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Life Insurance

14 years ago

A group of friends, male and female,in their late 60's to early 70's were discussing having Life Insurance after the kids are grown, house is paid for, money in the bank and investments and no debts to pay.

Would you keep the policy and pay the high premiums? Or would you cancel and save the premium money?

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Comments (6)

My3dogs ME zone 5A
14 years ago
No. I am 55, single and no debt. My financial adviser told me a few years ago that there is no need for me to have life insurance, unless I want to pay those premiums to leave my two sisters more than they will inherit as it is now.

It's sort of a tough thing to grasp, and if you have children, your thoughts may be different. I canceled my policy and only have the 2x my annual salary that my company offers free of charge.
tinam61
14 years ago
Life insurance is not all the same. Some policies you have a time when the policy is paid up, so you are not continuing payments for ever. Also, depending on what type policy, your payments may stay the same and not be high. There is alot to consider.

I was executor of my grandfather's estate. Here is one example. He had 4 paid up policies that left my grandmother with quite a bit of money and that is in addition to property, investments, etc. that he left her.

On the other hand, my FIL cashed out his paid in full policy and invested that money. He passed away about 6 years ago and my MIL has a nice nest egg invested. They also had other investments, no debt, etc. but it has enabled her to continue the lifestyle she was accustomed to, which includes traveling.

So, again, it depends on what you have. But to answer your question, and at the age you stated, and with no debt, etc. I wouldn't be paying high premiums.

tina
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There's cost associated with the policy itself, administrative and the actual cost of the death benefit. Those are probably based on current cost, interest rates and the amount you are paying. The assumptions may include a different premium amount, interest rate etc. It sounds to me as though they are saying they guarantee as long as you continue to make your payments and make no changes to the policy that it will stay in force until the date they give you (15 years). On the other hand to go further than the 15 years, maybe they have increased the premiums, the interest rate etc. to enhance the length of time the policy will remain in force. Is the product fixed or variable? Just curious why you went with the universal life policy?
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Other things being equal, many of us prefer to get life, and possibly also disability insurance, related to paying a mortgage off on our own as a separate contract. The mortgage insurance's beneficiary is the bank, not the mortgage holder, who, though paying the premium, has no flexibility in case of need. The amount of coverage decreases over the years, as it covers only the portion of the mortgage remaining unpaid, while usually for a similar cost (sometimes lower), a mortgagee can get regular term life insurance for the full amount originally owing on the mortgage ... and it usually stays at that level throughout, if they so choose. Premium rate may increase at the end of the agreed term, if it is shorter than the years that the mortgage is to run. If premium rates are comparable, if the mortgagee dies the amount of benefit making up the difference between the original amount owing and the amount remaining owing at the time (which they would likely pay to the bank to retire the mortgage) would be really helpful to the survivors. It's wise to carry disability insurance, as well, as there's a far greater possibility of long-term disability (about 4 times) than of death during one's years of employment ... lacking employment income, how does one pay mortgage should s/he become disabled? Lacking a will ... no problem ... as long as the owner of the family's assets ... remains alive. Suppose someone were to come to your house tomorrow and, reading from a clipboard, ask you what your family owns, then say that this and that was to be done with each of the various pArts of it. As you listened, you'd likely object strongly, sputteringly saying, "But ... but ... we don't want our things and money to be dealt with that way!!". That person would just be telling you what your state's rules are, that would come into effect ... ... if the owner of the assets dies without a will!! So - get the will in place ... before you die. Can't do it after!! ole joyful P.S. Confession time. I'm close to 80 ... and I don't got one, either. Stupid. My kids'd get the stuff ... but they'd get a lot less, after all of those admin. costs. And they'd get the stuff later. And the charities'd get ... nothing! o j
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Hi Moni, Whole life covers one for the rest of one's life ... and, as they say, builds cash value. But the cash value relates to the lower price of insuring one while young, with the actual annual costs rising as one ages, resulting in the cash value decreasing as one gets old. One can borrow against the cash value, resulting in a cost for interest. It is my understanding that the cash value disappears when one dies: one then gets only the death benefit that was guaranteed. You can have the cash value, or the death benefit ... but not both. Term insurance covers the life insured for a specified number of years, e.g. 10 years, 20 years, etc., usually for the full face value, but I think that, though seldom used, decreasing term is available, where the payout rate diminishes as the years in that contract period go by. As one ages, the possibility of one's dying during the period of the next term increases, so the price quoted rises, very substantially as one ages. It becomes very difficult, if not impossible, to initiate any policy for a person over age 80. As Iva Mae says, in Canada "Term to 100" is available, to cover one until age 100. It may cover one beyond that, but I suspect that the coverage dies on one's 100th birthday: if it's claimed that such isn't so, I'd want it in writing. Ordinarily, over one's lifetime, a fanily's need for insurance decreases, being for a large amount when young, if there's a family, to pay off mortgage (and I don't like insurance just to cover mortgage), and provide the surviving spouse and small children with their needs until they become independent, probably including at least part of the cost of advanced education. As one ages, the need reduces, so, while the premiums for a specified amount of term insurance increases, the amount that the family needs to carry reduces, thus they can continue to pay less for term than for whole life with the difference available for investment. The idea then is that the amount of one's invested asset increases over the years, thus reducing the amount needed to support the family's needs. The goal is to have enough assets built up over the years to be able to self-finance, thus being able to do without term insurance late in life, when it becomes very expensive. Thus, we often hear the saying, "Buy term (when young) and invest the difference (between the cost of whole life that stays constant through the years and term, which increases as each term expires). ole joyful
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I sell life insurance and I'm an advocate of term insurance as long as you have covered your potential loss for that term. You need to personally evaluate what you are trying to cover and for how long. There are generally 10, 15, 20 and 30 year term policies. Some companies offer 40 years. Once the term is over you will be offered annual renewable term at a much higher price. The longer you "lock" your premiums, the higher the annual/monthly cost. Look for a conversion privaledge which should (depending on the company) allow you to convert the term policy in a specified time frame to a permanent policy if your needs change. The company I write for offers the conversion privaledge with no medical underwriting which means if your health changes, you can still have a policy. Remember, you are looking into the future and you can't possibly know everything that will happen. I always suggest apply for more, see how the underwriting goes and then if you have to make changes upon issue, you have that opportunity. You'll want a company that offers several different rating classes, not just smoker or non smoker. Look for 4 - 6 rating classes.
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neetsiepie
14 years ago
Since you're likely talking about Term insurance, I don't think it'd be necessary. It wouldn't make any sense to buy whole life at this point.

