Author Topic: Life Insurance?  (Read 17250 times)

sulaco

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Life Insurance?
« on: March 12, 2012, 12:21:41 PM »
With our first kid on the way, my wife and I have been talking about whether or not we should purchase life insurance for her.

Our current 'stache is about twice as large as my income annual, our only debt is our mortgage, and I receive some multiple of my income in life insurance from my employer. I've taken the perspective that life insurance is valuable only if the person who is insured passed and left the remaining family members in a difficult financial position - say a single income father passes leaving a wife and kids with mortgage, student, and consumer debts.

As DINKs - soon to be SIOKs - it doesn't seem like we would have a significant financial burden if either of us died. For the time being, it would require the remaining person to continue working - surely a suboptimal situation - but not financially devastating. Because of this, I see little value in term life insurance.

I have heard and read that whole life doubles as an investment vehicle, however, I see little advantage over maintaining investments in bonds and other less-risky investments, while introducing several disadvantages, such as liquidity.

What do other mustachians think about term and whole life insurance?

velocistar237

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Re: Life Insurance?
« Reply #1 on: March 12, 2012, 01:12:09 PM »
My wife and I both bought term life insurance, which comes out to a little less than $300/year each for $500K coverage each. If one of us dies, we wanted the other to be financially free to take care of the kids without having to work. Day care is a huge financial burden, which would put the brakes on further savings. By the time our insurance term is over, we will be financially independent, but right now, we have a mortgage and school debt and not enough savings. We have two kids with another on the way. If we become FI before the term is over, we can cancel if we want.

For some weird reason, $500K of term life insurance was cheaper than $300K.

I don't know much about whole life insurance, but I am interested in learning more.

Mike Key

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Re: Life Insurance?
« Reply #2 on: March 12, 2012, 03:05:40 PM »
I'm personally in favor of term life insurance. I used to be a rep for Modern Woodmen of America. There are two reasons to get life insurance in my opinion. One to protect loved ones incase something happens to whoever is the income producer, or to leave an inheritance. That's really it.

You might have a large savings, but do you want your loved ones to blow thru that in the event something could possibly happen? Let's be real, we all think we're immortal, but you just never know what life will bring or if you're going to wake up tomorrow.

If you're the sole income earner and you have debt, you doubly had better have some life insurance.


Whole life is only if I plan on being dead before age 110 which I don't. Or if I want to leave a tax free inheritance.


TheDude

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Re: Life Insurance?
« Reply #3 on: March 12, 2012, 04:00:49 PM »
My wife and I have one kid and we both work. At this point we each have 500K of 10year life insurance. It was originally just a 10 year term policy. I think we still have about 6 years left. Assuming your fiances somewhat resemble the MMM philosophy I wouldn't by anything but term insurance.  If you are in decent health and young term is cheap, whole is not. You also shouldn't need whole as your stache will be big enough in 10-20 years to self insure.

Gerard

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Re: Life Insurance?
« Reply #4 on: March 12, 2012, 04:16:37 PM »
A couple of thoughts:
1. Definitely term, not whole life.
2. What if you *both* die?

sulaco

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Re: Life Insurance?
« Reply #5 on: March 12, 2012, 04:17:45 PM »
You might have a large savings, but do you want your loved ones to blow thru that in the event something could possibly happen?

That's what I'm trying to figure out. I doubt my wife's spending would increase if I died. Except for funeral expenses, why would she blow through our savings? Plus, as I mentioned above, I'm covered through my employer. If I bit it tomorrow, it's likely our stache would double. If that gained no interest and was just spent at our current rate of spending it would cover 8 years of expenses. If I was worried about my wife blowing through our stache, why wouldn't I be just as worried about her blowing through the insurance payout? (She's more mustachian than I, so I'm not worried about either - she probably wouldn't touch the principal.)

My wife is planning on staying at home once our boy comes, and we've already made arrangements to live on a single income (primarily by eliminating all of our liabilities except the mortgage). In this situation, I still don't see a significant financial change - we would likely get help from gandparents for child care until he is school age.

