life insurance

[bucketmouth64]

Do rates among life insurance companies vary greatly given everything is relatively the same? My son who is contemplating on getting whole life or term life insurance. The $25k whole life would cost about $40/month and a $100k 30 year level term would be about $25/month from an insurer his work uses. I said the $25k isn't much and would be enough to do the funeral. I'm no expert with this stuff, any advice for a 25 year old? At least he's thinking about the future.

[mainbutter]

My advice with life insurance:

It's close enough to being a scam that it kinda irks me that it exists. Life insurance has no cap on what is taken in versus what is paid out in claims, and is a very bad financial investment. The protection you get is mathematically not worth it.

If you can afford $40/month life insurance, you can afford to save it yourself. He just has to have the self-discipline to do so and not reach into the honey pot if he's itching for a new toy.

[eyeguy 54]

I have always thought term for life insurance. select quote is a great place to start. check 10 or 20 year also. married, single? questions they will help with.

[bturck]

That's fine Main Butter if your whole financial plan hinges on retirement only. However if you die before that time and leave behind bills and loved ones, loss of income for how many years then you are way off. My advice Term Life, buy as much as you can afford for as long as you can and invest the difference in your ownIRA or a company sponsored 401k. Whole life is not a good investment

[bturck]

That's fine Main Butter if your whole financial plan hinges on retirement only. However if you die before that time and leave behind bills and loved ones, loss of income for how many years then you are way off. My advice Term Life, buy as much as you can afford for as long as you can and invest the difference in your ownIRA or a company sponsored 401k. Whole life is not a good investment

[bturck]

That's fine Main Butter if your whole financial plan hinges on retirement only. However if you die before that time and leave behind bills and loved ones, loss of income for how many years then you are way off. My advice Term Life, buy as much as you can afford for as long as you can and invest the difference in your ownIRA or a company sponsored 401k. Whole life is not a good investment

[bturck]

Geez wasn't trying to over emphasize my point, iPad went nuts.........

[eyeguy 54]

lol, it was worth saying 3 times...

[SalmonSlayer]

I bought a $250k whole life policy when I was 25 when my employer stopped matching my 401k contributions. The younger you are when you qualify, the better the rates. It has been paying dividends for over 100 years with no lapses, it's getting me about 6% return, I can borrow from the policy, tax free. I also carry term through my employer because the policies are high payout, and it's cheap. I don't recall the numbers, but very, very, very few term policies ever get paid out, where as my whole life policy will be paid in full, tax free to my beneficiaries on my death.

And I wouldn't go around telling people whole life is not a good investment. I may agree it's not a good investment if it's the only investing you plan on doing, but as part of a wealth management plan, it's a very useful tool.

[nofishfisherman]

My advice with life insurance:

It's close enough to being a scam that it kinda irks me that it exists. Life insurance has no cap on what is taken in versus what is paid out in claims, and is a very bad financial investment. The protection you get is mathematically not worth it.

If you can afford $40/month life insurance, you can afford to save it yourself. He just has to have the self-discipline to do so and not reach into the honey pot if he's itching for a new toy.

Life insurance may not be worth it if you are single with no kids. If you die you aren't leaving anyone behind that was counting on you and your income.

Add in a wife and kids and now its not such a bad investment. Both my wife and I carry enough term life insurance to pay off the house, and any other outstanding debt and still leave a nest egg for the survivor. We are a 2 income family and have one kid as of right now. If one of us were to die we want to make sure the other one doesn't have the added financial stress on top of the stress of suddenly becoming a single parent.

I think both of our policies together are about $500/year or roughly $40/month. Sure I could skip the policy and just toss that $40 into savings and come out $10,000 dollars ahead after 20 years if neither of us die. However, if one of us does die that money I save won't offer much financial security where as the term policy would provide everything my family would need for the forseeable future.

Odds are I'll never need the policy but I rest easier knowing my family is taken care of either way.

[aanderud]

Whole life insurance is definitely a "safe" investment -- because it has that guaranteed payout at the end. But, there's no free lunch anywhere. The insurance company isn't in business to give you a good deal, but to make money -- and they calculate the premiums that you're going to pay so that they're high enough to cover that guaranteed payout AND provide a handsome margin to the insurance company. There's a good chance you could do better yourself by putting that money in the 401k and letting it ride out the roller coaster with a diversified strategy. But, that comes with risk, so you have to figure out your risk tolerance.

On the other hand, if you don't need a guaranteed payout of 250k after you're dead.... but you primarily want to hedge against dying early and not realizing your lifetime earnings potential, and make sure your loved ones are able to pay off their bills (student loans, mortgage, etc) if you die young, then that's what a cheaper term plan is good for. The fact that they don't pay out very many term plans was mentioned above -- but that is a GOOD thing. That's precisely what keeps the premiums low. LOL. Not sure why anyone would be hoping for all term plans to be paid out, as premiums would skyrocket in that scenario.

