Life Insurance: Working Out the Numbers

I decided to review our current insurance policies with a little one on the way. After careful consideration, I’m very close to purchasing a cheap term life insurance policy for my husband. We bought our current policy three years ago, a 20-year term for $500,000. 

At the time, we owed very little to our primary home and had nine years remaining on a fifteen-year mortgage. We also didn’t have any children to consider.

Fast forward, and our landscape is quite different. We are expecting a baby in October and now owe nearly double on our primary home. We used a 15-year cash-out refinance to purchase another property, resulting in a new primary mortgage that doubled the amount of our old one.

Given the increased debt, I would like to attain $1 million worth of coverage for at least the next fifteen years. 

We currently hold mortgages on two distinct properties in two different states. We will pay off our mortgages in fourteen years, but I would like to have enough insurance to pay for those properties outright if something happened to my husband. I also need to consider his possible income loss and child-related costs, including college.

At the end of fifteen years, we may build another house on a piece of land we purchased using the cash-out refi. So I’d like to maintain a policy for at least $500,000 for fifteen to thirty years into the future.

Since we initially purchased cheap term life insurance three years ago, when my husband was in better shape, our current policy costs just over $300 a year.

I thought of canceling that policy to purchase a new $1 million 30-year term policy. Still, after considering the dates and expenses, I’m now considering adding a new policy covering only $500,000 more.

The original policy will expire in fifteen years, but our current houses will be mortgage-free by that time. That means we would only need to consider paying off the new home (if we build one) and paying for any child-related expenses.

After reviewing my husband’s current weight/height ratio and looking over the various categories for coverage, it seems cheaper to purchase a new $500,000 30-year term policy while maintaining our current one than buying a new $1 million one outright.

We may need to purchase a life insurance policy with no medical exam, because he weighs more now than he did three years ago. I would imagine he no longer falls into the premier rate categories.

So now I have to rethink things and make sure my new plan makes sense. If our two homes are mortgage-free in fourteen years, I see no reason we’ll need a $1 million policy after that. Maintaining a $500,000 policy from years 15 through 30 should cover all our bases.

If we are lucky enough to pay off everything in the given time frame, we’ll throw ourselves a mortgage-free party.

Should I include anything else? Is there anything else I should consider before making a decision?

2 thoughts on “Life Insurance: Working Out the Numbers”

  1. Congrats on the little one! I think you're doing the right thing by checking over your insurance policies in light of these new changes. It will lead to peace of mind knowing that you've gotten yourself covered appropriately.

  2. You and your family have worked hard to acquire your home, a rental property or other real estate holdings. You can purchase mortgage life insurance so that in the event of an untimely death, funds are available to meet any outstanding mortgage balance.


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