Life Insurance

[gsganzer]

Some of the recent threads about losing a spouse, living wills, etc. prompted me to also remind everyone of the importance of life insurance.

When my brother passed away last year, we were quickly reminded of exactly how important life insurance is. Without a life insurance policy, my SIL would not only have suffered the loss of her spouse, she also would have needed to sell the house and consider additional employment to make ends meet.

The time to get insurance is when you're young and healthy. If you develop a medical condition, you might even find that you're no longer elegible for insurance. If you or your spouse passed away today, what financial burdens would be thrust upon the survivor? Would the survivor be able to pay the mortgage? Would the children have money for college?

Term life insurance is relatively inexpensive. And as the name implies (term), it covers you for a specified term. It's designed to cover the term in your life when you have financial burdens that would pass on to someone else if you died.

Just as an example, I've been getting quotes for 250K policy with a 25 year term. I'm 40, so this covers me to 65. The amount would cover all of our financial liabilities, including a good chunk of college money for the girls. By the time I'm 65, there won't be any financial liabilities because the mortgage will have long been paid and the kids (god willing) will have completed college. If I croak at that point, everything we have will be an asset.

Hopefully, one or two of our brethren that are in the insurance industry will chime in and give some guidelines regarding coverage, terms etc.

This really is important and needs to go hand-in-hand with your will, advanced medical directives etc.

 

[Birdhunter1]

I'm 26 years old, if I died tomorrow my wife could go the rest of her life without haing to work too hard at all, possibly not even needing a full time job.
My parents had a whole life life insurance policy on me since I was born, on that one I am locked in at teh rate of a newborn. Another they took out on me when I started playing football in high school just in case something happened to me, on that one i am locked in at the rate of a 14 year old.
Then at work (state job) I have a policy that covers 5 years of my salary, my wife would have health benefits for life, and my retirement.

 

[MossRoad]

Many times the couple will have life insurance on the husband only and forget what a significant contribution the wife brings to the marriage, regardless of if she works outside the home or not. Both spouses should be insured.

 

[reb]

Hopefully, one or two of our brethren that are in the insurance industry will chime in and give some guidelines regarding coverage, terms etc.

You make some good points. I would suggest consulting a competent financial advisor who does not sell insurance before making any decisions, however.

 

[RonR]

Guys, I'm on the other end of the spectrum. Had term life (cheapest available) while the kids were little on each of us. Realized that I couldn't afford to keep the house without insurance on the MRS, if she died.

My annual renewable term insurance was getting pretty pricey (about $1K a yr for $250K coverage) on me.

Meeting with my financial planner, he showed me I didn't need life insurance anymore. He's right, but instead of dropping it, I reduced mine by 2/3rds, reducing the premiums also.

Sometime, I'll drop it all together.

No one will ever convince me that buying anything but term is a good deal for the person. It's a REAL good deal for the insurance company to sell you whole life!

Just remember to keep insurance for what it's intended for--the premature death of you or a spouse. Invest in other things, but don't invest in life insurance for anything above your death needs.

Disclaimer: I don't sell insurance, I"m not a banker, an investment adviser/salesman, or fin planner, just an average guy.

Ron

 

[Phils]

I own a small agency but nothing more than's been said here comes to my mind. Each and everyone's situation is different and I've never found guidelines that applied universally.

I prefer "whole" life insurance, also preferring a policy that the premium can be changed. Many policies can't. I've increased my premium a couple of times and if I don't die I'll get back all I've paid in plus some.

If something does happen to me before I retire my wife will get my agency, guaranteed (few companies have that promise). She can sell it back to the company if she wants, or run it herself. Between that and my life insurance she should be comfortable. Not wealthy, but comfortable.

I'd only re-emphasize that people need to get it while they are young and healthy, just like health insurance. The problem that arises is that "young" many times means "cash strapped" too. Those instances I recommend a "term" policy that can be converted to a "whole" life policy any time during the term. That is, 19 years into a 20 year term a person is diagnosed as having diabetes (or any of a multitude of things that won't immediately kill you but precludes you from ever buying life insurance again) they could "convert" all or part of the term amount to whole life that will provide insurance for life. Again, that is my recommendation for young people with limited income: get term (as much as you can afford) now, then convert to whole later as budget allows.

Of the death benefits I've delivered no one has ever been unhappy to see me come carrying the check. Sometimes, the amount may have been sufficient 40 years ago but never updated. One was a check for $5000 to a widow with some extensive medical bills to pay.... that amount doesn't go far these days.

Laws require people buy auto insurance, mortgagees require they buy homeowners insurance but there is no requirement for people to buy life insurance. Loss of potential earnings is usually a bigger loss than a burnt house or crashed car.

Phil

 

[RonR]

Phil,

You do bring up some good points.

The conversion issue is important as you described. My policies allowed me to convert to whole life if I became un-insurable.

And you are right on concerning the updating. My Mom had a life insurance policy that she bought in the 50's. For a face value of a whopping $1,000! It was a 20 pay life, and had been paid off forever when she died in 2001. But $1K was a pitiful amount to try to pay for her funeral with. Fortunately, she had some other assets............

Best wishes,
ron

 

[randy41]

deciding about what kind of life insurance to get has many variables and generalities do not apply to all. the suggestion to seek help from a person who does not sell the product you are shopping is the best advice given. i suggest you seek the help of a cpa or a lawyer. one with experience in this area.

 

[bugstruck]

I have both term and whole life. Term is the much better deal, especially if you take the excess and invest it. Most won't. Whole life is a bit of a rip but it works for me in the amount I got at the time I procured it. Gives me the option to carry it on and build cash value and build additional pay-out benefit, roll the (future) additional paid up insurance into investment instruments, let it run unfunded at current thresholds self-supporting (no premium), or simply cash out. Don't get me wrong, the cash value is almost a joke but it is still more than all of my premiums paid to date. Just not much in added value for that investment, except of course if my wife ever needed it. Just don't do a huge whole life policy for the total amount of your life insurance requirements. But at perhaps 1/3 of your total life insurance requirement as a younger person the whole life isn't always a bad decision. Just stack a term policy or two behind it to get where you need to be (while you are insurance healthy). Worked well for me so far. I'm thinking of stopping the premium payments soon. It will allow me to drop the term policies earlier too if I so choose.

Keep in mind, I don't know insurance. So the advice by Others to get some advice outside the insurance arena is smart. I didn't do that and I'm sure someone could have painted a more financially astute way for me to attack it. They may have steered me wrong given a few late 40's health issues that insurers don't like but that advice would have been better for the vast majority of us. As it turned out my ineptitude somehow helped me. That's a rarity.

Edit: So the guys selling me the insurances did offer the best possible advice at the time. Just like all other careers, most of them are decent hard working people. I've had good Agents who didn't try to over-insure me. They often get an undeserved bad rap.

 

[3RRL]

Go to a CPA or financial advisor for advice on finances or taxes or maybe investments, but go to an insurance company to fill your insurance needs. Insurance needs are different than asset current financial matters. They provide for those things that you or your spouse and family will NOT have.

Determine what your family needs will be income to pay off mortgages, provide college funds or a stable income to make up for yours (or your spouse). Work out a long range plan as your needs change to keep them in balance. Insurance is a vehicle to accomplish this. Get whole life whenever you can afford it too. Just my 2¢