Author Topic: Life Insurance for an Unmarried Senior?  (Read 4384 times)

LeRainDrop

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Life Insurance for an Unmarried Senior?
« on: January 11, 2016, 10:53:11 PM »
Hi, everyone, I have been trying to educate myself about life insurance options for a little while now, and am still feeling overwhelmed.  I'm in need of guidance so that I can help my father make a decision about life insurance for himself.  Most results of my research have targeted advice towards young adults, but here I am talking about a 66 year-old man, so I'm not sure how that would affect the advice.  He currently has a MetLife Variable Life policy that he purchased in 1993, but he has borrowed a lot from the ~$100k benefit.  Thankfully, his long-term financial advisor recently retired and he does not like the guy who took over his account, so he's finally open to leaving this arrangement.  His default mindset is that he needs life insurance.

I have been trying to steer him away from whole life insurance (this thread was very helpful: http://forum.mrmoneymustache.com/investor-alley/why-whole-life-universal-life-insurance-is-a-bad-idea/), but he's afraid that he won't be able to get a reasonably-priced term life policy at his age.  He's also worried about what happens if the term runs, let's say 20 years from now, and he's still alive -- how would he be able to get another policy at that age?

(1)  To get to my point here, I'm questioning the whole premise of my dad's dilemma -- does he even need a life insurance policy at all?  I tend to think he doesn't, but I'm afraid to say so to him in case I am wrong.  My parents are divorced, and there is no one financially depending on him.  He does not have any separate coverage for funeral-related costs, so his view is that life insurance is necessary for this purpose at a minimum, and he thinks funeral costs are typically $20k-$25k.  He has about $500k in some ridiculous annuity product for retirement.  But he also has more than $100k in student loan debt remaining from three kids' college educations (he has only paid minimums or nothing for several years).  He is concerned about whether he needs life insurance to cover the balance of the student loan debt (because he is insistent that he wants to leave a "legacy" for his kids and does not want his retirement to be applied to the student loan debt upon his death, even though at least one brother and I have no need whatsoever for a penny of inheritance).  Based on this information, can you see any legitimate reason that he should have a life insurance policy of any sort?

(2)  If life insurance is a good idea for my dad, what type of product should I be steering him to?  I'm pretty sure that I'm correct he should avoid whole life, but I'd appreciate reassurance  (or correction) on this.  Should he be getting a term life policy?  Should he be getting a value high enough only to cover funeral costs, or also to cover the student loan debt?  FWIW, his mom died in her 50s, and his dad died in his 80s, and he is convinced he'll live into his 90s.

Any other thoughts that will help me sort this out so that I can speak confidently with him would be greatly appreciated.  I feel like if I'm going to convince him to do anything different than stay the course, I need to have solid reasoning and support to back me up.  Thank you in advance!

ETA:  Part of the consideration here is that my dad has locked himself into very high monthly expenses -- which he is completely unwilling to reconsider -- such that he's barely making ends meet on monthly cash flow.  His income comes from the annuity (hence his reluctance to change the annuity in any way), long term disability, and social security.  He would like to reduce the monthly premium amount that he's currently paying.
« Last Edit: January 11, 2016, 11:13:37 PM by LeRainDrop »

gooki

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Re: Life Insurance for an Unmarried Senior?
« Reply #1 on: January 11, 2016, 11:19:22 PM »
He has no dependants.

1. Scrap the life insurance.
2. Save an emergency fund (this becomes the funeral expenses fund on his passing).
3. Invest the spare cash in an index fund/repay debt (depending on interest rate).

former player

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Re: Life Insurance for an Unmarried Senior?
« Reply #2 on: January 12, 2016, 02:36:41 AM »
I see three issues here which are important to your father-

1.  He needs to reduce his high monthly expenses.
2.  He needs to ensure that his funeral is paid for.
3.  He wants to ensure that the student loans will be paid off.

