Life Insurance

you'll probably hear this often and it's true...buy term and invest the difference. whole life is a rip off. term life is basically this...you die, the entire coverage amount gets paid to the beneficiary. you can insure yourself for a lot more for less. very simple. with whole life there's a cash value option. you pay a HUGE premium for this "investment". as your cash value grows your death benefit actually decreases. and when you die with a whole life policy, your beneficiary gets either the cash value at the time OR the death benefit. not both.

also, it is you and your spouse that needs to be properly insured. don't get suckered into buying a policy for your kid. just add a child rider to your term policy.

 

^ Agree...whole life is the biggest scam there is. Your agent will love to sucker you into this.

 

The first thing to consider is why you are buying life insurance. Once you know the reason you are buying life insurance, then you can know how long you need the life insurance for. For example, if you have a mortgage and let's say the mortgage is for 30 years, then you probably need a 30 years term life with death benefit that will cover the mortgage.

Also, look at the big picture when you are making a financial (life insurance is part of your financial decision). It is not just about whether you are buying whole life or term life, or buying term life and invest the difference, it is about your whole portfolio of assets and what you are trying to achieve. The extra premium you pay for whole life gives your a guaranteed return in the form of accumulated cash value and non-guaranteed dividends. For some people, that may be important. For other people, they may be better off using those extra premium investing and assume the risk themselves.

 

There are actually circumstances where policies other than term make sense, but they are very specialized cases and have to do with tax and estate planning rather than financial security for your family.

This poster is right though, get a term policy for you and your spouse with a child rider for your newborn and call it a day.

If you need a referral to someone who can help you with this, send me an email through the board and I'll get you someone.

Edit: Also, there is no "best company." Different companies rate people differently under different circumstances. Work with an independent agent (email me if you need one) and get competitive quotes. If you work with an agent that is pushing something like MetLife or something else without showing you any competitive information, you can be assured that this person is pushing the most profitable policy for himself on you. That may mean you are paying way too much, a little too much or it could be a good deal. You don't know unless you work with someone who actually shops it for you. There are honest insurance agents, but many are commission whores.

 

Term insurance is a lot cheaper, but if you outlive it, the policy is over. The way I see it, 30 year term is the way to go. If you happen to outlive the policy, in 30 years, there shouldn't be a lot of debt in your life to pay off (hopefully). Your child or children will be grown by then, and at that point you can get a burial policy if you want, so your family won't have to pay 12-15k for a funeral. Burial policies are a bit expensive, but if you know you're at the end, it's worth it.

Also, do it before your next birthday. Life policies go up the older you are, so it's best to do it now.

 

Get a 20 year term to cover your family if something happens and hope you never need to use it. After 20 years you should of put enough away to become self insured i.e inheritance

Whole and Universal life is snake oil and the only person who will sell it to you is an insurance salesman because it makes them a large commission

 

Deciide how much income your family would need to replace without you, living expenses, college savings, non- employment health insurance etc.
Multiply that by 33 (3% return and burn rate)

(Hint: it's a lot)

 

Buy a whole life policy for your child, not a lot per month, $50 or so. Have him take it on and pay it himself when he leaves home. Make him PROMISE not to dip into it or cancel it.

If you can have that discipline, and he can as well, then he will retire a millionaire, no matter what else happens.

But in that case it's as an investment, not primarily as insurance.

Term is great, it's cheaper, IF YOU ARE YOUNGER AND IN GOOD HEALTH.

The thing you have to watch out for with term is that the higher your likelihood of needing it, it will become increasingly prohibitively expensive, eventually leading you to a point as you age where you may be on a fixed income and literally not be able to afford to keep it. Whole life, as much as a 'ripoff' as some people like to say, will never leave you in that situation.

So it's not as clearly cut and dried as it may seem at first glance.

You have to make the best decision for yourself and your family. Don't take this stuff lightly.

 

This thread is hilarious. None of us can make a recommendation to you about life insurance without knowing your age, your health, your income, your occupation, your future earnings power, your debt vs. your current wealth accumulation status, and your future financial plan, etc. For anybody to simply tell you that term is best or some other policy is best without going over all this information tells me they are novices at best.

By the way, there are a ton of hybrid type policies today which are neither term nor whole life but share some of the best features of both. Life insurance isn't so black and white as term vs. whole life anymore. That's really a question for the 1980's as visions of A.L. Williams dance through my noggin. And just as then many people "bought term and invested the difference" only to wind up broke and without life insurance both because of some of the idiotic investments they sank their money into. Not to mention all those people that bought UL under the allusion that it would earn 12% interest compounded. Not to mention all those people that bought 10-year term, had a health issue, and then got dumped on the street with no possibility of continuing coverage when they were at their earnings peaks with kids a few years away from college and no funds other than their earnings to fund those educations.

Have a conversation with a professional where you are asked a number of questions about your financial status and health and then let them explain the options to you.

 

I think HONESTY.

 

Everything can be a rip if it's not what you're looking for, but yeah, term is most likely the best for your situation (and most other people). I'll freakin quote you right here if you give your age/sex/smoking status/amount of coverage wanted.

