How much insurance?

[cmorris]

I'm finally out of school and landed a job teaching. I already went to my benefits meeting and am going to get medical/dental/vision/long-term disability (free)/etc. I also maxed out the life insurance (very cheap).

 

However, I am a single mother. My son is 2.5 yo. How do I know how much insurance to get and do I need a trust? I just want to make sure my son is well cared for should something happen to me.

 

As it stands now, I'll have $208K in term life insurance. All but $50K is from employment (8K is free). The 50K is with State Farm. If I die next year, I don't think that amounts to very much money for my son. I'm just not sure how much to get and where the best place to go is. The 50K policy costs $10/mo.

 

Also, with car insurance, how much do I get? I have full coverage, with a 500 deductible.

 

Thanks!

[radi8]

Some things to think about:

 

Are you in the Social Security system? Would your son qualify for survivor's benefits? That'll add to the pot for his care.

 

What's his father's role? Could he expect any support from him, or are you more comfortable providing for it yourself?

 

Do you want extra set aside for his college or other educational expenses?

 

Personally, I carry ten years worth of my salary in term life. I came to that figure by taking my youngest son's years until he's 20 (at the time) and figuring replacing my salary up to that point.

With the SS and the income provided by my spouse, I figured that'd be more than enough with careful usage.

When the term is up and they are all (hopefully) self-sufficient, I'll drop that coverage to a lesser amount.

 

I don't know if my method of figuring (salary replacement until they are adult age)is the right way, or if there's a better way, but it made sense to me at the time

 

For car insurance- I assume you're talking about liability coverage?

I carry 500,000 of it, it's pretty cheap. I figure that's enough to protect all my modest assets, plus my salary against judgements for the forseeable future.

Unless I hit a bus full of accident and injury lawyers, that is hopefully enough

 

MI is a bit different though, in that the state has a catastrophic injury fund, and lawsuit recoveries are limited.

So, I'd have to hit that bus out of state.

[insuragent]

old rule of thumb is 7x annual salary for a married person leaving a spouse, for a single with child I would recomend 10-15X annual salary on a term policy (much cheaper, allowing you to get more covg..as well you will only need the covg until a child is on there own, afterwords the amount of covg needed will probably be lower).

 

For auto 100/300 is the min recomended for homeowners, personally I go with 500K CSL, again a few more $$ is worth the extra coverage. Auto is sold in both split limits (100/300/100) and CSL (500K). Split limits apply to per person bodily injury/total bodily injury/property damage, where CSL is not divided. With split limits, if you are found at fault in an accident resulting in 200K in injuries, with 150K to the driver and 50K to the passenger (not unrealistic these days with hospital prices) a 100/300 csl policy would leave you unprotected by 50K (because of the one person 100K cap) where a 500K CSL policy would still cover you (since the cap is 500K, coverage is not divided into specific liabilties).

 

 

As for other coverages in auto, $500 deductibles seem to be the best bet most times, but ask your agent about $250 or $100, sometimes its only a few $$, others it can be $75-150 more a year or more..just depends. Make sure you carry um/uim, scary thought but anywhere between 7-20% of autos out there are not insured or carry only state mins (15/30/10 in SC I think). Generally once a car hits the 7 year mark, collision coverage is wasted $$ (unless its value is still $5K or more) and comprehensive only coverage would be the best bet for physical damages. Rental and tow are cheap most times, but if you have AAA, dont waste the $$ on the towing.

[Clarkfan2]

15x coverage for a kid is outrageous! If it is a couple..many financial advisors recommend no coverage at all of children since they contribute no income. Since you are single...that probably qualifies as a different animal..

 

Personally,I would just have enough for the kid to cover college education since the child would be entitled to SS benefits until age 18 or would possibly be living with his father. IMHO your coverage is ample.

 

Im not an expert on car insurance but know that if your policy has a "NO DUPLICATION OF BENEFITS' clause--and most do-- then if you have health insurance there would be no need for Uninsured Motorist coverage since it would be a duplicate benefit.

