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Author: Subject: Life Insurance

Peach Head





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  posted on 8/12/2009 at 01:14 PM
I am not an insurance salesman and do not have any ties with the industry, but after the deaths of some of the really good people on this sight I felt the need to start this thread. One of the few smart things that I did years ago when my son was born was to buy a whole life policy from a friend of mine. He represented a reputable company(New York Life) and convinced me that while the premiums sounded like a lot at the time, down the road i would not miss it. i gave up cigs, cut down on drinking and stopped doing the BAD things. i had enough coverage to pay of the house and have some left over for my family. As the years have past I have added coverage to the point where if something happens to me my family will be allright. The other reason I feel strongly about this is that when my father died when i was young my Mom collected a monthly check for over 50 years. If you are young and can pass the phiysical requirments I urge you to think about the ones you love.
 
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Zen Peach



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  posted on 8/12/2009 at 01:17 PM
One of the things I'd like to add to that is to find a policy that offeres a disability clause. If, during the time you have the policy, you should become disabled the policy will stay in effect but the premiums will be paid by the disability insurance provision. You will be able to keep your coverage should money get tight.

 

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Peach Head



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  posted on 8/12/2009 at 01:23 PM
I have one of those too.
 

Ultimate Peach



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  posted on 8/12/2009 at 01:44 PM
I don't know about buying a whole life policy (my Dad was an insurance salesman, after retiring from the Army) but definely a person should have a term life policy. Also, agree with adding the disability clause. The only thing a whole life policy will do is build some cash value, but overall it isn't much for the preminum that you're paying. You can get more insurance for the money on a term life policy.

 

Peach Head



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  posted on 8/12/2009 at 01:52 PM
I added term but started with whole life because the premiums remain the same and it is in effect your whole life.
 

Extreme Peach



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  posted on 8/12/2009 at 01:59 PM
great thread and I am in the industry and have
thought the same thing about folks on this site
dying and/or that are sick. it is unfortunate to hear and
see kind, generous people here giving money and items
to be auctioned only to raise a small amount. Not that
it is not helpful, i realize
every little bit helps. however, if you are young you can
by a lot of life insurance for a very small investment. actually
almost any age up to age 55 life insurance costs are reasonable.

i feel the same way about health insurance. for the drummer
of a band like Little Feat not to have health insurance is
hard to believe. those guys have been touring like crazy
the past several years. you know they are making enough
money to have health insurance but i guess they were/are
not worried about it. i understand that the Bros. have
health insurance for the band members, is that correct.
(different subject and thread, i digrees. sorry)

bigann is talking about a feature nomally called "waiver of
premium". it takes care of paying your life insurance premiums
if you have a disability.

if you have kids and mortgage, etc.... buy some life insurance.
term is the least expensive and does the trick for a set period
of time, normally 10, 20, or 30 years.


 

Universal Peach



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  posted on 8/12/2009 at 02:15 PM
I'm a financial advisor, and have pretty extensive knowledge of this topic. It's something I don't talk about on the site, out of general respect plus compliance issues. But since it has been brought up, I would like to add a word of warning on a related topic.

During the eighties and much of the nineties, a form of life insurance called Universal Life was quite popular. Nothing at all wrong or unethical with this, but it had a potential flaw that is a cause for concern. These contracts depended on interest earned by the premiums to help pay for the insurance. The problem arose when interest rates dropped well below projections, and stayed there for a long time. The result was, that in many cases, the scheduled premiums no longer provided enough cash flow to fund the policy.
The result is that in many cases, policy owners have to substantially increase premiums, put a substantial deposit into the contract, or have the policy expire worthless. In spite of making all premium payments on time.

Modern contracts contain what is called a "no-lapse clause" to prevent this. Older contracts did not. If addressed in time, there are a number of options out there to deal with it. But not always.

Bottom line, if you have one of these policies, or know someone who has, have it reviewed by someone you trust. You can also ask for an "in-force illustration" from the company that will show you where you stand.

 
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Maximum Peach



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  posted on 8/12/2009 at 02:39 PM
I did just a term life policy when my first child was born. The advisor tried to sell me a whole life policy but I declined. I try to keep my assets and liabilities seperate, although some people want that guaranteed nest egg to draw from. The premiums on the whole plan were a little high for me, and quite frankly, any additional money I have is mostly invested in a taxable brokerage account, in addition to my 401K, 529s for the kids, etc. At the time, I believe the advisor told me he could guarantee me a 4% return on the whole life insurance policy and also said I could borrow against. Although if you croak and you have borrwed against it and not paid it back before your death, your family, who you are trying to protect, ends up footing the bill, as far as I understand it.