What am I missing?

sulaco

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Re: Life Insurance?
« Reply #6 on: March 12, 2012, 04:22:09 PM »
2. What if you *both* die?

If we both die the kid(s) would either go to my parents or hers and inherit about 4 years worth of income. If put away in bonds, by the time they went to college their tuition would be covered with a bunch left over.

We definitely need a written will. But at the moment, I feel fairly comfortable with our financial position if something would happen to one or both of us.

velocistar237

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Re: Life Insurance?
« Reply #7 on: March 12, 2012, 05:02:12 PM »
What am I missing?

It sounds like you have a pretty good handle on it. If you and your wife are content with the financial situation as it is, there's no reason to buy the insurance.

AJ

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Re: Life Insurance?
« Reply #8 on: March 12, 2012, 05:13:01 PM »
RE: Employer-Paid insurance - what if you lose your job then die? I consider my employer-paid life insurance a bonus (the same way I think of Social Security). Personally, DH and I each carry a $500k 20-yr term policy. We bought it before we had FI plans, and I will cancel it when we do FI, but for now it is a safety net.

IMO, your wife should be insured for enough to cover childcare, at a minimum. Personally, if we had kids I would want enough that I could quit and stay home with them while they were young (like your wife is doing for you) rather than send them to daycare or after-school care. I would also want to have enough that if we both died, their god-parents wouldn't have to scrape by to provide for them. If the kids have well-off god-parents that might not be a concern for you.

Honestly, it really isn't that expensive, assuming you're both reasonably healthy, and you only need to carry it until you FI.

Mrs MM

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Re: Life Insurance?
« Reply #9 on: March 13, 2012, 09:31:41 AM »
Everyone's situation is different, so each family might feel comfortable doing something different.

In our case, we don't have life insurance.  Why?  Because if one of us died, the other would be fine.  We never saw a need for it.  But, that's just us.  Plus, we have one child who is 6 and in public school right now, so even if there was only one working parent, it wouldn't be too hard to work while he's in school if a financial problem should arise.  We would also probably move to a much smaller house and downsize our lifestyle quite a bit.  Plus, I could possibly move in with a family member.  I can think of many solutions without requiring life insurance.  I guess I've just never seen a real need for it, but again, everyone has a unique situation.

Congrats on the baby on the way!

sulaco

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Re: Life Insurance?
« Reply #10 on: March 13, 2012, 10:09:29 AM »
Congrats on the baby on the way!

Thanks! He's actually a toddler - they grow up so quickly now-a-days! We're just waiting on paperwork to bring him home. We're growing our family like like Mustachians grow their staches - unique, unconventional, with purpose and care.

I have thought about losing my job and losing the insurance - not that I think it's likely, but that would merely bring things from 8 years covered down to 4 - still adequate in my opinion. And like Mrs. MM said, my wife would move in with family who are financially secure. On the plus side, my current employer is aching to hire more resources, so I'm not afraid of losing my job in the foreseeable future (as long as I don't act like a bonehead).

I really appreciate the perspectives from everyone.

TLV

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Re: Life Insurance?
« Reply #11 on: March 13, 2012, 10:47:31 AM »
+1 for term insurance.

It's most important if you have kids and either spouse would have difficulty getting by alone. However, even if you're not in that situation now (as in newly married and don't have kids yet), it's not a bad idea to take out a term policy sooner if you anticipate having kids before FI.

My wife and I got 250k 10-year term policies when we got married. At the time we were healthy and got the lowest rates. 6 months later, my wife was diagnosed with Crohn's disease; shortly thereafter my mom passed away from a stroke at age 44, and I had some serious problems with depression as a result of all the stress. Bam - neither of us is eligible for life insurance anymore (though I may eventually become eligible again). Without those policies we took out earlier, it would have been a much bigger risk (especially for my wife) for us to have kids before reaching FI.

upnorth

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Re: Life Insurance?
« Reply #12 on: March 13, 2012, 10:54:11 AM »
Hubby and I never bothered.  We were DINKs and by the time our kiddo came around we could self-insure.  In your case, I would probably buy term insurance until you were FI (or close).