This pooling capability and low probability of payout is, IMHO, the best case for insurance. You pool a bunch of people with low probability of payout together and give them a lower rate than would otherwise be required for that specified payout. It's much like your homeowner's insurance at that point. Yeah, there is a finite chance that your house ends up as a total loss due to fire or tornado -- but you don't pay a premium that would ever come close to covering the total loss scenario. Since there aren't many total losses (statistically, assuming the insurance company has a large and diverse customer base), the lower premium pooling will cover those few large payout events and supply dollars for the insurance company's profit of course, at the same time.

[Down Deep]

The chances of a 25 year old dying in the next 35 years is very slim. Check out the actuarial tables on the net. Sudden impact is probably the cause of death he needs to be most concerned about.

Whole-life is a bad deal. Your son would be better off buying a similar term amount and investing in the difference in an index fund he could buy himself with no commissions. If your son has a wife, kids, home and an income he needs to insure he needs a whole lot more insurance than he can get for the money spent on whole-life. If he has no one depending on him he should buy enough insurance to cover 3X his income in term.

[fishersofmen]

I agree with at least having term as it is cheap enough to have and the security it would give to my wife and kids can't even be measured. I would hardly call it a scam. Of course they are making money because of the low payout but that is what makes it so affordable. For 25 bucks a month I have close to half a million. That's only $3,000 every 10 years for a TON of financial security and we aren't getting rich any time soon so if something happened to me without it my family would be in big trouble.

[deerminator]

Yeah, if he's on his own, enough to cover a funeral is good but with wife and kids, I say as much term as can be afforded through a work-related policy the better. I have 7x my annual salary through work plus double that if my death occurred on the clock. My dad had a $100,000 policy 20 years ago when he died. That didn't go very far for very long then. And he had the chance to double it a few months before his death and didn't. That experience kind of influenced me in terms of going big on the insurance for the benefit of my own family.

[Lip_Ripper Guy]

Bturk is right on. Term life is a really good idea, for everyone.

When I was 19 I started a $100k 30year term for $140/year. At 22 I added a $250k 30year for $195/year. I'll be 30 this year and adding another $250k, so long as prices haven't changed too much. Very cheap insurance. I spend more than that on cheeseburgers in a year, and I don't eat very many cheeseburgers!

You just never know what can happen, and when it will happen. There's a whole bunch of stuff out there that may seem improbable, but when you're the 1 out of 1,000,000, odds are someone is counting on you in some capacity. Even if it is only enough to cover a funeral ($15-20k), do them that favor.

[Tom7227]

When we bought a house I bought term life insurance. The policy was enough to pay off the house plus 2 years of my salary. I figured that if I went the wife would need to get on with her life and so after 2 years of crying over my death she would have to get out in the world and earn a living. As the houses got more expensive I bought more insurance. Now that the house is nearly paid for and I am retired I am going to let the policy lapse.

Two things haven't been mentioned. First if you buy a policy you have insured that you can buy coverage. If you were to have an accident or an illness you may find that in the future you couldn't find a company to issue a policy. So you are insuring your insurability. Second, you are locking in the amount you pay for the set number of years. I am not a fan of whole life but as the earlier poster mentioned he is getting 6% return on the investment. Right now that looks like a great deal. I suspect that it also means that the policy was written quite a few years ago when you actually could earn interest on an investment or a bank account.

Term insurance is just that. You buy $X of payout for Y years and it costs $Z. Whole life in a simple way is just term insurance with a forced savings plan. In it your really paying $Z+ $? in order to have something you can cash in at some point if you need the dough. What you have to decide is whether you can really force yourself to save the $? dollars and can you get a return on that investment that beats what the whole life policy is offering. In a way whole life insures your ability to save money.

[bturck]

Life insurance through your employer is a sweet benefit and should be taken advantage of: however if you should leave that place of employment that benefit stays with the employer, my advice is still to govern your own destiny, financial planning for retirement and life insurance go hand on hand. A good Growth Stock Mutual funds should realize a 10 0/0 annual return. You cannot look at your investment daily and panic, long term growth is the answer to a comfortable retirement. Many options out there, do your homework and get more than one quote

[10,000 Casts]

I always cringe when I read some of the responces to posts on Insurance.. I've sold life insurance for 5 years now and I have handed out many death checks to families in need.. IMO, Life Ins is for one thing, INCOME REPLACEMENT. I have Life insurance because if I die, I want my wife and son to not have to sell the house and cars and dramatically alter the lifestyle that I have built for them. I also have it because if I ever become terminal, I want to be able to use my accelerated death benefit.

Quote:

Do rates among life insurance companies vary greatly given everything is relatively the same? My son who is contemplating on getting whole life or term life insurance. The $25k whole life would cost about $40/month and a $100k 30 year level term would be about $25/month from an insurer his work uses. I said the $25k isn't much and would be enough to do the funeral. I'm no expert with this stuff, any advice for a 25 year old? At least he's thinking about the future.