 

Also if you want to save some money, I would recommend the opposite of what our friendly insurance agent recommends.... that is to lower your insurance costs look at RAISING your deductibles. Get a quote on a $1000.00 deductible and see how much it saves you in a year. If you don't have a 1k emergency fund, you might come out better using a low interest credit card for the 1k if you had an accident. Run the numbers and you will be surprised how much you can save by implementing this strategy.

 

Clark

Comments are personal opinion and not professional advice.

[maporsche]

Im not an expert on car insurance but know that if your policy has a "NO DUPLICATION OF BENEFITS' clause--and most do-- then if you have health insurance there would be no need for Uninsured Motorist coverage since it would be a duplicate benefit.

 

This is very important and bears repeating.

[radi8]

Im not an expert on car insurance but know that if your policy has a "NO DUPLICATION OF BENEFITS' clause--and most do-- then if you have health insurance there would be no need for Uninsured Motorist coverage since it would be a duplicate benefit.

 

This is very important and bears repeating.

<{POST_SNAPBACK}>

 

Here (MI) we are forced to carry PIP (personal injury protection) which duplicates my health insurance coverage, it is mandatory. And it's expensive- the largest line item on my policy. <sigh> waste of money.....

 

 

I agree on raising deductibles. I carry a 1K deductible, I'm not about to file a claim for anything less as it'll surely cause my premiums to increase down the road. Been there, done that, paying the bill for it now.

[cmorris]

My son wouldn't get squat from his father--he can't even manage to pay child support! I've received 2 $50 payments in 2.5 years, when it should be $230/month. Our divorce papers also state he is to only have supervised visitation, so I hope if something happened, my son could stay with my parents.

 

Before anyone recommends jailing his father, let me say this: He doesn't care about going to jail. It would also just irritate his mother, who just might try to exact revenge. It is best to leave well enough alone. For now, there are no visits, just the occassional phone call. I don't want any drama.

 

I don't think I have enough SS credits for my son to get anything, and if he would, I doubt it will be enough. It might be wasteful, but I would rather be over-prepared. I would love to get an additional $500K+ policy, I'm just not sure it is necessary. Should I see an attorney? Set up a trust? I know if somehow my ex got ahold of the money, it would be gone fast. I want my son well taken care of, and at least some college paid for.

 

Thanks for the advice and numbers! I'll make a decision in ~1 month, after I get my check. I'll update then.

[radi8]

I hear ya, Cmorris. Been there with the screwey father thing...

 

Insurance isnt' entirely about money, it's also about comfort and security. If you are more comfortable carrying what some may consider excess coverage- that's your decision.

I pay thru the nose for my life policy because I'm stupid and smoke.

But I worry about what my kids would eat if I weren't here..and the money is worth it for the peace of mind.

[genseeker]

On the life insurance you can name a different party to be the custodian of the funds for your son. Not all ins compaines do this so you will need to ask. You will also want to name a custodian in your will to be in charge of anything your son inherits. We have named a responsible relative to be custodian for our kids and another family member for them to live with. The alternative is to have a bank or atty be the custodian of funds, but that can be expensive and it can be harder to get things approved for payments. With a trusted relative, you can tell them wha tthings you approve of, like clothing/field trips/etc and it will be paid quickly.

[Athena53]

Im not an expert on car insurance but know that if your policy has a "NO DUPLICATION OF BENEFITS' clause--and most do-- then if you have health insurance there would be no need for Uninsured Motorist coverage since it would be a duplicate benefit.

<{POST_SNAPBACK}>

 

I'd get it anyway. Background: I'm an actuary, and 7/8 of the way to CPCU (Chartered Property and Casualty Underwriter) designation. This is not professional advice, either, but... Depending on the way your group health insurance policy is written, it may specify that Auto insurance is primary for claims resulting from auto accidents. Depends on the state and the companies involved. Ask your agent! In NJ you could get a decrease on your Auto coverage if you elected to have your health coverage pay first.

