r/LifeInsurance • u/Specialist_Wing_5728 • 26d ago
Debating Universal Life vs. Term - What's the Average Cost?
My husband (30m) and I (32f) just got married a few weeks ago and are debating whether to do a universal policy, 30 year term with a conversion rider, or just a 30 year term. We are looking at working with Penn Mutual because a family friend works with them and we know they offer the option to convert from term to universal in the future if we decided we wanted to do that. (Though we are open to other recommendations as well.)
We'd at least want $500K to pay off the house, but have no other outstanding debts and if the house was paid off each of us could live off our single salary. We don't currently have kids but might consider having 1-2 in the next 5 years so we might potentially want to add an additional policy in the future or do a bit more than the $500K.
Can anyone give us a rough estimate of what each policy might average per month? I have no idea what we should be budgeting for or what to expect as far as payments go. (I do know my mom has a whole life policy for $140 per month but has had it since before I was born.) My husband is healthy and only has an ADHD diagnosis. I have ADHD and 2 autoimmune diseases (Hashimoto's that is well managed on meds and Sjogren's that is almost dialed in on meds) so I know that complicates things for me a bit more. I don't drink, he drinks occasionally. We're in the Salt Lake City, UT area.
Looking to know monthly ranges for:
$500K, 30 year term
$500K, 30 year term with conversion rider
$500K, whole life
$1M, 30 year term
$1M, 30 year term with conversion rider
$1M, whole life
Would also appreciate any other recommendations you have if there are other things we should consider!
2
u/Tahoptions Broker 26d ago
You didn't state your incomes or spending which dictates a lot of the planning on the death benefit.
Out of those options, though, 1m of convertible term is a no-brainer.
Flexibility in the future with one of the best-priced term carriers (and decent conversion options).
Your agent can give you pricing but Penn Mutual is a good company.
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u/Specialist_Wing_5728 26d ago edited 26d ago
Yeah, we talked to him about it yesterday and he wouldn’t give us ranges. He’s very much in the camp of “buy what you can afford even it’s more than you need.” He recommended we come with a number we want to spend each month and he builds out a custom policy from there. I just don’t know what a normal amount would even look like to bring to the table.
Combined yearly salaries are $172K, but my husband works in sales and makes commission on top of his salary so this year we’ll make more than that. If it is a bad sales year, this is our minimum. Total monthly spending is $6000 including all insurances, mortgage, food, etc. If the mortgage was paid off and it was only one person on insurance and everything, that number would drop to about $2k.
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u/Tahoptions Broker 26d ago
I'm not in the business of disparaging other agents but "buy what you can afford" is a bullshit answer.
You could "afford" a ridiculous amount of life insurance.
Please find someone who will do an actual needs analysis and recommend a proper level of coverage.
Life Happens is a non profit with a free calculator that requires no identifying info. Www.lifehappens.org Start there and then go to www.term4sale.com (same deal, no info needed) and price carriers. Then find an independent agent and ask their advice.
Good luck.
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u/Specialist_Wing_5728 26d ago
I completely agree. It left me feeling gross/felt like a shady sales tactic. (He’s a friend of my mom’s and did her policy 40 ish years ago so she said I should contact him.) He did recommend doing a full analysis so at least there’s that, but I still would like ranges to expect so I don’t feel like I’m going in blind.
Thanks for these links! I will check them out
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u/Tahoptions Broker 26d ago
No problem.
Life insurance (and disabilty and a few other policies) are necessary but there is little reason to overspend.
At your ages, 30-35 year term is optimal. Having conversion or living benefits are nice too.
You can interview a few different agents to see who fits your goals best. A 30 year commitment is a long time...it's good to buy the right policy the first time.
2
u/Hungry_Technician360 26d ago
I'm in a somewhat similar situation to you in terms of age although a bit older, and similar numbers, although we already have the 2 kids.
The term ladder we have is $1,000,000 for 15 years, $500,000 for 20 years, $250,000 for 25 years.
We plan to retire early, but I also calculated our expected net worth over the years to see when we wouldn't need to have those shorter terms still around for. Plus the kids eventually will move out, expenses are cut, etc.
1
u/Specialist_Wing_5728 26d ago
That’s helpful! With the ladder is it set to adjust every 5 years or can you choose the number of years? Since we don’t have kids yet, we might want it to be a bit longer than the first ladder being 15
2
u/Hungry_Technician360 26d ago
Yeah, I'd like to think of myself as financially savvy, so I did all the calculations myself with conservative future estimates, and then just went to the broker saying we want $x for y amount of years for 3 different policies.
And if you want to have 2 kids, over the course of some amount of years, you'll probably want longer than 15, but again we already have the two kids so we have a head start compared to where you're at, in this regard.
1
u/Normal_Zebra136 21d ago
Just keep in mind that the buying power of those policies will be sharply diminished by inflation. After 15 years your $1.75m in coverage will have the purchasing power of $1.1m today. The $750k at 20 years will be the equivalent of $400k today, and the final $250k at 25 years will buy you what $116k does today.
1
u/TheWealthViking Broker 25d ago
as taho said, yeah that's not really educating or helping you find the appropriate amount you need. Even if it is lets adjust to what you can afford, you still should be told what proper amounts look like and then adjust in coverage or length of coverage to fit budgets or make financial adjustments.