Mrs MM

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Re: Life Insurance?
« Reply #13 on: March 13, 2012, 02:16:47 PM »
Congrats on the baby on the way!

Thanks! He's actually a toddler - they grow up so quickly now-a-days! We're just waiting on paperwork to bring him home. We're growing our family like like Mustachians grow their staches - unique, unconventional, with purpose and care.

That's awesome! I love the way you put it...

gooki

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Re: Life Insurance?
« Reply #14 on: May 07, 2012, 03:24:26 AM »
Like you I have life insurance through my employer, equal to a multiple of my income. With no other debts I'm 100% comfortable having no other life insurance cover, because:

My wife is smart with money.
I'm smart with money.
We have a good family network that would ease any financial burden.

bogart

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Re: Life Insurance?
« Reply #15 on: May 07, 2012, 09:11:00 AM »
Congratulations on your growing family!

We're SIOKs with a soon-to-be kindergartner (public school).

My hubby is retired with a pension on which I have 100% survivorship, and I have $50K life insurance on him; I'd have more were he not expensive to insure (he's old).  My unearned income would go up if, heaven forbid, he passed away, thanks to SS survivorship, but I wouldn't want to need to think or worry about expenses shortly after his passing away, and I would want to be able to take time out of the workforce to be with our son, who is used to having one parent at home, and to grieve.  I'd miss the guy.

I have lots more on myself (about a million spread across 3 policies, one of which I'll probably drop soon, as DS is growing older and our 'stache is growing).  We don't expect the folks we have named as prospective guardians to support our son if we pass away; we intend to provide for him including and through college.  I figure if, heaven forbid, he loses his parents at an early age, at least we can offer him financial stability and an education.  It's not a good substitute (though I do have absolute faith in our named guardians -- still, losing your parents is losing your parents), but some things are outside our control (i.e. it's not like I can guarantee he won't be orphaned).

Last and least, but not irrelevant, if DH or I were to fall ill and endure some months or years of ill health before passing away, knowing the life insurance is there makes me more confident we would be able fully to focus on caring for each other, keeping the ill person comfortable, and seeking whatever medical treatments were needed rather than worrying about limiting expenditures in the last years of life.  We are likely older than you are, which makes such things more salient, but, again, there are no guarantees whatever your age.

James

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Re: Life Insurance?
« Reply #16 on: May 07, 2012, 09:32:53 AM »
I have a whole life policy from my definitely non-mustachian days, and I haven't decided what to do with it yet.  The very expensive up-front costs are gone, and there is no way to get them back.  From talking to an independent financial adviser he said it was pretty much 50-50 whether I stayed with it or dropped out and switched to a term policy.  I would have some savings on the policy itself, but lose some benefits of the whole life that I've already paid for.

Regarding what to have, I would agree with others who have suggested having a policy in place prior to full FI.  It's just so cheap to have, especially at the pretty low amount mustachian living requires.  Who knows what unexpected hardships would come up after one person passes away.

My policy is 1M for myself and $250k for my wife.  That made sense when the kids were younger and our expenses were higher.  At some point I'm going to need to figure out a plan for what I do in the future, we certainly don't need that amount now and our need for life insurance will only drop going further into the future, but for now I'll probably leave it alone.  Or maybe I'll figure out all my options and ask for advice here some day.

gooki

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Re: Life Insurance?
« Reply #17 on: May 07, 2012, 04:06:28 PM »
James - if you don't mind me asking - what's your monthly cost of your current life insurance plan?

bogart

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Re: Life Insurance?
« Reply #18 on: May 07, 2012, 07:27:35 PM »

If we both die the kid(s) would either go to my parents or hers and inherit about 4 years worth of income. ...

We definitely need a written will. ...