Whether you choose to purchase term versus whole life is really up to you and is entirely dependent on your unique situation. However, make sure you have someone reputable. There are plenty of people trying to sell you added services or solutions because they may get a higher commission. That applies to just about every business these days though!!

 

World Class Peach



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  posted on 8/12/2009 at 04:22 PM
Term is the way I went.

My mistake was not having it for more than 20 years. Those years flew by and to renew it I was looking at quite alot more than just $30.00 a month. I should've bought it for 25-30 years.

My advice, which could be 100% wrong... is to buy Term for the time your children will depend on you and in the mean time have some other insurances going that will bury you, etc. If you just can't save money and want a nest egg that others will use, get another form of protection. Everybody dies...there are better ways other than betting on when you will die.

Remember this: Everything that is sold to you is based on only two factors: Fear and Greed. Teeth aren't white enough? Hair isn't thick enough? Crime a problem? Water spouts clogged up? It is all about moving money from your pocket to theirs. An insurance salesman will exploit both of those factors without you even thinking about it. Make mistakes in life, sure...just make the right ones.

 

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A Peach Supreme



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  posted on 8/12/2009 at 07:45 PM
Whole life is good, compared to nothing. But if you're disciplined, you'll almost always do better to buy the same amount of coverage in term life and put the difference in premiums (i.e., savings compared to whole, universal, etc.) into a retirement account. Even putting the difference in premiums into a regular savings account or CD rate you'll do better with term than paying a lot more in whole life. The amount in whole life that you bank-roll with guaranteed pay-out in the end is extremely conservative investment with almost no return on the "investment" in the higher premiums for whole life.

The only asterisk I'd throw in is that if you make a $hit-pile of money each year (as in several hundred thousand dollars per year), then there are tax benefits in having a whole life policy that you wouldn't qualify for with a term life policy. But if you're making that kind of cash, you should be able to "self-insure" and not fret it. That's the "almost always" disclaimer in one of my first sentences above.

Also, you only need to insure for the amount of time you (or your family) would otherwise be depending on your paycheck. No sense insuring past retirement date. If you're doing that, you need to talk to a different financial planner or talk to a risk management professional about the entire purpose of insurance.

 

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A Peach Supreme



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  posted on 8/12/2009 at 07:49 PM
Also, term life policies are at an all time low in terms of cost/premiums. So it would be next to impossible to come out ahead with any other type of life insurance policy, assuming you invest the difference in premiums compared to a whole life policy. There's a reason Clark Howard, Dave Ramsey, and all the consumer advocates all agree on this point. If your insurance salesperson is trying to sell you something different, and you don't make well into the 6-digits annually and need the tax break, then run, not walk, to a different fee-based financial planner for a second opinion.

 

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Peach Master



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  posted on 8/12/2009 at 09:31 PM
I am jaded on this topic...my dad had bought me a life insurance plan way back in the 60's when i was born real cheap payments but the concept meant wonderful things if something happened. I wont say the name as it is a top provider... anyway my dad passed away five years ago i am now in my late 40's mym mom said you need to have the policy and i will transfer to you. Well i was like this is great no problem well the last two years of my dads life many things went finacially un taken care of one was this policy....i fought with the insuarance company and when it was all said and done i closed the policy and ended up with pennys....my employer offers me a life insurance policy bar none ..i say be cautios when purchasing these policies because they have small print that bascially null and voids years over 40 in my case of payments... anyway bad subject i will stop ranting....

 

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Ultimate Peach



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  posted on 8/12/2009 at 09:45 PM
great thread & thanks to all who have given their thoughts & advice!
i do feel that it is the responsible thing to do for any couple or family... sadly, we went without it for many years *only* because my husband felt we were "jinxing" ourselves if we had it. i always felt guilty that we didn't & i am sincerely thankful for obvious reasons that nothing has ever happened to either of us. it's hard to survive for most of us in this day & age that to lose your spouse & also their income would be very overwhelming in so many ways. about a month ago i actually just basically forced my husband into getting it & he was quite upset me with for pushing the issue....but i have the peace of mind now that if anything were to happen to either of us the other wouldn't have to stress as much financially on top of the trauma & pain of losing the other etc.

