Life Insurance?

[JustaTexan]

For the past few months I've been researching various types of life insurance. I've got two young children and well they need to be protected should anything happen to me.

Esquire's thread about wills really got me thinking that I need to get on the ball with this because well, ya never know.

I'm thinking of a 25 year term policy. My youngest child is almost 2 so that would cover them both through college should I pass. But they also have policies where you pay slightly more a month but you get what you paid in back at the end of your policy if you don't die.

Anybody have any experiencies with either type?

Thanks alot!

[zfire]

My two cents worth:

We have term, plus one through work. Term goes away like 4 years after C retires. That's all we need now that we're old as dirt. You could take that EXTRA cash and sock it in the bank or somewhere safe for emergencies.

Deanna, some companies won't let you put your minor kids as the beneficary, so think about who gets it before you do a policy ok? And if they do allow minors to be named, remember who may get custody of the children.

[willingtocope]

Not to over simplify, but there are basically two major kinds of life insurance. One, they bet you won't die before the "term" expires, and the other they bet you will live long enough to pay them (or, let them earn interest on lending your money) the amount of the payout. The first is "term life", the second is "whole life".

There's lots of variations on these themes.

It sounds like both of the policies you're looking at are basically term insurance...except that the second one expects to collect enough in premiums from you to earn enough in interest so they can give you back what you "invest".

Confused? Its intentional...they want your money...they don't want to have to pay you money.

Anyway, under the circumstances you describe...the first plan...the "normal" term life insurance sounds like the way to go. You'll be able to get more coverage for the same amount of money, and, if you should pass before your kids are old enough to vend for themselves, they'll have money to support them (assuming you also have someone you trust to look after them).

[JustaTexan]

You could take that EXTRA cash and sock it in the bank or somewhere safe for emergencies.

Deanna, some companies won't let you put your minor kids as the beneficary, so think about who gets it before you do a policy ok? And if they do allow minors to be named, remember who may get custody of the children.

You mean the extra I would be paying with the non-term policy? You know that is a good point Z.

I would probably name my father and then my brother as the beneficiary. I also need to create a will and all that jazz to name my father as the person who would get my kids if I passed, so that's something else to add to my list and think about.

I sure will think about that and thanks for the advice Z!

[JustaTexan]

Not to over simplify, but there are basically two major kinds of life insurance. One, they bet you won't die before the "term" expires, and the other they bet you will live long enough to pay them (or, let them earn interest on lending your money) the amount of the payout. The first is "term life", the second is "whole life".

There's lots of variations on these themes.

It sounds like both of the policies you're looking at are basically term insurance...except that the second one expects to collect enough in premiums from you to earn enough in interest so they can give you back what you "invest".

Confused? Its intentional...they want your money...they don't want to have to pay you money.

Anyway, under the circumstances you describe...the first plan...the "normal" term life insurance sounds like the way to go. You'll be able to get more coverage for the same amount of money, and, if you should pass before your kids are old enough to vend for themselves, they'll have money to support them (assuming you also have someone you trust to look after them).

Yeah it is pretty confusing. There are just so many different varations, etc. to choose from.

I think you right though about going with the basic term. I'm only 25, non-smoker for the past 5½ years, decent health, etc. I've gotten quotes for only $25 month for $250k.

Thanks alot for the advice! I'm kind of weird about wills and life insurance and just things involving death for some reason, but getting ya'lls imput makes it a little easier.

[jq26]

Life insurance- unless you're wealthy, simple TERM insurance is the way to go. Its dirt cheap and you get a huge bang for your buck. Whole life is wasteful and expensive for the average person.

I'm slightly older than you with only one child. The amount of term I carry will pay for college for one kid (about $300k in year 2026) plus pay off the mortgage on my primary residence with about a years salary leftover for bills should I die. All told I think my policy is for about $600k and it is dirt cheap (like $30/month). If I have another child, I'll increase it like $300k more to pay for college #2. My children and wife will have their needs taken care of. But no need for a windfall for anyone.

