future life insurance recommendation - current dollars?
ESP recommends life insurance for me in the future but not now. The recommendation is that I have insurance coverage starting in 2025, when I start drawing SS at 70, through age 99 in 2054. The peak amount is about 100K in 2029, age 74. Coincidentally, that's when the premiums on my current term policy are no longer level. It's good until age 95 but at potentially phenomenal rates.
I don't plan to wait until my current policy expires before getting another. I may replace it now or in the near future, while I know I'm insurable. (Yes, the premiums I'll pay now are more than ESP considers.) Since the recommended amount is in the future, one might think I'd need less because present dollars will grow. But insurance policies are fixed amounts and lose value in real terms.
So, my question is, in what form are the recommendations for future insurance expressed? Does a recommendation for 100K coverage in 15 years mean I'm covered if I buy a 100K policy today? Or do I have to buy a larger policy so it will be worth 100K in 2029?
Fri, 08/29/2014 - 13:49
This may be a moot point. By
This may be a moot point. By changing my wife's SS benefits from age 70 to age 62, it virtually eliminates any need for insurance on my life and results in a slightly higher living standard.
I'd still like to know, though.
Fri, 08/29/2014 - 18:41
By experimenting you've already shown you can increase your standard of living somewhat and can almost certainly make additional improvements with sensitivity analysis.
Specifically to your question, the amounts are in "real" or inflation adjusted dollars so $100K (in 2014 dollars) will be higher in 15 years in nominal terms. For example, $100K today at 3% inflation would be around $150K in 15 years in 2029 dollars.
Sat, 08/30/2014 - 13:56
I agree with Brian. The
I agree with Brian. The future insurance recommendations are in today's dollars.
Mon, 09/01/2014 - 14:21
Meaning, a requirement of
Meaning, a requirement of 100K insurance 10 years in the future means I need 100K face value, if purchased today?
Mon, 09/01/2014 - 17:44
No, 100K face value today
No, 100K face value today would need to be about 151K nominal dollars in 2028 in order to equal 100K in purchasing power today.