All Life Insurance Tips

Term Life Insurance at age 21?

I am 21 and I was wondering if I should purchase a $1,000,000 term life insurance policy through USAA. I received a quote for $42.19 (and an additional $11.66 for waiver of disability) and the premium is guaranteed for 30 years. Do I need this policy at my age? Also, should I get the Waiver of Disability for $11.66 more per month? All answers are appreciated! More info: I am married No children No debt (except car payment) Thanks!

Public Comments

1. That sounds a little high for most 21 year olds, but if you are making between $60000 and $120000 (depending on your husband's risk tolerance) that sounds like a good premium (although they are probably quoting you a rate that only about 5% of people ever get). $11.66 to cover waiver of premium?? At best, this covers the cost of your premium and most riders only pay out if you are totally disabled for more than 90 days. If you are totally disabled for more than 90 days, you prob have other financial concerns that are greater than $42/m - like rent or car payments. You should talk to an independent agent who can help you shop different companies for a stand alone policy that covers your other needs and includes partial disability.
2. Are you planning on having children in the future? Are planning on buying a home in the next five or so years? Are you planning on ever converting the term insurance to permenant insurance? If you answered yes to the first two questions, then the amount of insurance seems to alright (but can vary depending on what part of the country you live). If you answered yes to the third question, paying the additional for Waiver of Premium in the event of a disability is a good thing to do as well. Now I have seen a few of the contracts that USAA rights and they are decent contracts, something in the contracts I don't like, and I have clients that bought the policies, and after we went through the contract and I explained what the riders did and do not do, they wanted to get rid of the policies. Be sure to ask lots of questions of the agent, and that you understand the contract frontwards and backwards before you take it. I make sure my clients do, if they don't ask the questions, then I ask for them.
3. Insurance is a tool. You buy a tool, to get a job done. Doesn't sound to me like you have a job you need this tool to work on. You're probably better off just putting that money into an IRA.
4. I recommend you invest in a VUL. It is a combination Term Insurance and Mutual Fund Investment. It builds cash value and you have a guaranteed rate of return on your investment you can watch grow as you age. You are too young to invest in something that doesn't have any cash value when you have no debt, no house, no children when you could use about $20 more a month a build a lifetime investment portfolio to retire on also.
5. $1 mil in your case may be excessive, unless you make a hefty salary and need it provide income replacement for your spouse. I would suggest a Return of Premium Wavier over a waver of Diasability. Ret of Prem allows you to get a porition, if not all, of the money you've paid in after the term period has expired. You might also look at converting the term policy to Permanent policies incrementally of the 30 years. My Life Insurance is with State Farm and covers what I need it to as well as giving me a discount on my car insurance.
6. Is the $42 a month no big deal? If not, take the policy; you're young, healthy and $1M is a nice chunk that you'll grow into. . Personally, I've got $500K and wish I'd bought more when I was young (and thin). I've never taken the disability riders. Most people agonize, over plan or under plan their insurance needs for years. I think it's great you've thought of this and have a good solution to consider at this stage of your life. Like Forrest Gump says: that's one less thing.
7. If your husband works and you have no debt, what is the $1 million for? Life insurance is designed to protect a family against the financial burdens that accompany the sudden, unexpected loss of a breadwinner. That does not seem to apply to you. Keep in mind that if when your 30-year term policy is up, you will be out $19,386. That’s not a huge sum of money, but you might be better off investing it over 30 years. You also might consider a whole life policy. A whole life policy covers your for your entire life. If you die the day after you get the policy, you’re covered. If you die in 20 years, you’re covered. And if you die when you’re 80, you’re covered. In the mean time, the insurance company invests the money, and some of the earnings are put into your policy in the form of cash value. The cash value builds over the years. At some point—when you are on a fixed income, for example—you can use your cash value to pay the premiums, keeping your policy in force. A whole life policy costs more than a term life policy, of course, because of these investment features. Some people say to get term life and invest the difference in premiums in something that earns more money than a whole life policy. You might be able to do that, but be realistic about your investing skills: Would you really invest the premium savings? Do you know enough about investing to guarantee a profit? And how are you going to such small sums of money? Good luck!