He can meet all of these by -

1.  Ditching the life insurance completely.
2.  Contributing to a "funeral fund", which can either be in a savings account somewhere or can be a pre-paid basic funeral with a local firm of funeral directors.
3.  The children on whose behalf those student loans were taken out taking responsibility for paying them off.

Drifterrider

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Re: Life Insurance for an Unmarried Senior?
« Reply #3 on: January 12, 2016, 05:35:25 AM »
On the subject of Death Insurance (it only pays upon someone's death and the dead guy doesn't collect).

If no one is financially dependent upon you, don't buy death insurance.  You pay all the premiums and someone else collects the windfall.  Someone will burry the body:  eventually. 

In this case if your father wants to make sure he has a specific type of funeral, plot, headstone he can prepay.  As to student loans, I would not even consider paying them at this point (seems he can't anyway).  Let his legacy be that he sent his children to college (debts are not inheritable).


lakemom

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Re: Life Insurance for an Unmarried Senior?
« Reply #4 on: January 12, 2016, 06:05:58 AM »
He really does not need life insurance at this point.

Double check the student loans but if there is no co-signer on them then his estate will pay them off upon death.  If he dies with no estate (or less than the balance on the loans) then the lending company is out the balance.

If he's dead set that he must have life insurance have him get a 50k or 75k 10 year level premium term policy.  If he's in good health that should not cost all that much per month.  Then get him to concentrate his spending on paying off the student loans so he won't feel so desperate for insurance in 10 years. 

Can he find a side gig that would bring in some additional cash flow?  Barring that I'd have him really start dialing down on spending.  Maybe if you remind him during conversations that "if you spend it all now you won't be leaving a legacy anyway."


AlwaysLearningToSave

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Re: Life Insurance for an Unmarried Senior?
« Reply #5 on: January 12, 2016, 10:09:32 AM »
Chiming in to support the ideas of the other posters.  Strongly consider not buying life insurance.  If no one is dependent upon him, he doesn't need it.  If he is dead set on having life insurance of some sort, steer him toward a $10k to $20k final expenses policy or a pre-paid funeral.  I also support the idea of paying no more than minimums on student loans (assuming there are no other people obligated on the loans).  Look into the specific terms of his loan.  I know that the federal student loans I had would be forgiven upon my death-- it is sort of a built-in life insurance policy.  I don't know if the same rules would apply for federal parent loans.  Even if they are private loans or federal loans that won't be forgiven upon his death, his estate can pay whatever balance remains and, if the estate is insolvent, the lender will be out the money.  In that case, his inheritance to the kids was the education. 

AZDude

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Re: Life Insurance for an Unmarried Senior?
« Reply #6 on: January 12, 2016, 10:21:54 AM »
Get your siblings together and have everyone explain to him that they do not need inheritance because he has done a wonderful job of teaching them the value or hard work, responsibility, etc... Maybe on his birthday or something.

Also, the siblings for whom the student loans were used to fund their education need to step up and help out paying those off.


LeRainDrop

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Re: Life Insurance for an Unmarried Senior?
« Reply #7 on: January 13, 2016, 11:23:20 AM »
Thank you, everyone, for confirming my instinct that dad no longer needs any life insurance and for distilling the issues for me so clearly.  Also, thanks very much for the back-up recommendations on the policy type to get if dad insists he must have some life insurance.  I feel better equipped to discuss this with him now.  Special props to lakemom for recommending a side gig -- dad is great at photography, has been using it to barter, and plans to get help building a webpage to turn the hobby into a bit of an income stream.

