Soon to be New Parent Finance Advice Thread?

Soon to be New Parent Finance Advice Thread?
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#41

@FrankM - hope things are going well. Due date getting close? How has the pre-planning been going?


#42

Do not prepay the visits and delivery. If for some reason he’s not the one able to make it to the delivery room (say it’s the middle of the night and you need an emergency C-section because baby is in distress, they’re not gonna wait for him to show up 1-2 hour later), he would get paid for the visits but not for the delivery. Whoever actually delivered the baby would be. You’d then may have trouble getting money back from one doctor to pay the other. There’s also absolutely no upside to prepaying anything unless he gives you a special discount. Even then I would not pay for the delivery until afterwards.

As far as paying for health expenses with credit card, and then getting reimbursed by FSA, it’s done all the time. For my dental expenses, I’m usually paid back by FSA before the credit card bill is due. Although in some cases, you get discounts from provider for NOT using a credit card, usually like 2-3% off to offset their transaction fees.


#43

Even more so, if your doctor’s billing is as slow as mine was, all you typically need for the FSA is the EOB from insurance… So you can get reimbursed before you even pay the doctor bill on your credit card.


#44

I’m 34 with a 7 mo old. I just switched jobs and am looking into life insurance.

My new employer offers:
Life Insurance $500,000 for $41/mo
Long Term Disability $11.99/mo for 60% earnings up to 10k/mo

Are these rates high?

I did a quick search at PolicyGenius, got a life insurance quote for AIG $35.40/mo for $1M for 20 years.


#45

If you are healthy, that is probably a little high for Life Insurance.

Not enough information to know on the LTDI without knowing the specific riders.
My knee-jerk is that it sounds pretty cheap, and would be well worth having if you don’t have an LTDI policy of your own.

But “the trick” with employer provided LTDI is managing to stay employed (and thus insured) during the fairly long time gap that may exist prior to LTDI kicking in (can be as long as 180 days).

You should talk to a broker about pricing a private LTDI policy to get a sense of what you’re comparing against.


#46

Old holdover from the FW days:

https://www.term4sale.com/

I’ve been happy with it for just quick quotes, and also for buying term policies. The bad part about employer Life Ins. is it disappears if you stop working there, and you don’t lock into a term.

Employer life Ins is good if you’re old and sick and can’t get a policy elsewhere for cheap.


#47

Any opinion on a short-term policy? Aflac is prevalent but it always seems expensive to me.


#48

Agreed.


#49

This cannot be emphasized enough. Employer life insurance is much more expensive compared to term life you can get on your own. Especially if you are healthy and young.

  1. The premium will not stay the same with you aging, you’ll get bumped into more expensive premium categories with time but your coverage will not change.

  2. If you leave your job or company goes under you suddenly have no coverage and will have to pay a higher rate due to you being older (and potentially less healthy). Since it’s a cost passed down to employees, employers typically don’t look for the best rates but go for whichever insurer costs them the least.

  3. your premium is based on no-medical exam statistical average rates basically. If you are healthy, this is not good for you. You’re basically being charged for being less healthy than you are.

I did this analysis 15 years ago and again this year when I needed an extension in coverage. Back around age 30 when I started my policy, the gap in premium between what I got in term life vs coverage by my employer was not too bad. My policy was $19/month via term life and $27 via my employer. By the time my 15 yr policy ended this year, premium by my employer was $55 where as my term life purchased 15 yrs before was still $19/month. I went out to get another term life for 50% more than my previous policy (to adjust for inflation and coverage needs). That still cost me only $41/month. At the current rate, by the time my policy expires, my company’s policy would cost me over $100/month.

Bottom line, unless you’re in very poor health, never ever go with company life insurance. It’s a rip-off.

I’m not sure about short-term policy though but you can always get a 10-yr term life policy and stop paying when you no longer need it.


#50

Thanks, I will look for term life insurance outside of work. Do you generally recommend the same for long term disability?


#51

This is not as clear cut for long-term disability insurance. Many employers actually pay the premiums for that coverage themselves so the case for free insurance is often compelling.

