Should my dad buy life insurance? Update!

[mozar]

My dad is 62 and working full time. He has a nine year old child. The mother does not have stable employment. He has very little in savings. He makes about 70k a year. He has disability insurance through his job. He will be eligible for a pension of about 2k a month at 65 and full social security at 66.
He has been talking to an aflac sales person. They offer term life insurance (50k payout), hospital indemnity (1300k payout), accident insurance and critical illness insurance that I'm not sure of the payout. I was thinking the term one might be OK. In his position what advice would you give him?

[myrrh]

Potentially yes to term life, no to the others.

Does he have his wife listed as a 100% pension beneficiary? There are pensions that have options for beneficiaries such as 100%, 50%, and nothing upon death.
Does he have any retirement savings? If so he can somewhat self insure.
A widow or widower age 60 or older (age 50 or older if disabled) is eligible for Social Security survivor benefits provided the couple was married at least nine months. There is no age limit for a widow or widower caring for dependent children under age 16. He can check the amounts on the social security website.

What expenses does he/his family have? If living in a house, is it paid off? Does he want to pay for college for kid? These questions will help him determine how much coverage he needs.

[terran]

I would be very surprised if he could get term life insurance at that age for any significant amount without spending a lot since he's a pretty poor risk. Term insurance is really meant for much younger people. He should take a look at his social security survivor benefits that his minor child will probably get if he dies until they reach 18.

[lhamo]

Before buying any policy he should talk with someone at SS and get an estimate of what his child and her mother would get as survivor benefits.  If they are not married he needs to confirm that the mother would get the parental caregiver benefit (which only lasts until the child turns 16).

Once he knows what the SS income stream would be he can better evaluate the need for/amount of life insurance.

[mozar]

He is not married. I did not know there is a caregiver benefit, I will tell him to look it up.
His child would get 1700 a month in survival benefits.
He has no retirement savings. He pays 2k a month for an apartment but I doubt my sister and her mother would continue to live there if he were deceased.
The rates look like they are around 100 a month for 100k payout. (I was wrong about the 50k)

[cchrissyy]

in that situation i would stop talking to the sales person and drop every idea except for

1) getting a quote for 10 year term life, anything else is too expensive at his age.
2) researching what survivor benefit SS would send the child.

that's not an awful situation and IMO those are the only things worth doing.

[mozar]

The sheet he gave me said it's $90 a month for term life for a 63 year old. Doesn't say how many years though.
The child's survivor benefit is 1700 a month.

[secondcor521]

If it's annual renewable term, that $90 a month will go up every year, and the increases in monthly premium can be quite dramatic in his age range.  If he dies in the first two years, they probably won't pay the death benefit; they'll just return the premiums he paid.  After two years, the premium increases will put him between a rock and a hard place - keep paying the increasing premiums or drop the policy and lose the death benefit and waste all those premium dollars.

If I were in his shoes, I'd probably take the $90 a month and put it into a 529 (if the kid is likely college bound) or just a straight taxable account (if not or unsure).  Skip the life insurance, try not to die, and use the SS survivor benefits for the kids' benefit if he does die.

[mozar]

I did not know the premium could increase. He does not have the discipline to put 90 a month in savings.

[Paul der Krake]

No. He should focus on his own retirement savings.

The survivor benefit is good enough.

[rmorris50]

One main purpose of life is to replace a loss of income in case of early death. Your father's working years are sunsetting, and most Life insurance is going to be pricey at his age. I would make sure I had adequate group life coverage from my employer (assuming they have it) while working, and as soon as I retire make sure I pick the pension option that leaves the maximum benefit to the mother upon my death. That and SS survivor benefits would hopefully be enough to pay the essentials upon my death.

[mozar]

That's a good question,  this might be the employer plan. I'll tell him to ask about that.

[mozar]

Here are the answers from the Aflac representative. Is there anything else my dad should ask?
The term is 20 years.
The premium will remain the same.
Full payout will take place from day 1 of coverage.
The Union is not contributing but in working with our organization they are able to make these benefits available to members with no underwriting. Non union Fairfax County employees do not have access to these benefits.
Thank you.