 

I would LOVE it if my agent said this to me.

 

I used to work for a life insurance company. I actually posted it on here, and took a lot of heat for it.

-Avoid Whole Life, it's a ripoff. It is more expensive, and the return amounts you get from the sellers are estimates, which are almost always on the high end. 95% of the time, you'll get considerably less. You are much better putting your extra money in a Target Date Retirement Fund and forgetting about it, than have it sitting in a Whole Life policy.
-If you want life insurance for your child, get a policy for yourself and wife, and add a rider to the policy. There are many different riders available, and a children's rider is just one of them.
-If you're in bad health and/or have any specific illnesses (ex. diabetes), then the most you can get without taking a test is probably around $250,000, depending on the company. If you fall into this category, it could be to your advantage to get the highest coverage you can, without taking tests, and add a rider that will increase the amount yearly.
-What do you want to cover? Are you 30 now, and have a child that's 1? The general rule is you want to cover them at least until they're 22. This would mean you want a 20-25 year policy. Are you concerned with covering your spouse when you reach retirement? Then a 30 year would be better.
-Don't lie. If you pass away, and they find out you lied, your claim may be denied.
-Most employers offer life insurance that covers 1 year of your salary for free. You can add additional amounts onto this for relatively cheap. This is good if you don't want to commit to a long term.
-Obviously you should get multiple quotes. One I would definitely recommend is Northwestern Mutual. They are consistently one of the higher rated (and cheaper) companies.

Some of the more useful riders:
1) Child Protection - Extra money can be added on, usually in $1,000 increments. This is primarily used to cover expenses if a child passes away.
2) Disability Income - If you become disabled and can't work, you'll receive a regular income. Be careful, some only apply when your disability comes from an accident, while others include sickness.
3) Guaranteed Insurability - Probably the most popular. You can purchase additional coverage at a later date, without taking exams. If you get cancer, you can buy additional coverage. Normally you would be denied. You can also take advantage of this after your policy expires, and you want a new one. They can't deny you.
4) Critical Illness - if you get a specific illness, you're paid a lump sum.
5) Waiver of premium - if you become disabled and can't work, you don't have to pay the premium
6) Accidental death - If you die from an accident, you get additional benefits, up to double. Sometimes this also includes things like becoming blind, or losing a limb.
7) Return of premium - If you outlive your policy, you get all of your premium payments back.
8) Accelerated death - You can get your benefit early to pay for things like a nursing home or specific medical bills.
9) Income benefit - pays the amount over a period of time instead of a lump sum, which allows your beneficiaries to have a consistent income.
10) Cost of living - allows you to add amounts to your policy (usually $10,000) each year. This is a good one to get if you don't want to take an exam, so you can only get $250,000, but you would like a higher amount. Each year it will increase by $10,000, but no exams are required.


Bottom line, if it were me and I had a child.....I would take out a 30 year term policy for myself and my wife. I would consider adding the guaranteed insurability rider, return of premium rider, and/or accelerated death rider, depending on the cost. Be sure the amount enough to replace 5-10 years of your salary, and cover costs of your death, like the funeral.

 

Pugs...

Whats your recommendation for someone with a 30 year mortgage and a spouse?

 

It depends on a lot of things. Are you going to have kids? Do you want to cover their college? How many years are left on your mortgage? Do you want to cover your funeral expenses? How many years do you want to cover your income after you pass away? How much annual net income (after taxes) will your family need? Any one time expenses you want to cover (wedding, new car, home improvements, etc.)? How much do you already have in liquid assets (primarly checking/saving accounts, not 401k's or IRA's)?

Based on what you said, with a 30 year mortgage, assuming you're in good health, and have no kids....30 year term, enough to cover the house, and replace most of your income for 10 years, as well as funeral costs. Add that up, and (what I do, most don't) tack on an extra 10-25% for other costs. So if you conclude you need a $100,000 policy, consider adding an extra $10,000-$25,000, just to be safe. I would probably add the cost of living rider, primarily to cover inflation. If you need a $100,000 policy now, you'll need a lot more than that for the exact same stuff down the road.

 

The best advice is to talk to an agent who will walk through all the different riders, options, term levels (guaranteed vs non guaranteed, etc.) tax issues, scenarios, etc.

Do you need a second to die policy? Is this to cover a mortgage? Are you trying to create an inheritance? I think trying to do this with someone on a message board is the wrong way to go personally.

 

Cool!

Like I said, email me if you need a referral to someone honest.

What you laid out sounds like a classic term policy to me.

However, one thing people who bash whole life (I do not have a whole life policy) fail to mention is that you buy that term policy now, 15 years from now you may be uninsurable and actually want life insurance until the day you die.

 

Get yourself a 20 yr term and call it a day.

If/when I have a kid, I'll buy them a whole life policy and put like $75 a month into it. By the time he's 30 and I tell him he has it, he won't have to post on a message board about what to do, it'll already be done.

My grandpa who is a CPA did it for me. Just found out about it a month ago. Pretty cool to find something like that out.