The return of premium policies are sort of a worthless gimmick imo. Over long term periods of time, the "premiums" you pay become worthless because the real value is the compounding value component that does not get returned. So over 25 years, you pay in $25000 and you get back $25000 in year 2034. The insurance company has profited over $100k from your money (this is perfectly acceptable), but you get returned to you what will likely be a nominal amount of money in 2034 (maybe one month's car payment or if we have low inflation maybe a mortgage payment).

With whole life, you can do some interesting wealth transfer techniques but 99% of people out there don't have an estate & gift tax problem to worry about. Plus its expensive. And really- once your kiddies are on their own as adults and bills are paid, then why have this wealth locked up in a policy when you could have had a cheaper term policy and invested the difference every month over your lifetime and built up a sizable Roth and had tax free income forever post-retirement?

[Ravenous Wolf]

The other half of the equation may or may not be important. It is all dependent upon you.

That is, your will.

There are a lot who come across a lot of money from an insurance settlement or a will and within six or twelve months, it is all gone. They go to Cancun, the Carribean, cruises, etc. They also pay the way of their friends. I have personally known people who blew the cash like that and there are plenty of stories in the media about it.

On the other side of the coin, I have also known a lot of people who put it in their will that their children can only spend the money on tuition payments, downpayment of a house, etc. Rather than them getting cash, it is spent directly on something that is part of their future.

But then again, there are plenty of people who are cool with it if their children spend all the money on a cruise and their friends (who are then gone when the money is gone). So it comes right down to how you want to define how the money is spent. Some people think it is important while others only think that the money is important, and what happens afterwards is not.

[zfire]

Cheap Term...that's what I'm saying.

Oh ho...I knew a lady a few years ago who died, and left everything (she thought) tied up. So be careful when you do the will. . Her grandson ended up with a lump sum of cash, plus was able in the end to sell the house and get the money she had left for upkeep. He now is a street druggie with nothing. If it had been written correctly he's be living on a small stipend, and still have a roof over his head.

[JustaTexan]

The return of premium policies are sort of a worthless gimmick imo. Over long term periods of time, the "premiums" you pay become worthless because the real value is the compounding value component that does not get returned. So over 25 years, you pay in $25000 and you get back $25000 in year 2034. The insurance company has profited over $100k from your money (this is perfectly acceptable), but you get returned to you what will likely be a nominal amount of money in 2034 (maybe one month's car payment or if we have low inflation maybe a mortgage payment).

Thanks JQ for the great post! I'm really hoping you are wrong in your example of the severity of inflation..... That's kind of scary.

[JustaTexan]

The other half of the equation may or may not be important. It is all dependent upon you.

That is, your will.

There are a lot who come across a lot of money from an insurance settlement or a will and within six or twelve months, it is all gone. They go to Cancun, the Carribean, cruises, etc. They also pay the way of their friends. I have personally known people who blew the cash like that and there are plenty of stories in the media about it.

On the other side of the coin, I have also known a lot of people who put it in their will that their children can only spend the money on tuition payments, downpayment of a house, etc. Rather than them getting cash, it is spent directly on something that is part of their future.

But then again, there are plenty of people who are cool with it if their children spend all the money on a cruise and their friends (who are then gone when the money is gone). So it comes right down to how you want to define how the money is spent. Some people think it is important while others only think that the money is important, and what happens afterwards is not.

Thanks Wolf, I appreciate the thoughts and you are very right. So I can create a will now, (even though I have little to no assets), and I can even desginate how the insurance money, (should I pass), be spent? I didn't know you could do that. If my beneficiary was my father then that would get rid of the problem of designating insurance money right?

[jq26]

25 years ago: http://www.1980sflashback.com/1984/Economy.asp

[JustaTexan]

Wow I just got a really good quote from Allstate at $23/month for 20 years for 500k. Although I can't really stand Allstate I'm thinking that might be the best quote so far.

[JustaTexan]

25 years ago: http://www.1980sflashback.com/1984/Economy.asp

And now a gallon of milk is twice as much.

[mariner]

And now a gallon of milk is twice as much.

1984

Cost of a new home: $97,600.00

Cost of a new car: $

Median Household Income: $22,415.00

Cost of a first-class stamp: $0.20

Cost of a gallon of regular gas: $1.21

Cost of a dozen eggs: $1.01

Cost of a gallon of Milk: $2.26

The cost of a new house seems a little high. I wish they would put the mortgage rates on these things.

