I want to buy some life insurance. I am 48 yrs old, non smoker, excellent health. I am married with one son 25 yrs old. I really do not want Term life which to me seems like throwing away money. I don't know anything. Does universal life pay a death benefit as well as building cash value? I would like to know if there is a formulae / guideline to go by. If I make 67,000 K per year, should I use a 12 years earnings for an 800,000 K death benefit? Salsemen tend to deluge me with information, and I do not want to throw money away, but if I get hit by a bus I want my wife to be OK.. Thanks in advance...
IMO Term is not throwing away money, Universal is. If you want to invest, invest. If you want an insurance policy, get one. If you and an insurance policy that pays you back, you'll get taken. Notice that is what an agent will try to sell you, but an honest one (very rare), will give you the truth. Get a the cheapest 20 yr term you can get from a company that will be around with the cash to pay if you do need it (look at the ratings). That should last you until you get your bills paid off, ss kicks in and you only need some cash to bury you. Take the additional money you save by getting the term policy and invest it in a semi-safe mutial fund. To keep you from just spending the extra savings, use payroll deduction if available. Or you can just make additional investments each time you send in your premium check. In 20 years, you should have way more value in your investment account than UL will have in the cash option. Additional insurance you may look into is Long Term Care. This can be pricy but the odds are you are going to need assisted living sometime before you die and that is really pricy if it's for any length of time.
Thank you very much Art V - I know a little more now than a did before. I will look into the Term life and put money in investments- Thank you very much.....
Is the Universal Life - cash building a Hook? Is it more expensive to allow the cash to build up... I did not know about term. At the end of 20 yrs the policy is over, and whatever you paid in covered that policy period??
I vaguely remember hearing Susie Orman saying the same thing on her radio show. ArtV's advice sounds very reasonable.
Actually, with life settlements becoming a more and more viable option, buying whole or term life isn't as dumb as it once appeared to be.
What ArtV said. Some term life will allow you to convert to a single paymnet whole life policy upon completion. Something to think about at least.
The problem with what ArtV said is this: what if you still need the insurance when the term has run out? The essential question is for how long you will need the coverage. If you can say without hesitation that you only need it for 20 years, then by all means get a 20-year Level Term, but what if you will need or want life insurance beyond that point? It will be much more expensive to start a new term and you may have insurability issues. You can gripe all you want to about the higher cost of Universal Life but remember this, there is always a Death Benefit attached to it. Can you say that about your investment alternative... especially after the 20 years is up? I'm in the insurance business. I specialize in LTC and disability. Ninety percent of the life insurance I've sold has been term. There is a place and a need for permanent (universal) life insurance. The mistake is in thinking of it as an investment. It's insurance. Any kind of insurance for which you want a longer commitment is going to cost you more. In this example, the "commitment" goes from 20 years to 50 years and more. Under which plan is a death claim more likely to be paid: the 20-year commitment or the 50+-year commitment? You can't have it both ways. Neither can the insurance company. Whole life insurance was a response to consumer complaint decades ago about wanting to even out the cost of the coverage over the life of a lifelong policy. That's why they give you a limited internal cash accumulation value. The advent of level term insurance strongly coincides with our society's growing willingness to take on debt. It surely has its purpose, but not every insurance need stops on a dime-- like when a mortgage is paid off. The original term product, annual renewable term, is hardly available anymore.
If you still have high debt at 68, then term would not be for you - that is true. My assumption is that with grown children and 20 more years of income, you will not have any debt left and the only thing your wife will need will be money to bury you. Also, I assume that TBar is contributing rather generously to a 401k at this point. Assuming that the 401k is semi-sufficient and the house will be paid off, the 401k + ss should be more than enough to pay the bills if she manages the money wisely and doesn't want to help a Nigerian get their money back. So if UL costs $1000 more a year for the same face amount (which I think is an unreasonably low figure), even in a 0% interest account, you will have $20,000 to bury you. Though I think well blended Roth IRA would be better than a 0% interest account. I'm sure giddyup is aware of the curve in the need for life insurance - small to begin, grows are you progress, diminishes as you get old. So my advice would be to get a 20 year term, pay-off all your bills, and invest the rest. I think this would be a better solution than a UL policy.
There are more scenarios that beg for permanent life insurance. I'm just protesting the broad swipe against universal life insurance that you unfurled. Level term is the proper choice most of the time, but you should remain open to the need for and use of permanent life insurance. Also, you should see how many people's lives don't go as they planned when they were 35. It happens... way too much. Can you say ENRON? Another thing I would add as a mounting problem is end of life bills: hospital bills and custodial care expenses (long term care). My next door neighbor's dad is about to die in the hospital and has spent $600,000 over the past four months. My own dad spent about $200,000 in long term care expenses over the last three years of his life. While the prudent thing to do would be to have those risks insured with good medical, or medicare supplement or long term care insurance--- many people choose not to or lose their insurability and don't have the option to insure those problems. Those monies lost can be replenished by "permanent" life insurance if it is purchased when you are insurable after passing. That money may help the surving spouse stay off welfare.
Why do you need insurance? To pay off the house? To fill the SS gap for your wife (until she turns 62)? To pay your estate taxes?
That's a good point. But it's also important to recognize that term isn't "throwing away money" any more than auto or house insurance is throwing away money. UL may be appropriate, but there's usually a steep premium attached to it. Not all insurance salesmen offer entirely unbiased advise here -- given the commission on UL is often higher. Recognize that insurance is not an investment, review how much you need, and plan accordingly. Most people don't need life insurance after they're 65 or so...assuming their debts are taken care of and their retirement planning is secure (and they have appropriate med insurance). Oh...and don't go entirely by what you read on a basketball bbs . There's probably better sources out there.
I have Term, and have had universal, but unless your using this as a savings vehicle, do term...I use this as a supplement to my work insurance... You pay much more for universal, and the cash build up isn't really worth it, IMO...
You're asking the wrong question, you know? In other words, why drive a Volvo when you can drive a Hyundai? I'll work up some numbers for you though...
All from the same carrier (Standard Rates): $600,000 DB 20 Year Guaranteed Level Term Annual Premium: $2874 20 Y Cumulative Premium: $57,480 $600,000 DB UL To Age 80 Guaranteed Annual Premium: $4178 20 Y Cumulative Premium: $83,560 DB guarantee holds at this premium level for 11 more years. How likely is death to occur between 69 and 80? $600,000 DB UL to Age 90 Guaranteed Annual Premium: $4959 20 Y Cumulative Premium: $99,180 DB guarantee holds at this premium level for 23 more years. How likely is death to occur between 81 and 90? Can you turn $1300 per year for 20 years and $4178/yr for 12 years into $600,000? OR Can you turn $2100 per year for 20 years and $4959/yr for 22 years into $600,000? You have a better shot at this but you also have virtual certainty of a death claim being paid to your beneficiaries.