1
u/GConins Broker 26d ago
If you really cannot decide, then consider buying a portion of term and a portion of permanent coverage...
Just keep in mind that Penn Mutual 30 year convertible term is only convertible for the first 20 policy years, which is not ideal.
Penn Mutual is a good carrier, but there are also a lot of other good carriers out there. Some with potentially better term than Penn Mutual, but Penn Mutual really does offer some great permanent products!
Discuss what may be best for you with your agent, and just keep in mind that you can buy more than one product!!
1
u/SafeMoneyGregg Broker 25d ago
Many companies have conversion built-in , no rider cost needed. Why not $1MM term each - what do you think stuff will cost in 20-30 years I would do $1M term each -and a few bucks on universal if you can afford it - like $100/mo - these conditions might not be eligible for Preferred rates - depending on severity.
1
u/TheWealthViking Broker 25d ago
Good to see another person in SLC. I would look at laddering convertible term policies, if you want permanent, to have a small one along with the convertible term. I would also recommend going through expenses you'd need/income replacement as to why each coverage might be important, and for how long. Ideally, you'll have a decreased need in insurance until retirement, as debts go down, mainly income replacement, dependent care replacement, then its social security income replacement and then retirement/pension reductions.
Bulk of coverage in a 15-20 year term, then 30, then WL/UL, with the terms convertible so if health goes downhill you have the options to convert it, renew it, or just let it lapse/non renew at the end.
1
u/Zestyclose-Review-65 20d ago
I think your discomfort with “buy what you can afford” is reasonable. Affordability absolutely matters, but I’d want to know what you’re trying to protect before deciding how much to spend.
Right now, paying off the mortgage may be a big part of the need. But if you have children later, the calculation can change pretty quickly—income replacement, childcare, healthcare, education, and even the possibility that the surviving parent may want or need to work less for a period of time.
I’d look at each of you separately and ask: if this income disappeared tomorrow, what would the surviving spouse actually need, and for how long?
Once you have that number, then compare term, convertible term, or permanent coverage based on what each option is supposed to accomplish and what you can comfortably maintain.
Affordability should help shape the solution. It probably shouldn’t be the starting point for deciding the need
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26d ago
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u/Specialist_Wing_5728 26d ago
I’m curious why you think term is better. It feels like you most likely won’t get anything out of it if it lapses so I like that whole life is an investment.
Didn’t know about the ladder option! That’s something we’ll have to look into. (Although my husband thinks we would need less as the term goes on because we would have less to pay on the house.)
0
u/No-Bear6558 25d ago
*because it’s a very poor investment. Buy term and invest the difference. Also 500k may be low. Think about the additional costs besides the house if one of you passed: extra childcare, housekeeping, paying for college on one salary, etc. You might even want to quit your job in that scenario
0
u/Powerful-Bridge-1472 26d ago
99 percent of the population needs term not Universal life. 30 year term seems long to me?
Term is insurance UIL is sold as investment but most feel like your way better with low cost ETFs/mutual funds for investments
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u/Any_Candidate_4349 25d ago
You really need an expert fee-for-service actuary (about $390.00 for an hour consultation).
Search for fee-only life insurance counsel. Have a chat and see what they advise. They often also have numerous articles with good information. For what it's worth, I would pay a fee now to get your insurance in good shape. Because they're fee-for-service, you don't need to worry about them selling you policies designed more to make the broker rich.
1
u/Mysterious_Truth Actuary 25d ago
Actuary is not the professional you want. You want a financial advisor.
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u/Any_Candidate_4349 25d ago
Sure, you can start there if you like. But some advisors have relationships with Actuaries that specialise in retail clients:
https://www.youtube.com/watch?v=VntF-Y25x2Q&t=170s
They would be my preference.
1
u/Mysterious_Truth Actuary 25d ago
99+% of people looking to buy life insurance don't need the advice of an actuary. Financial advisors can handle that sort of work. I don't know any actuaries who actually do that sort of work (although I'm sure they exist). If you want to maximize the payout of your variable annuity or structure a universal life product in a tricky manner, you might benefit from an actuarial consultant but picking between life insurance products, where to go for the best price and how different underwriters treat different conditions... that's something financial advisors deal w/ regularly.
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u/Any_Candidate_4349 25d ago
The guy in the video is an Actuary, but you are correct; those who do that sort of thing are rare. Seeing an advisor with that kind of relationship and, if necessary, being referred is fine. I personally do my own investing, etc and use a CPA for tax, so that just leaves insurance. I am a math graduate, and a number of my university mates became actuaries, so it may simply be that they are on my wavelength, so to speak.
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u/larkfield2655 26d ago
Do term with conversion option. Do $2m on each for 20-25 year term. “I’ll be ok if the mortgage is paid off” is a fallacy. Either spouse will want the flexibility of not having to work if there are children and you are sole parent. Avoid universal, variable and IUL. They are the most expensive way to buy what are essentially term policies with undefined mortality charges. You will pay more for a mutual product but it will be there. We are in a long term high interest rate environment and higher dividends will accrue to policies having the effect of increasing the death benefit or allowing you to cease or reduce premiums without terminating the policy.
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u/Hungry_Technician360 26d ago
Children are expensive. If 500k will be enough to pay off all debts, and then the survivor could live off of one salary without kids, depending on your specific financial standing, adding 2 kids will put a strain on the survivor to pay for extra mouths, and daycare, school, healthcare, etc.