Upon further reflection, I'd add that as you plan/implement your wills, it is surely worth talking to the prospective guardians and were it me, I'd ask them the life insurance question explicitly.  I've had this conversation with a number of family members (both on the requesting and the being requested side of guardianship) and have always addressed this topic.  I personally wouldn't dream of being named as a guardian for the child of someone who had the means to buy life insurance (which is darned affordable) and didn't at least express a plan to buy it (nor have I ever insisted on documentation, mind you -- but I'd no more think it OK to ask someone to serve as a guardian without providing for my child(ren) financially for the duration of their dependency than I'd think it was OK to run up a bunch of debt and then declare bankruptcy).  Your family may approach this issue differently, but unless this is absolutely a common value and shared knowledge among your extended family, I'd bring it up. 

James

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Re: Life Insurance?
« Reply #19 on: May 07, 2012, 08:30:00 PM »
James - if you don't mind me asking - what's your monthly cost of your current life insurance plan?


I'll try and look it up and get back to you, I know the total going to the company, but I dont' know what amount is for the policy and what amount goes to the investments in the plan.

James

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Re: Life Insurance?
« Reply #20 on: August 21, 2012, 08:39:22 PM »
James - if you don't mind me asking - what's your monthly cost of your current life insurance plan?

I'll try and look it up and get back to you, I know the total going to the company, but I dont' know what amount is for the policy and what amount goes to the investments in the plan.


Finally getting back to figuring out my life insurance situation.  I'm paying $78 per month for $750,000 of coverage, and paying $20 per month for $250,000 on my wife.  I've cancelled all the other "investment" parts of the plan, over 8 years I've contributed $15,000 in the investment portion of the plan and it's worth $10,000.  Not such a great return, I got pretty mad at my financial advisor and dumped him and have moved all my money to Vanguard.


Anyway, I'm switching to term, just deciding how long to lock it in for.  Probably going to stay with the same coverage but lock it in for 20 years.  That will save over $33 per month by switching from the old coverage, despite adding 9 years to the locked in duration, since my old plan is only locked for 11 more years.

$_gone_amok

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Re: Life Insurance?
« Reply #21 on: August 22, 2012, 04:53:11 PM »
+1 on having life insurance. A good friend of mine's father passed away when she was young and thanks to her father's multiple million dollar life insurance policy, her mother was able to quit her job and stay home full time raising the kids.  They end up going to ivy league colleges and really made their mom proud.

Nords

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Re: Life Insurance?
« Reply #22 on: August 23, 2012, 09:52:11 AM »
Yesterday was also a blogger "life insurance awareness" day, with over 135 bloggers posting on the subject.

The list is here:  http://www.goodfinancialcents.com/lifeaware-participants/

A post on life insurance for stay-at-home parents:  http://www.goodfinancialcents.com/how-much-life-insurance-do-you-need-for-stay-at-home-mom-or-parent/

And finally, one filled with military acronyms for servicemembers:  http://the-military-guide.com/2012/08/21/military-insurance-sgli-vgli-sbp-and-other-benefits/

ShavinItForLater

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Re: Life Insurance?
« Reply #23 on: August 23, 2012, 10:36:44 AM »
If you are already completely FI, then great, no need to insure, you are self-insured.  Until that point, I highly recommend you have it, on both parents.  It's really easy to think of it as wasted money because life is good and easy right now.  That's not what insurance is for, it's for when life turns crappy.  You're both young and healthy right now, but nobody who ever got a life threatening illness, or a sudden death for that matter, saw it coming.

Let's say you got some form of debilitating cancer.  You can't work, you lose your job.  You spend all your money fighting it and maybe more, and then die.  How does that leave your family?  Is that really how you'd want to leave them? 

I'm not recommending everybody take a OMG the sky is falling attitude all the time, but precisely when you are young and healthy is when term life insurance is cheap and easy to afford.  I bought a policy for my wife who stays at home with our two boys with $500K coverage starting in 2003, 20 year term, we pay $245 per year for it.  I started with life insurance on myself back in 1999 when we had our first child, but in 2003 re-shopped and got a 20 year term with $1.5 million in coverage, annual premium is $537.50.  We were in our early 30s at the time, if you are in your 20s and healthy it will probably be even cheaper.