My MIL has been paying for 20+ years for a $20K policy on her DH. She's currently paying over $225/mo for this policy as he's 75yo. I've told her that if she were putting that into a savings account, she'd have been a lot better off.

DH has a small whole life policy that is also a retirement account...minimal, but it'll pay for his funeral. He bought it years ago and is nearly vested. We've got term thru my employer...more on me since I'm the majority earner. Our kids are grown, but we still have a mortgage, so the $ is intended to help DH thru the time he'd have to sell the house and move on. Assuming I go well before the house is paid off, of course!
holleygarden Zone 8, East Texas
14 years ago
Only one thing I would add here. Have your burial pre-paid. We just buried a member of the family and the burial and headstone cost almost $20,000. (a small funeral and a single headstone) If there is no other debt for other members to have to deal with, as long as you have money set aside for burial, or a pre-paid plan, you may consider cancelling. Read the fine print, though, before you make your final decision.
nicole__
14 years ago
"I'M DEBT FREE!!!!!!!"
I'm a BIG Dave Ramsey follower.I've never believed in having debt. :0) So I listen in rapture when I hear him on the radio expousing "my own" beliefs. Here's what "the expert" has to say........

Here is a link that might be useful: Dave Ramsey's advice on buying Life insurance...
Montana Lolly
3 years ago
last modified: 3 years ago
I recently took out insurance. Just so you know I've been thinking about this for the last 5 years.Usually, only people with serious illnesses or the elderly take out life insurance. However, I am an exception, I am 35 years old and I think that life insurance is a very important thing. No one knows what may happen to me tomorrow and I'm afraid to think about what my family will be left with.I believe that life insurance underwriting is a guarantee of a stable future, so do not delay it.

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