So Deanna, that was when you were born and I was your age!

BTW, that is a cutie of an avatar!!

[JustaTexan]

So Deanna, that was when you were born and I was your age!

83 Aquarian Baby here! I'll be 26 in Feb. Thanks for the compliment! Making me feel good!

[jq26]

83 Aquarian Baby here!

Ah yes. I remember '83. I was finger painting and taking naps (I'm 31). Those were the days.

[miracle]

Life insurance... is very VERY different for each person, and when there are kids involved it can get to be a sticky situation. I have a strong insurance background and I have noticed that most people are either pro-term or pro- whole life. Not too much in between. I would suggest that you sit down and discuss your situation with an licensed agent in your state. There are many things to consider and not all insurance sales people are out for your money. Many of them actually care to give you what is appropriate for your situation because if it isn't truly what you need, most will realize that and stop paying their premium or go to someone that takes a personal interest.

Previous posters are right.. there is much to consider. For example if you put the beneficiary of your children and something were to happen to you before they turned 18 the money wouldn't technically go to them, it would go to their care taker. So that raises the question of who should take care of your children if something were to happen to you. You can leave the money behind for specific things but then you usually have to look into setting up trusts at that point, etc. It CAN get complicated, but it doesn't have to be.

For what you have presented so far, if you were sitting down with me I would probably encourage you to look into term insurance but there are many questions left to be asked (do you have a mortgage, lots of debt, any special situations, etc) and it is best to sit down with a licensed professional to figure it all out thoroughly.

[JustaTexan]

Thanks Miracle! I wish you could be my insurance agent. So are you pro-term or pro-whole life? How does a mortgage and lots of debt play into the picture?

[miracle]

Move to Utah!!

If you have debt (secured or unsecured) including mortgage, I personally think that one should have enough money to cover those things. This makes it much less of a nightmare for people that would have to deal with your estate if something were to happen to you. Esp if you have children. So there are a few options there. You can get insurance that decreases over time as you pay off your mortgage and then the premium shrinks but then you don't really have anything. I am generally pro-term and then save the difference you would pay and invest it in a low risk account but I am very conservative with my money... others (including other agents) do have other views but that is my personal feeling on the matter. I do have some perm life but that is because my mom started it when I was about 10 and it just worked out that way.

[OMGWhatHaveIdone]

1984 So Deanna, that was when you were born and I was your age!

Damn I feel old.... I was in 8th grade in 1984. Sheesh! I just got an email from our Senior Class president letting me know the date for our 20 year reunion has been set.

As far as wills and insurance go.....

My situation is extremely difficult. With my oldest having special needs and having been on SSI since she was 10 days old, I can not leave anything to her. I have to literally dis-inherit my own child. She's 13 now and should anything happen to me, if I leave anything for her in a trust, the state can take it and claim something called Cost of Care Liability. From my understanding, they can take her trust as "repayment" for the SSI monies she received. IMHO, it's Bull Chips, but I really don't see any way around that.

I can't put a life insurance policy on her either. I've been told, she's "too much of a risk". Hell she'll probably outlive me. Many adults with Down syndrome live well into their 60's now, thanks to the advancements that have been made in medicine.

I have no will. I have no life insurance policies. The only thing I do have is guardianship papers regarding my oldest, which get revised and notarized every year, stating that should I die or become so incapaciated that I can no longer care for my oldest, that my sister will become her legal guardian. Of course, it's also in there that my sister must re-locate to PA so that my child can continue with the supports and services and schooling that she has now. If she doesn't agree to those terms, then legal guardianship will automatically go to my mother. My youngest would automatically live with her father.

I guess I should, at the very least, have a will since I do have assets (house and car) and I don't want the state to end up with what I have.

I do carry $300,000 worth of homeowners insurance. I wonder if a provision could be included at the next renewal, where should something happen to me, that the insurance would pay off the mortgage so that the deed is free and clear. If I could do that, I'd draw up a will naming my mother AND sister as beneficiaries of the house. Is something like that possible?