I consider this a great value, and this was also based on a very anti-Mustachian path at that time.  High income, but also high spending.  We still have a big mortgage that I would want to be able to pay off if my wife or I died.  If I died I would want my wife to have the choice to continue to stay home--or to have the money to go to grad school and pursue the career of her choice, either now or when the kids are grown and on their own.  If my wife died I would want to at least be able to hire help to take care of the kids, but more likely I'd want to either retire or get a much less demanding job so that I could spend a lot more time at home.

When we reach what we consider FI then sure I'd drop the insurance, I certainly hope we'll be there by 2023 when these policies run out.  Until then I consider them a must-have.

For the same reason, if you can get affordable long term disability insurance through your company, GET IT.  You might think bah we are young and healthy, what are the chances one of use would ever be disabled?  According to the US Census Bureau, the answer is 1 in 5.  ONE IN FIVE.  Much higher than the chance you would die prematurely.  Think about how your life would change if you were crippled in a car accident or had a stroke or something and your wife had to care for you, and the kid.  Then think about what a difference it would make if your salary continued instead of being cut off.  I carry LTD coverage through my workplace and I pay extra to make it full salary replacement instead of just partial.  Admittedly I think LTD is not very affordable if you can't get it through work, but even in that case I'd at least shop around and consider it.

I'm not an insurance salesman, never have been, never will be, and I think things like Whole Life and Universal Life and almost all insurance company Annuities are complete ripoffs, and many financial advisors and insurance agents who sell them I would consider not very different than scam artists.  I think term life insurance and (affordable) long term disability are worth every penny to me.

shadowmoss

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Re: Life Insurance?
« Reply #24 on: August 23, 2012, 01:40:49 PM »
Here is what happened to my parents:  They had 'enough' with SS, pensions (my Dad's), and the little they had saved.  They weren't going in the hole on their savings, so life was pretty good.  They lived in senior housing and had nice apartments.

Then, Dad, who was 89, got a blood clot in his leg, and that night in the hospital they od'd him on blood thinners.  He was frail enough that the week he spent in CCU from that meant that he was bed ridden the rest of his life (me?  Bitter?).  In order to  have Medicaid pay for his nursing home, which they would have anyway in time, Mom had to blow through ALL of their savings in 2 weeks.  She did buy a nice small used car for cash.  Or, pay it to the nursing home.  They monitored her accounts to make sure she spent it on only herself, and didn't stash any away.  When Dad passed, the only money other than SS and his pension that she has is his small life insurance money.  We were a bit surprised they didn't come after that small amount, too.

So, if you are a couple, get life insurance.  No matter how FI you are, in cases of medical costs you may blow through it, or need to, and the only thing left after you are gone may be that life insurance money.  My $.02 USD.

EDIT:  My Dad's insurance was $10K, seemed like a fortune when they got the policy 50 years prior.  Mom's life insurance is $2K.  Again, she was the 'stay at home' Mom.  If her funeral expenses hadn't already been paid that would not even pay them now.  However, my parents' are/were awesome with money.
« Last Edit: August 23, 2012, 01:43:18 PM by shadowmoss »

James

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Re: Life Insurance?
« Reply #25 on: August 23, 2012, 07:17:28 PM »
Any thoughts on "Return of Premium" term life insurance?

ShavinItForLater

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Re: Life Insurance?
« Reply #26 on: August 23, 2012, 09:27:32 PM »
I'm not an expert but what I've heard about "Return of Premium" is that it's a gimmick and not worth the additional cost.  The analysis would be to take the extra cost and invest it, and see if you'd project that it would end up more than your return of premium payout--I think in most cases it would, as long as you would actually invest the difference.

Here's a link to one such analysis, which essentially concludes that it depends on what you'd do with the money otherwise (e.g., invest in stocks, park in CDs) and your tax bracket:

http://www.investopedia.com/articles/pf/08/return-of-premium.asp#axzz24QjSCIFb

It does say that in the example given, the Return of Premium amounts to a tax-free 6.25% return, which isn't bad, so assuming your carrier's deal is similar, it may really depend on your investing risk tolerance more than anything.

el_beardo

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Re: Life Insurance?
« Reply #27 on: August 23, 2012, 11:08:43 PM »
My wife and I both bought term life insurance, which comes out to a little less than $300/year each for $500K coverage each.

