How much life insurance?

[deleted481566]

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Hey all,

I had a question about getting life insurance, now that match is coming up and I'm looking at residency soon enough. I've used several calculators and read a number of articles on how much life insurance to get, but I keep getting different numbers. Here's my situation:

26 year old M4 - married with a 6 month old son at home. My wife works in social services, making a pretty low salary (<40K). I doubt she'll make much more than that over time in her career, and she may decide later in life to stay at home with the kids. I've applied for IM - hoping to do either Pulm/CCM or Heme/Onc, so probably a better salary than primary care but a longer training path. We own both of our cars, we rent (and plan to for a long time), and have no debt other than my own student loan debt (125K).

1. My household will obviously be dependent on my salary when I finish. Should I insure for how much gross income we will be making while I'm in residency (~80-90k), since that is currently our standard of living? Or should I insure for more, understanding that I will be making significantly more as an attending but several years down the road?

2. I would like to insure at least for the cost of college for my son. How much is a safe bet? 200K?

3. We plan to start two Roth IRAs in residency and contribute as much as we can while limiting the interest on my student loans. Does this, or later retirement accounts, factor into how much I should buy?

I'm currently looking at 30 year, fixed premium policies. I do have a little higher rate due to a chronic medical condition and being overweight, but it seems doable overall. Any thoughts would be appreciated.

 

[nogolfinsnow]

Hey all,

I had a question about getting life insurance, now that match is coming up and I'm looking at residency soon enough. I've used several calculators and read a number of articles on how much life insurance to get, but I keep getting different numbers. Here's my situation:

26 year old M4 - married with a 6 month old son at home. My wife works in social services, making a pretty low salary (<40K). I doubt she'll make much more than that over time in her career, and she may decide later in life to stay at home with the kids. I've applied for IM - hoping to do either Pulm/CCM or Heme/Onc, so probably a better salary than primary care but a longer training path. We own both of our cars, we rent (and plan to for a long time), and have no debt other than my own student loan debt (125K).

1. My household will obviously be dependent on my salary when I finish. Should I insure for how much gross income we will be making while I'm in residency (~80-90k), since that is currently our standard of living? Or should I insure for more, understanding that I will be making significantly more as an attending but several years down the road?

2. I would like to insure at least for the cost of college for my son. How much is a safe bet? 200K?

3. We plan to start two Roth IRAs in residency and contribute as much as we can while limiting the interest on my student loans. Does this, or later retirement accounts, factor into how much I should buy?

I'm currently looking at 30 year, fixed premium policies. I do have a little higher rate due to a chronic medical condition and being overweight, but it seems doable overall. Any thoughts would be appreciated.

Congrats on very manageable student loan debt!

I'm a PGY3, wife had a baby late last year so decided to get my "insurance house" in order. Most of my reading has suggested physicians carry between 1 and 3 million in 20-30 year term life insurance. As a resident with a typical resident income, I had a little trouble getting a longer policy (apparently many companies don't like to insure you for a lot more than you're worth), but I got an initial 10yr policy and will look to replace it with a 20 or 30 year policy when I start as an attending. It looks like you're going to be the primary source of your family's income, so keep that in mind when you come up with your number. If you die as a PGY-2, will your wife have to work more to support the household? Or do you want to be able to provide her with enough income to work part time and have some college savings for your child? In terms of a dollar goal for college, I don't even want to think what undergrad will cost in 18 years....

As your retirement nest egg builds, your life insurance needs go down.

Also look into disability insurance as a resident. Something I never thought about, but if you get hurt or sick it could save your family. Good for you for thinking of these things now. If you want more information, I suggest starting to browse whitecoatinvestor.com. The author posts on this forum sometimes, but his own site has become pretty busy. He has great articles on how to get your financial house in order as a resident (and beyond).

 

[The White Coat Investor]

There is no right answer, only a right answer for you. I wrote a post about this very question- how much to get as a resident, especially when you can't afford as much as you want/need. Here it is:

http://whitecoatinvestor.com/term-life-insurance-strategies-for-physicians/

Honestly, just go buy a million. Then when you graduate from residency, buy two more. All 30 year level term. Cancel it when you become financially independent. Try to lose a little weight and maybe you can get a little lower cost. Since you're not perfectly healthy, you would really benefit from a good independent agent who can "shop" you around to see if one company doesn't care as much about your particular medical condition.

