Life Insurance and Short Term Disability Insurance – Recap

So, I wrote a couple of posts on making sure you have the right amount of life insurance and if you really need short term disability.  You can find them here:

• Do You Need Short Term Disability Insurance?
• Ensure You’re Not Over Insured
• How Much Life Insurance Do You Need?

I wanted to write a quick recap post to talk about how my wife and I just got all of this straight and ended up saving ourselves about ~$1,500 a year.  Read on to find the details!

 Money Saving Breakdown – Life Insurance and Short Term Disability Insurance – Recap

• Difficulty (Super Easy/Easy/Medium/Hard/Expert): Hard
• Average Savings per Year ($/year): 1,467
• Time Required (mins): 120
• Savings for your time ($/hr): 734

 

The Insurance Savings Details

So, it was kinda a pain in the ass to go through running all of the calculations to determine how much life insurance my wife and I actually.  Also, sitting on the phone with the benefits folks isn’t exactly my idea of a stimulating conversation.  That’s why I rated this money saving idea as “hard”.  But after about two hours of work, I think we have all of our life and short term disability insurance straight!

Here’s the savings breakdown:

• I reduced my life insurance from $600K to $300K.  This saves $155.88 / year.
• I had $200K of spouse life insurance.  I am increasing this to $250K as my wife’s work covers her for free for $50K ($250K+$50K = $300K – my magic number).  This will cost an extra $18.60 / year.
• I cut accidental death insurance I had for spouse & kids.  This was $250K spouse, $50K child.  This saves $100.80 / year.
• My wife had additional $350K life insurance through her work.  We cut this and saved $403.20 / year.
• My wife ditched her Short Term Disability.  This saves $826.02 / year.

 Grand Total Saved per Year = $1,467.30

 

My Wife Was Crazy Over-Insured

Now, we’re both insured for $300K, we have no life insurance for our kids (no need), and my wife has no short term disability (not planning on having any more rugrats).  We feel that this is the proper amount of insurance for us.

One crazy thing is that before we made these changes my wife was INSANELY over-insured for life insurance.  Let’s look at the payout if she died in an accident:

• $50K life insurance provided free from her company.
• $50K accidental life insurance provided free from her company.
• $350K life insurance my wife was paying for through her company.
• $350K accidental life insurance my wife was paying for through her company.
• $200K life insurance I was paying for through my company.
• $250K accidental life insurance I was paying for through my company.
• TOTAL = $1,250,000!!!!  Holy Crap Batman!!!

I’m glad we reduced her life insurance coverage just to keep me honest 🙂  Accidents are happening more and more these days…

Final Thoughts

So, what is the morale of the story here?  Take the time to make sure you are properly insured.  In our specific case, we were WAY over insured because we never took the time to think through how much we’d actually need if something were to happen.  We just always assumed that more insurance was better.  As a result, we’ve wasted tens of thousands of dollars over the years in insurance that was overkill.

Please – if you haven’t taken the time to look at how much you’re spending on insurance do yourself a favor and check!  You could be in for a big surprise!  “Right-size” your life insurance and short term disability insurance today!

Bonus Pro-Tip

Normally you aren’t allowed to change your benefit elections during the middle of the year unless you have a “qualifying life event”.  You’d have to wait until the benefit election period in the fall.  I’ve heard that you can get around this by telling the benefit folks that your spouse just recently changed jobs.  They don’t really have a way to check this I guess…  If you’re running into this issue, give it a try – it may work for you!