Curious were do you get your insurance, as nobody mentioned it in the thread.  I pay $120 a month for 1M coverage for term with AAA


Nords

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Re: Life Insurance?
« Reply #28 on: August 24, 2012, 12:09:03 AM »
Any thoughts on "Return of Premium" term life insurance?
I think you should buy insurance for the insurance benefits, and invest for the long-term compounding of your savings.

Any mixing of the two just piles on more fees & commissions. 

ShavinItForLater

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Re: Life Insurance?
« Reply #29 on: August 24, 2012, 07:32:51 AM »
I shopped my term insurance with the online brokerages, Accuquote or Selectquote or one of those, can't even remember which.  You put in the coverage level you want and your basic age and health information.  Assuming you're healthy and don't require special underwriting, it gives you quotes pretty much instantly from a bunch or insurance companies and you can decide who to apply with based on what minimum financial stability rating you want, and of course price.  A doctor came out to our house to do a quick physical and take blood.  Pretty simple process. 

For my wife we went with West Coast Life Insurance, and for myself we went with Empire General, but if I were to reshop today I'd just repeat the same process above.  I haven't, because I figure now that we're 9 years older I'm unlikely to get a better price in my 40s starting over with another 20 year term.

James

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Re: Life Insurance?
« Reply #30 on: August 24, 2012, 10:00:44 AM »
I'm not an expert but what I've heard about "Return of Premium" is that it's a gimmick and not worth the additional cost.  The analysis would be to take the extra cost and invest it, and see if you'd project that it would end up more than your return of premium payout--I think in most cases it would, as long as you would actually invest the difference.

Here's a link to one such analysis, which essentially concludes that it depends on what you'd do with the money otherwise (e.g., invest in stocks, park in CDs) and your tax bracket:

http://www.investopedia.com/articles/pf/08/return-of-premium.asp#axzz24QjSCIFb

It does say that in the example given, the Return of Premium amounts to a tax-free 6.25% return, which isn't bad, so assuming your carrier's deal is similar, it may really depend on your investing risk tolerance more than anything.


The policy being quoted to me offers an equivalent of 6.75% return, which is getting awfully close to the 7% number I'm guesstimating for the general market.  And this is guaranteed returns as long as the company doesn't go under.  For me it is pretty much right on the line and doesn't directly tell me where to go.  On the one hand I don't see a lot of problem with either selection, on the other I like to have solid reason for making a selection, and I don't feel I have that.

ShavinItForLater

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Re: Life Insurance?
« Reply #31 on: August 24, 2012, 01:52:32 PM »
Well I've never delved into return of premium too much before, but did a bit more reading, here are a few potential gotchas:

- If you do die, you don't get the returned premium--just the death benefit--so the ROP cost was wasted.
- If you let your policy lapse or decide not to continue it for the full term you signed up for (20 years, 30 years, etc.) then you don't get NEARLY the full premium returned.  On a 30 year level term it would be more like 9% returned after 10 years, 19% after 15 years, 35% after 20 years.  So, you damn well better keep that policy paid in full through the whole term, otherwise the ROP cost was mostly wasted.  A lot of people don't continue their term insurance--something like 5% per year.
- By extension, there is very little liquidity in this "investment".  You can't really get at it until the very end of the term.  Most other investments you would be able to sell earlier if you needed it.
- Finally of course, if the insurance company went insolvent, you get nothing, so you'd probably want to stick to companies with an A+ rating or higher--you might have anyway, but if it meant you would be picking a different company with a higher premium to get the A+ rating, you'd have to factor that into the cost side of the equation.