All companies are different but they can vary. Some companies self insure and some have to reinsure which can effect rates. He'll prolly have to take a med exam and differnt companies have different underwriting guidelines to meet certain rates i.e. non-nicotine - Super Select. it's also possible he could be table rated for blood pressure/cholesteral/diabetes etc. IMO $25 a mo for 30 yr term isn't bad. If he wants to nickle and dime it then maybe go with the 20 year term for less mo premium, ($5 mo?). Another thing to do is check with his auto insurance co and see if they have a 5% discount if he has a life policy. I'd just make sure that it is a solid company with a good outlook.

Whole life isn't right for everyone but it does have it's place. I personally have all term on myself.

[ozzie]

to me whole life is a great policy to put on a young person 16 or younger. I have 10 year pay 25,000 whole life policies on my kids ages 5 and 1. This quarentees them insurability, I only pay 3,000 over 10 years and after 14 years the policies have a cash value of what I paid in but I won't have made a payment in 4 years!! The policy also gives my boys the options as they get older to add coverage to the policies up to 6 times throughout their life. My wife and I both have 20 year term policies in the amounts of 250,000 to cover us if something bad happened to either one while we were still trying to raise the kids. Peopl depend on you and to not have your life insured is a big mistake...why do you think families have to have spaghetti suppers in memory of such and such and to help their family out? It is cause they didn't care enough to think of their family and their well being so now the communitie feels they must help out!!! Life Insurance is NOT A SCAM it is peace of mind knowing that if something tragic were to happen to you or a love one the survivors would be helped with things such as to pay for your funeral expenses, pay off your left over debts, making house payments, time to grieve, paying for kids college and many other life events. If you don't have it look into it...

[Hillbiehle]

Here are a few thoughts that I'd consider (I am an insurance agent for businesses, however life insurance is not my specialty). Your son is more likely to live to see retirement than die prematurely. I would focus on the $40 a month to pay down debt or adding to his Roth contributions, etc. That being said....

If he buys life insurance (I have term), consider a 1,000,000 term policy. You will most likely find the premium from a reputable company to be very reasonable. If he ever gets married and has kids, he won't have to increase the insurance and be underwritten a second time and the premium will be reasonable as his income increases. I'm 37, and I pay $800 a year on a 20 year level term.

Secondly, I've always stayed away from whole or universal life. However I've changed my tune and if I'd done it over, I would have done whole life. Read the book "Tax Free Retirement" by Patrick Kelly. Actually I encourage anyone reading this thread to read the book.

[delcecchi]

When it comes to whole life, don't believe what you are told. Read the actual paperwork, every word. What does it Guarantee paying as compared to what it paid last year. All that stuff.

I am a big fan of term insurance, which is pure insurance with no savings component, no investment component, just a bet that you will live or die. You need enough to take care of your responsibilities should you bite it prematurely, especially if you have people depending on you, like a family. It needs to be in effect as long as you have those responsibilities and don't have the assets to take care of them.

[bucketmouth64]

Thanks everyone for your insight. I have a level term, but I didn't get insurance when I was that young.

[10,000 Casts]

Ozzie said it perfectly a few posts up and I'll read that book that Hilibillhe recommended. And like del said, on wl, read you illustration on what's guaranteed.

[Myrt]

I have a mix of term and whole. Wasn't planning on getting any whole life because have been preached to from friends about it being a terrible investment and a scam.

After considerable research I feel I have what's best for me, term for income replacement for my wife or me, a survivorship whole life policy for my wife and me(we both have to pass),

small whole life for kids just to make sure they have life insurance as adults in case something arises that makes them uninsurable.

I am also able to do Roth's and have my own business, so the whole life isn't looked at me as my only investment, just a component. Just because it may not have the return as other investments does not make it a scam.

My personal priority was to establish my business first, term second in case of tragedy, outside investments thirdly, and then whole life. It works fro me, my policy will be hopefully

be my kids college fund, the cash value is more than what I have put in totally, so what's the difference than if I hid it under a rock, the difference is the death benefit.

This works for my situation, a good honest agent who can access your wants and needs is probably the best start for this process. There is no right and wrong, just what fits you.

[JakeJ_Mn]

When I was 26, I bought a whole life policy for 75,000 for $29 a month. Now at 60, I still pay just $29 a month for the initial 75,000 and have added 50,000 over the years which in total cost me $10. I pay $39 a month now for the $125,000. The policy has a cash value of just over $10,000 which will add to the total. I also was lucky enough to have a lifetime $25,000 policy paid by my employer.

Trying to save per month is great IF you can live long enough to save the cost of helping your family survive after you have gone.

My math tells me that if you are 25 and save $40 per month until you are 60 you will have $16,800 in the bank plus some interest.

Nowdays, it costs most people at least $600 to $800 to live in the own home. That $16,800 won't go very far.

Term or whole life is a choice, but everyone should have enough to help their family survive.