insurance policy, for 20 or 30 years, name wifey the beneficiary, and the payout amount won't go down! The rate is locked in for the whole 20 or 30 years! AND, it's cheaper than mortgage life.