 

Even if the health insurance policy covers first, there will be things it won't cover. Medical bills? Yes. Lost wages? No, although PIP provides limited coverage in no-fault states. Costs of replacing essential services while you recover? (Cleaning lady, etc.) Heck, no. If you're injured in an accident by someone who's negligent and uninsured and the court awards you $500,000 to cover all that, plus some for pain and suffering, your medical policy will cover ONLY the medical expenses.

 

I have $2 million in liability coverage and $2 million in Underinsured/Uninsured to go with it.

 

And, to the OP on the Deadbeat Dad issue: when I divorced, my attorney wrote a will that not only stated who was to have custody of my son (my brother and his wife), it also said specifically why my Ex was not to have custody (in polite legal terms, it said he was useless and irresponsible). My attorney really didn't like my Ex. So, there are ways to make sure the father of your child doesn't end up with custody of your son and thus control of the funds.

Edited July 31, 2005 by Athena53

[Clarkfan2]

Even if the health insurance policy covers first, there will be things it won't cover. Medical bills? Yes. Lost wages? No, although PIP provides limited coverage in no-fault states. Costs of replacing essential services while you recover?

 

Personally in addition to my health insurance,(Reference lost wages) I pay $20.00 a month for long term diability.(5 years) That should cover me if I were in a bad enough accident that I had to sue an insurance company.

 

 

 

Athena53,

Background: I'm an actuary, and 7/8 of the way to CPCU (Chartered Property and Casualty Underwriter) designation.

 

Need a new younger man? lol--with those credentals you wouldnt have a problem finding one! lol

Edited August 1, 2005 by Clarkfan2

[Athena53]

Athena53,

Background: I'm an actuary, and 7/8 of the way to CPCU (Chartered Property and Casualty Underwriter) designation.

 

Need a new younger man? lol--with those credentals you wouldnt have a problem finding one! lol

<{POST_SNAPBACK}>

 

Thanks, Clarkfan2, but I married a really nice man 2 years ago. I think he's pretty happy!

[hegemony]

old rule of thumb is 7x annual salary for a married person leaving a spouse

<{POST_SNAPBACK}>

that is a real joke.

[Athena53]

hegemony-

 

could you elaborate? Too high/too low?

 

I think a lot depends on the age of the spouse, the rest of the assets and the ages of dependent children. I have life insurance equal to my annual income but I think in my case it's enough.

 

Another point on the Uninsured Motorists issue- if you depend on your medical coverage to pay bills from auto injuries, you could be left with huge co-payments and deductibles. And, as ClarkFan2 noted, you may need separate disability coverage for lost wages. In some states, such as Michigan and PA, Personal Injury Protection is very generous and covers lost wages, but in most states it's not that generous- and this coverage exists only in states with No-Fault auto laws.

[hegemony]

hegemony-

 

could you elaborate?  Too high/too low?

 

I think a lot depends on the age of the spouse, the rest of the assets and the ages of dependent children.  I have life insurance equal to my annual income but I think in my case it's enough.

 

<{POST_SNAPBACK}>

I meant it is too high. And the poster seems to think that "one-size" fits all. What about a married couple without kids who both work? Do they really need 7X income for each other? I guess if the surviving spouse wants to retire and live a life of lux after the death of the other. There is no need for most people to have that much insurance.

 

A married couple with 4 kids is different.

 

7X or 10X or 15X...there is not standard rule IMHO.

[Athena53]

7X or 10X or 15X...there is not standard rule IMHO.

<{POST_SNAPBACK}>

 

I agree. The OP may actually need a pretty high multiple. She's young and there doesn't appear to be any source of funding to take care of her son if she's gone. Some things that might decrease this:

 

1. No kids.

2. Large savings,

3. Possibility of a surviving spouse being able to work outside the house.

4. Kids near college age, college funded adequately.

 

Even as a single mother, I didn't buy life insurance over what my employer offered because I had adequate savings that would fund my son's college, a lot of equity in the house, and family who would be able to take care of him.