On the plus side, it is most likely a tax-free return (some would argue it shouldn't be tax-free, but so far it looks like the IRS is treating it as such), so if all of the above doesn't scare you off, I suppose it wouldn't be an incredibly bad thing to consider.  Tax-free 6.75% is on par even with equity investing, so it could be quite tempting.  I would just say be honest with yourself about all the caveats above--you might think everything will go fine and according to plan, but if something goes wrong and you want to or have to cancel the policy, suddenly it was a bad decision.  There *is* in my opinion at least some significant chance that you won't make it all the way to the end of the term.

Personally I don't think I'll be doing it, but as I stated that's partially because I'm already halfway through my term and prices would likely be a lot higher for me now.
« Last Edit: August 24, 2012, 01:59:29 PM by ShavinItForLater »

James

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Re: Life Insurance?
« Reply #32 on: August 24, 2012, 08:33:25 PM »
Thanks for the thoughtful reply, I agree with your points.  I think the policy I'm being quoted seems to be a pretty good one as far as return of premium policies go.  If it was what I'm seeing as "average", I wouldn't even be considering it.  The return I would get if I quit after getting half way through it is pretty good, though I don't remember the exact number.


They key is that I'm not looking for an additional method of investment, and in the end it doesn't promise a huge improvement over what I expect elsewhere, just an nice return.  I can get a nice return simply by pushing more into my other investments and keep my term insurance simple.  If I FIRE early and decide I don't need life insurance I'm not tempted to continue it.  I'll have better liquidity like you pointed out, and will be keeping things simple which is one of my primary goals.  So while I don't think this is anything like the whole life I absolutely regret getting into, it's probably not the direction I want to go.

cdngb

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Re: Life Insurance?
« Reply #33 on: November 26, 2012, 11:31:51 PM »
You must either be life insured or self insured.

Insurance is a responsibility of parenthood.  The need of insurance is to replace the income of one or both the parents for the benefit of the surviving spouse or the child. 

In most cases there is no need of an insurance payout as Mom, Dad and children live a long healthy life.

However there is a need when things do not go right.  It covers the what ifs.  If Dad has a car accident and is killed on the way home from the hospital after spending thirty hours waiting for the birth of his child.  Do you really think that Mom will say no problem.  I'll go back to work right away and take care of my new born.  What about the grieving period, or post-partum depression or who is going to spend ten hours a day with junior?   What if junior is not the healthiest baby and requires special attention.  What if the bank calls and says we would like our money as the mortgage was given on the basis of both incomes.  What if Mom doesn't make it through the delivery.  Do you really think that your parents or in-laws want to raise your child while you go back to work?  Although unlikely, these are real situations which do happen.

For the cost of newpaper or a coffee each a day you can insure that the survivor can manage financially.  It is certainly an inexpensive way of providing peace of mind.

Do you need the life insurance forever?  No as the need of life insurance decreases as your wealth increases, otherwords as you become more self insured.  If you follow the MMM rules you may be self sufficient and able to cancel the policy in ten to fifteen years. 

Good luck.


happy

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Re: Life Insurance?
« Reply #34 on: November 27, 2012, 03:22:44 AM »
As a single mum I carried some life insurance for many years....I gave it no thought just kept paying...most recently $52/month. ($600/year). Early this year I realised  that my children were now teens, and  should I die,  my net-worth would support them through schooling and probably tertiary studies. Depending they could pay rent or afford a modest 2 bedroom apartment if they were studying in the same location. Probably for a few years they would reside with one of my family members, but they could pay their own way and not be a financial burden.  In some ways, they might even be better off financially, since my retirement would no longer need to be funded.

This was a great relief and I cancelled the policy. In fact I probably could have cancelled it a fews years earlier if I'd thought to question it.

So I think the answer is,  it depends on your circumstances.... there's no substitute for doing the math, and  reviewing your situation regularly with your brain switched on.

chucklesmcgee

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Re: Life Insurance?
« Reply #35 on: November 27, 2012, 09:30:22 PM »
If your dependents could maintain their current lifestyle with your assets, there's no need to buy it. If on the other hand, you're a hot shot workaholic living large with a large income, massive mortgage, fancy cars and a trophy wife but relatively little savings, life insurance is probably your thing.