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I'm 36 years old, married with no kids. (We're considering having a kid that but would still be at least 1.5-2 years out.)

One of the things that Suze Orman and other personal finance speakers encourage people to do is to buy term life insurance. We don't have it, and I'm considering buying it. But there's something I am not clear on: given that I have Accidental Death & Dismemberment insurance through my employer, does buying term life at this point still make sense?

Thanks,

Jim

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It probably does make sense for you to buy term life insurance separate from your employer, for a few reasons:

  1. If you lose your job, you won't have the coverage.
  2. It probably doesn't give you as much coverage as you need. In my experience, you only get 1 year's salary from your employer, which may not be enough depending on your goals.
  3. If you are allowed to pay to continue the policy after getting laid off, your premium will probably be much higher than you'd get from an agent. (Assuming you're in good health.)
  4. The policy you have through your employer may not cover all situations. A term life policy you purchase may have broader coverage. Read the policy from your employer carefully to see what it excludes.

There are a number of life insurance calculators on the web. Try two or three -- some of them ask different questions and can give you a range of answers regarding how much coverage you should have.

Then take a look at some of the online quote sites -- there are a couple that don't require you to enter your personal information, just general age/health/zip code so you can get an accurate quote for a couple of different coverage levels without having to deal with a salesman yet. (It was my experience that these quotes were very close -- within $20/year -- of what I was quoted through an agent.) Using this information, decide how much coverage you need and can afford.

If you're a homeowner, and the insurance company with whom you have your homeowner's policy offers life insurance, call them up and get a quote. They may be able to give you a discount because of your existing relationship; sanity check this against what you got from the quotes website.

  • 2
    +1 and get it sooner than later while you are young and healthy. – MrChrister Apr 2 '11 at 4:24
  • +1, Also if you get later in life, the premium would be much higher. – Dheer Apr 2 '11 at 7:01
  • Thank you, I appreciate the time you took to write out a reply. This all makes sense. – user3190 Apr 2 '11 at 17:54
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Most likely, yes.

AD&D is insurance against a specific type of peril. Life insurance is, too, but there are fewer exceptions to payout. I'd imagine that you'd have to die by accident, or be dismembered but not die, for it to pay out. The exceptions in the policy are what you need to be concerned about.

If loss of you (and your income) would be of financial hardship to your wife and your goals for your family, then you should consider life insurance.

(If you do, consider having your wife buy the policy on you, and make sure it's clear that her funds were paying for it. It may be possible to avoid having the payout go into your estate that way.)

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I think that mbhunter hit the nail on the head regarding your question.

I just want to add that having a policy that isn't sponsored by your employer is a good idea... employer policies are regulated by the federal government via ERISA. Independent policies are state regulated, and usually have better protections. Also, look for a policy that allows you to increase your coverage later without medical qualification so you don't need to overbuy insurance initially.

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