 

[TexasPhysician]

I decided to go with 1.25 million for 15 years when I was 1/2 way through residency. 1 child. That's enough for college and modest living in my opinion. We save yearly even throughout residency, so in 15 years, I don't expect to need any more life insurance. Circumstances may change though.

 

[ClevelandClinic]

I decided to go with 1.25 million for 15 years when I was 1/2 way through residency. 1 child. That's enough for college and modest living in my opinion. We save yearly even throughout residency, so in 15 years, I don't expect to need any more life insurance. Circumstances may change though.

how much did you pay a month for that policy if you dont mind me asking?

 

[TexasPhysician]

how much did you pay a month for that policy if you dont mind me asking?

Still have it. About $31/month.

 

[Tenesma]

but 1 million for now - then as a resident buy another 1-2 million - then when you are an attending for 1-2 years add another 3-4 million coverage... then leave it alone and never buy any gimmicky non-term life ins products (ie; cash value)

 

[MD Financial Services Scott]

Hey all,

I had a question about getting life insurance, now that match is coming up and I'm looking at residency soon enough. I've used several calculators and read a number of articles on how much life insurance to get, but I keep getting different numbers. Here's my situation:

26 year old M4 - married with a 6 month old son at home. My wife works in social services, making a pretty low salary (<40K). I doubt she'll make much more than that over time in her career, and she may decide later in life to stay at home with the kids. I've applied for IM - hoping to do either Pulm/CCM or Heme/Onc, so probably a better salary than primary care but a longer training path. We own both of our cars, we rent (and plan to for a long time), and have no debt other than my own student loan debt (125K).

1. My household will obviously be dependent on my salary when I finish. Should I insure for how much gross income we will be making while I'm in residency (~80-90k), since that is currently our standard of living? Or should I insure for more, understanding that I will be making significantly more as an attending but several years down the road?

2. I would like to insure at least for the cost of college for my son. How much is a safe bet? 200K?

3. We plan to start two Roth IRAs in residency and contribute as much as we can while limiting the interest on my student loans. Does this, or later retirement accounts, factor into how much I should buy?

I'm currently looking at 30 year, fixed premium policies. I do have a little higher rate due to a chronic medical condition and being overweight, but it seems doable overall. Any thoughts would be appreciated.

I try to use the following process to determine what one needs in the amount of life insurance. What does $1 million do? Well that depends on if your family uses that to pay off your debt then tries to live off the balance or if they take the capital to invest and live off the distribution while leaving the capital in place. My suggestion is to buy the Amount of coverage you need first and then the duration you can afford 2nd. One thing you know right now is what your family needs to live on, what you don't know right is what your family needs will be in 30 years. To summarize, buy what you need for your family now and if finances allow then buy the 30 year coverage otherwise a 10, 15, or 20 will work better since it allows you to buy the needed amount. Let us know if we can be of further service.

 

[The White Coat Investor]

What debt? His student loan debt goes away if he dies.

I also submit it is relatively easy to know what needs will be in 30 years (if they're going to be zero in 20-25 due to saving and investing well, they'll almost surely be zero in 30).

I like your reasoning on amount vs term though.

 

[MD Financial Services Scott]

The debt comment was in regards to CC's, autos, home, personal lines and any other loans that do not go away at death which are then left behind for the family to figure out. In regards to the 30 years vs. now what I am saying is that you know what your family needs are if you died in say 1, 3, 5, maybe even 10 years from now but 20-30 becomes pretty cloudy since we don't know if the our situation changes, marriages, divorces, practice buy-ins, building acquisitions, vacation homes, expensive hobbies, extended family needs, dependents with special needs, the ever changing estate tax issue, and the such. On top of that as we know when one first gets out of training and become fully employed we know they increase spending, debt service, and asset accumulation so at age 60 (only as an example) the world looks different most of the time, focuses change, family has changed, the love of medicine has evolved, and thus the needs or maybe wants have changed. Keep an open mind and keep your plans flexible to accommodate whatever your situation becomes.