[secondcor521]

Here are the answers from the Aflac representative. Is there anything else my dad should ask?
The term is 20 years.
The premium will remain the same.
Full payout will take place from day 1 of coverage.
The Union is not contributing but in working with our organization they are able to make these benefits available to members with no underwriting. Non union Fairfax County employees do not have access to these benefits.
Thank you.

Those numbers really sound too good to be true.  I'd probably go out to some of the life insurance quote places on the web and see what kind of numbers your Dad could get.  Price shop it, basically.

Even so, before buying the life insurance I'd try to figure out if his dependents could survive on the SS benefit in a reasonable fashion.  If so, I'd forgo life insurance and just try to work and save as much as possible.  If not, and the price and quality seem competitive, then I'd probably consider it more seriously.

Which life insurance company is it?  I'd probably also check to see if it's a quality insurer like MetLife, Northwestern Mutual, etc.  I didn't think Aflac did life insurance, but maybe they do.

[Catbert]

Often times group life insurance is a bad deal (price) for younger members but a good deal for older members especially if they couldn't otherwise get insurance because of pre-existing conditions.

The only other question I would have is whether the insurance can be carried into retirement when he'll no longer be a member of the Union.

[former player]

Those numbers really sound too good to be true.  I'd probably go out to some of the life insurance quote places on the web and see what kind of numbers your Dad could get.  Price shop it, basically.

If this is a deal worked out between the Trades Union that OP's dad belongs to and the life insurance company then it is entirely likely that it is a better deal than is available on the open market - the deal gives the insurance company easy access to a large number of people working stable and well-paid jobs without having to advertise or search them out, and that is worth enough for them to give much better terms than those available on the open market.  The Trades Union can then offer its members access to that better deal as part of the incentive to join and stay a member.  Win/win all around, as long as the members of the trades union only take up the offers that are worth it to them.

[mozar]

I know he can continue to carry it when he is no longer at that employer. But I will ask him more details like does he have to continue to pay union dues after he retires.

[rmorris50]

I know he can continue to carry it when he is no longer at that employer. But I will ask him more details like does he have to continue to pay union dues after he retires.

Wow, if he can carry this into retirement, and at the same rate, if I were your dad I would be seriously considering this option.

[Rosy]

I know he can continue to carry it when he is no longer at that employer. But I will ask him more details like does he have to continue to pay union dues after he retires.

Wow, if he can carry this into retirement, and at the same rate, if I were your dad I would be seriously considering this option.

+ 1 - I looked into life insurance around that age and there was nothing out there that made sense.
Locking in the premium is huge and so is the fact that they pay the full amount from day one.
I'm surprised he can carry the coverage into retirement, he can't afford to drop the ball on this one.

He may want to talk to a Union rep to be sure he is taking full advantage - maybe there are other goodies he wasn't aware of.

The best thing he can do is choose the highest survivor benefits and work until he is 65 if that is possible.

[mozar]

Thanks for doing that research. He's trying to make it to 65 but he's running out of steam. If he can make it to medicare that would be awesome.

[frugaldrummer]

Sounds like he should definitely take this insurance NOW.

But also - why does the mother of his child not have steady employment? Is that because she's a SAHM? Or is it because she's not able to work or not willing?  I ask because it sounds like he's going to take an income cut of about $18,000 a year before taxes if he retires at full Social Security age. How are they planning to make up that shortfall? His daughter will start becoming more expensive as she enters her teen years and I'm presuming the mother of his child is significantly younger (unless they adopted?).  Shouldn't part of the planning be for the mother to start working more, to make up for the shortfall in income when he retires, and also to better secure her own retirement future? 

[mozar]

That story would be for the mustachian wall of shame. The mother was a substitute teacher but that's not possible right now. I doubt she has a plan. My dad will probably keep working part time. And move somewhere cheaper.