The advantage of paying for your own long-term disability is that you may control how much it pays you in case of disability. That varies depending if you’re the sole income earner or not. But also you can decide for how long it pays you (you probably want a policy that pays until age 65), whether it includes COLA, whether it covers disability preventing you from doing your own job or any job (this is a big deal because insurers may force you to take another job if they find one that your disability does not prevent you from doing if the policy is based on ANY job), whether the policy is cancellable and guaranteed renewable (basically if your premiums are guaranteed to stay level), and whether you pay for it in pre-tax dollars or post-tax dollars in which case benefits would be either taxed or tax-free. So lots more options and flexibility. The decision depends mostly on how much more it’d cost you vs. how good/bad the terms of your employer’s policy are for your own situation. So for me the decision is much more complex but probably more important since you are more likely - when young - to become disabled than to die so it should be something people look at much more closely.


#52

Do not get life insurance from your employer ever, unless it’s free.

Term life is cheap.


#53

My “short-term policy” is my emergency fund.

I’ve never looked into it, because it is a relatively easy thing to self-insure compared to life insurance or long-term disability.

It really comes down to how long of a wait-period there is for your LTDI as to how easily you can self-insure that gap, though.


#54

Unless your employer offers a base life insurance at no cost to the employee, as my husband’s employer does. Then you might as well take it.


#55

At least to the tax-free amount which is $50k of coverage, I agree.

After that, it’s not as good a deal because of taxation on the benefit. In my case, my employer provides about $200k of extra coverage for free but I end up paying about $60/yr in taxes for it. If I bumped my term life insurance coverage by $200k, it’d cost me more than $5/month but still, it’s not entirely free.

And if you do not need life insurance (like when close to retirement and no longer need income replacement), you may want to decline the coverage beyond the tax-free $50k. I know several colleagues in their late 50s who do. I’ll likely do the same once all my kids are out of college.


#56

My husband’s employer doesn’t offer that choice. It’s a straight year-and-a-half of salary for free, with options to purchase more, which he doesn’t.

Just saying, that options that you might have don’t translate to everyone else.


#57

Many employer have a take it or leave it option. Either you accept the whole coverage or you decline it. In most cases, it makes overwhelming sense to accept it.

But if you have no clear dependents or beneficiaries, it may be worth declining the whole coverage to avoid paying tax on something you do not need.

At my company, it makes sense because additionally the company is giving employees who decline coverage the equivalent of what they would have paid for it. So you can either get $50k coverage for free, accept the whole 2x annual salary coverage (and pay taxes on whatever is beyond $50k coverage), or decline all coverage and receive like $10-25 depending on age as year end bonus. I realize different companies have different policies but it’s worth checking your options which are not always well advertized by HR.


#58

I just looked at my policy. Term policy for 500K. I got it at 32. It is $21month. Based on that, you may want to shop some more. My policy is with Fidelity but there were other comparable choices as I recall at the time.


#59

The amount that each employer subsidizes their life insurance varies so much from employer to employer, that you really shouldn’t say this. This may be the case for you, but it doesn’t mean it is the case for everyone. My work life insurance was WAY cheaper than an equivalent term life policy for a healthy individual. For me, it is based on my pay and only goes up in cost in relation to my pay, not my age. As with any purchase where prices vary, you have to do your homework.

That’s a lot of typing to say something is not as good a deal, but is still a good deal.


#60

My comment was based on 3 employers. All 3 had optional term life that was horribly overpriced probably because they did not subsidize it much. In that context of low/no subsidies, it made sense that premiums which were likely based on some average health/medical history with no medical exam were not as good as what I could get on preferred plus tier in competitive environment.

But I’m still stunned that your employer optional life insurance premiums were NOT age-specific at all. I mean a 70-yr old employee will probably earn 2-3 times more than a new hire in their 20s but their life insurance premiums would likely be 10-20 times more.

Anyway, your conclusion is correct to always do your homework but I’d be curious to hear more from others here on whether their employer optional term life insurance was a good deal or not compared to their health category (preferred plus, preferred, standard, smoker/nonsmoker).