By Harry Gross
Dear Harry: We are both 30, and we have a combined income of $90,000. We own our own home with a $200,000 mortgage. Even today, it's worth more than the $250,000 we paid for it. We had a long discussion with a financial planner last week who suggested that we buy enough term insurance to cover the mortgage and a year's salary. He suggested increases when we have children. He also made some very reasonable recommendations regarding our 401(k) plans that we have already adopted. What do you think of the insurance idea? Neither of our employers has life insurance for employees as part of the company-benefits package.
What Harry says: It's a rare occasion when I hear of life-insurance proposals that are less than I think people need, but that's the case here. My suggestion is that you have "first to die" insurance for $500,000. This will give the survivor enough to get a fresh start. I do not like life insurance that is specified for a particular purpose - such as paying off a mortgage. There may be more pressing needs when the death occurs. There is another insurance need that you did not mention: disability-income insurance. At your ages, it is far more likely that one of you will be totally disabled for at least 90 days than that one of you will die. Your employers may very well have taken care of this for you. If not, be sure to get covered for at least two years for at least 60 percent of your salaries. As a matter of making sure you are dealing with secure companies, make certain that the companies you choose are qualified to write the policies you choose on New York residents, as well as on Pennsylvania residents. *
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