I have been talking to dad about an emergency fund for quite some time, and he completely agrees in principle -- he's actually the one who taught me the importance of one while I was still in high school! -- but the trouble is getting him past the high expenses so that he nets positive on a monthly basis.  Honestly, the hang-up about funeral costs is his own -- while I'd prefer that his assets cover his funeral costs, it's not a big deal to me, as I will take care of his burial wishes no matter what.  My greater concern is that he has high anxiety and depression, and he worked very hard for 35 years (until being unfairly canned, then rapidly burning through his emergency fund) to give us kids a fantastic foundation in life, yet he is now suffering mentally from the stress of constantly being on the verge of having zero cash, paying his bills late, etc.  I want him to have an emergency fund for his own peace of mind.  I'll also continue to work with him on cutting his expenses -- we have made some good progress -- but he lived high-income/high-expenses for so long that he is mentally tied to the idea that he should be able to have the same lifestyle as before he lost his job, got divorced, had to sell our family home, legal troubles, close relatives died, all within an extremely short timespan.

Regarding the college student loans, while I understand the folks saying the kids should take responsibility, there are so many reasons why I just don't think that's fair in this situation.  First, one brother and I did pay off all of the loans on which we were the signers or co-signers (and we 100% covered all costs of our graduate-level educations, so parents never had any involvement in that part); the second brother is barely making ends meet, and is so far in the hole from other debts, that there is no chance in hell he could make payments for at least several years.  Second, our dad had not shared with us that there even were outstanding loans for over a decade.  Only when my parents divorced about two years ago was that revealed, plus that he had only been making minimum payments or skipping payments, racking up interest, late fees, etc., plus he had squandered hundreds of thousands of dollars that should have been in my parents' accounts.  As such, third, he royally screwed over my mother financially.  Fourth, the divorce split those debts 50/50 between my parents, and my mom then made a lot of sacrifices to pay off her share in full!  After she did that for us, I feel like paying my dad's share would be to reward his extremely poor behavior and to slap my mom upside the head.  We have confirmed that the remaining loans are in dad's name alone, so we're just gonna let that ride.
« Last Edit: January 13, 2016, 11:29:58 AM by LeRainDrop »

LeRainDrop

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Re: Life Insurance for an Unmarried Senior?
« Reply #8 on: May 01, 2016, 05:10:03 PM »
Update:  Dad cashed out his whole life insurance policy and said he set it aside in savings so that he would be able to cover whatever amount of taxes he would owe for 2015 and 2014 (since he got an extension but then forgot to actually file that year).  Tax returns were completed in early April.  Lo and behold, all of the life insurance cash-out was already gone (who knows where?) and he was asking for another loan from me and my brother to pay his taxes.  We offered only a 1-month bridge loan so that he could get the cash out of his giant annuity, but otherwise no to any other loan.  Dad said he'd "figure it out on [his] own" and now is talking shit about us.  Dad makes me sad.
« Last Edit: May 01, 2016, 05:18:53 PM by LeRainDrop »

electriceagle

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Re: Life Insurance for an Unmarried Senior?
« Reply #9 on: May 03, 2016, 09:37:36 PM »
Update:  Dad cashed out his whole life insurance policy and said he set it aside in savings so that he would be able to cover whatever amount of taxes he would owe for 2015 and 2014 (since he got an extension but then forgot to actually file that year).  Tax returns were completed in early April.  Lo and behold, all of the life insurance cash-out was already gone (who knows where?) and he was asking for another loan from me and my brother to pay his taxes.  We offered only a 1-month bridge loan so that he could get the cash out of his giant annuity, but otherwise no to any other loan.  Dad said he'd "figure it out on [his] own" and now is talking shit about us.  Dad makes me sad.

I've seen a lot of people with parents in similar situations to yours: material desires exceed income, no likelihood of additional income, want to leave a legacy.

Things usually get worse, not better. The older folks get, the less they see the point of saving for the future. Also, senility sets in and decisionmaking gets worse.

Your goal should be to ensure that he has a place to live and enough income to survive, no matter how he spends. That means analyzing his situation as if he were filing bankruptcy.

Does he have a paid-off house that is worth less than your state's bankruptcy exemption for seniors? If so, make sure that he doesn't take any loans against it.

Does he have bankruptcy-proof income such as social security or a pension? If so, let him do what he wants. He isn't going to tell you how he spends, and you couldn't stop him if you tried. As long as there are no co-signers, the debts will go away when he passes.