 

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A Peach Supreme



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  posted on 8/13/2009 at 07:24 AM
Does Term assurance have a different meaning in the US to the UK?

In the UK, a term assurance policy would pay out if you died in those 10 years. If you survived, you receive nothing.

This doesn't sound like a good investment to me!

Don't you have endowment policies which pay out if you die during the term, or provide a lump sum if you survive? These come With or Without Profits so the investment income can be good (although not recently!).





[Edited on 8/13/2009 by Shavian]

 

A Peach Supreme



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  posted on 8/13/2009 at 08:00 AM
Yes, if you outlive the term, you aren't paid anything. But the premiums are so much cheaper for a level term life policy than for whole life insurance that you would have more money buying the cheaper level term policy, and then take the money you saved compared to the premium for a whole life policy and invest that difference in a retirement account. The "investment" component of a whole life policy is so conservative that you would get almost no return on the investment. Or think of it this way, the part you get back in a whole life policy is sort of like a partial refund on the premiums you've been paying all along, but the premiums are so much higher compared to a term life policy that you've done worse. This doesn't sound like a good investment to me!

Good reading here: http://clarkhoward.com/liveweb/shownotes/category/9/81/#framesize_190

Basically, term life policy should have coverage somewhere between 6x and 10x your annual income, depending on your comfort-level. Unless you make $300k or more, in which case a whole life policy starts to make better sense for the tax advantages.

 

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A Peach Supreme



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  posted on 8/13/2009 at 08:03 AM
Dave Ramsey provides an even better explanation of why term life is better than whole life, but keep in mind he is also trying to sell his product and sell the products of the companies he endorses (incl. an online insurance broker). But it doesn't take away the objective factual analysis he provides:

http://www.daveramsey.com/the_truth_about/life_insurance_3481.html.cfm

And don't rely on what your employer provides, because if you lose the job you lose the insurance and at that point you may be too old to be able to afford a reasonable individual life insurance plan, or even worse, uninsurable if you have severe medical issues (diabetes, heart attack, stroke, disability, etc.).

http://www.daveramsey.com/etc/askdave/index.cfm?event=dspAskDave&intCon tentItemId=8270

 

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Zen Peach



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  posted on 8/13/2009 at 10:12 AM
quote:
Whole life is good, compared to nothing. But if you're disciplined, you'll almost always do better to buy the same amount of coverage in term life and put the difference in premiums (i.e., savings compared to whole, universal, etc.) into a retirement account. Even putting the difference in premiums into a regular savings account or CD rate you'll do better with term than paying a lot more in whole life. The amount in whole life that you bank-roll with guaranteed pay-out in the end is extremely conservative investment with almost no return on the "investment" in the higher premiums for whole life.

The only asterisk I'd throw in is that if you make a $hit-pile of money each year (as in several hundred thousand dollars per year), then there are tax benefits in having a whole life policy that you wouldn't qualify for with a term life policy. But if you're making that kind of cash, you should be able to "self-insure" and not fret it. That's the "almost always" disclaimer in one of my first sentences above.

Also, you only need to insure for the amount of time you (or your family) would otherwise be depending on your paycheck. No sense insuring past retirement date. If you're doing that, you need to talk to a different financial planner or talk to a risk management professional about the entire purpose of insurance.


dead on balls accurate ( to quote Marissa Tomei in My Cousin Vinny)

you can get an individual Health Policy ( if you start in good health ) pretty reasonably at BCBS of Alabama..it's insurance..you need it..but it's one of the first things to go in tough times

 

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Maximum Peach



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  posted on 8/13/2009 at 11:04 AM
Great topic, thanks for the info
 

Zen Peach



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  posted on 8/13/2009 at 11:48 AM
I have a term policy. I can keep it going until I am 80 but eventually when I get into my sixties the premiums will become so high as to be prohibitive. So I will obviously drop the policy when it is no longer needed. To me insurance is just that, insurance, not an investment. I have a homeowners policy and a car policy which I would like to never use. But it needs to be there just in case. I also recommend disability insurance becuase it is actually more likely you will be hurt or sick and unabel to work than to die.

 

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