Damn I'm feeling old by posting this, but here goes:

I'm looking into a number of different options for supplemental life insurance right now. I'm a fairly young, medically healthy, non-tobacco male ... so my quotes will most likely be good. I'm trying to decide between 30-year term coverage and whole life coverage. I'm looking for somewhere between 250k-500k in coverage ... enough to pay off my debt and ensure financial stability for a few years.

The main issue I'm contending with is choosing term or life.
-Term coverage is dirt cheap, but will skyrocket if decide I need it beyond the 30 year coverage.
-Term coverage payout is easily 20x any "total" amount I would put in over the 30 years.
-If I invest in retirement correctly, I don't plan on renewing at present. Thus, to me, term coverage is "lost" money.
-Whole coverage rates are guaranteed until age 102, but are about 4x the term rates.
-Whole coverage payout is 5x the "total" amount I would put in over a life of 75 years.
-If I invested the same money I put into whole coverage into retirement instead, even at a crappy 3% return, I can make 4x the payout after 50 years (i.e. age when something might happen).

Thoughts/opinions appreciated.

1/23/2007 10:36:09 PM

You should only need term while you're working. When you're at retirement age you should have enough in your 401k or whatever to where you won't need it. Don't waste your money on whole life. Of course Dave Ramsey tells you to only buy term, but it's whatever makes since to you. And he is right if you put that total amount into a roth ira that you would have put into whole life you'd have a lot more than 5X that amount.

1/23/2007 10:40:44 PM

term

1/23/2007 10:52:28 PM

A lot of people like a combination of term and whole.

Are you married or do you have kids? That makes a big difference. If you are looking to go as cheap as possible and have some idea of how long it will take you to pay off whatever debt you have you may want to look at a decreasing term policy or a combination using that. That way as your debt goes down, so does your insurance benefit and your premiums are lower as well.

To get an agent to run quotes for you using decreasing term you will have to demand it from them because they are going to run the more expensive policies past you first.

1/24/2007 1:57:18 AM

Term. Take the difference between that and whole life and put the remainder in a Roth, like was previously mentioned.

TEH WINS

1/24/2007 7:42:12 AM

Is anyone financially dependent on you? Do you really need it?

1/24/2007 1:21:08 PM

Well, Whole Life will allow you to build up your premiums. If you are disabled or unemployed, you can use what you have accrued to pay the premiums.

Also, life insurance payouts are not considered income for tax purposes (when you die). You could invest the money in a roth, but its going to be taxed as income at some point.

I would only get a policy if you have a family.

[Edited on January 24, 2007 at 6:08 PM. Reason : blah]

1/24/2007 5:46:49 PM

i have whole and universal life policies ($175k). i'm undecided on whether i should cash them out and put the money into other investments, then just carry the military's SGLI term life insurance (which is somewhat subsidized...i think it's like $20/month for $250k of term life, and you can get up to $400k or so, i believe).

the problem is, once I do that, it's tougher to turn back. getting permanent policies later in life will cost a lot, and another complicating factor that I have is that many insurers either won't insure pilots, or have an aviation-exclusion clause in the policy (so if i died in a crash, i wouldn't be covered, which isn't a loophole i'd be willing to deal with), or else charge huge rates.

i think i pay about $135/month for my whole and universal policies right now.

1/24/2007 5:51:23 PM

Quote :

"You could invest the money in a roth, but its going to be taxed as income at some point."

Do you even know what a roth is?

1/24/2007 6:30:49 PM

I meant to say IRA instead of Roth.

There are different tax situations for a roth and traditional ira (no deduction for roth contributions, so you are paying your taxes up front). However, there could be estate tax issues with left over roth (the exemption is $1 Million in 2012) to consider as well.

1/24/2007 7:37:25 PM

I certainly hope I make it past 2012.

1/24/2007 7:41:50 PM

sorry to break it to you, but the end of the world is coming dec 21, 2012

http://www.greatdreams.com/2012.htm

1/24/2007 8:23:17 PM

Quote :

"Is anyone financially dependent on you? Do you really need it?"

Legally, not yet. Ask me again later this year and I'll answer yes. The reason I'm looking at the range I am is because should something happen to me right now, I'd want enough to pay off my debt (student loans = $55k alone) and support my fiancee until she finishes graduate school. Should something happen to me down the road (say age 50), I would want enough to cover the family for a few years.

Duke, that is subsidized. My last job had comparable rates ($180/yr for 250k coverage, $360/yr for 500k coverage). My current employer covers 1x my salary, but does not offer subsidized supplemental insurance. Rates are definitely higher than what I just listed, but still affordable to me.

So if I did a combination of term/whole, what amounts would you recommend for each?

1/24/2007 8:44:00 PM

Quote :

"Should something happen to me down the road (say age 50), I would want enough to cover the family for a few years."

Shouldn't your next egg be able to take care of that? I really don't see the point of someone getting whole unless you have a pension of something that goes away if you die.

1/24/2007 8:53:19 PM

I think you would be wasting your money. Get term life insurance when you have children or if your fiancee/wife becomes disabled. If your fiancee has the skills to go to grad school, she can manage without you if the unthinkable happened.

As far as when you are 50+, you'd be better off dumping the money in your 401k/IRA.

[Edited on January 24, 2007 at 11:01 PM. Reason : ?]

1/24/2007 10:59:03 PM

Quote :

"next egg"

FTW

1/25/2007 5:32:26 AM

I am pretty sure government student loan debt is forgiven if you die in repayment. Not sure about private loans.

1/25/2007 8:13:55 AM

I actually have both, a whole life and a term insurance (also, dont feel old, I've had my whole life policy since I was 19).

My term insurance is part of my benefits package at work, so I dont really have to pay for it. I have the option of upping it, but it was not necessary for me right now.

My whole life insurance policy was actually initially purchased by my parents when I was 19. They continue to pay the premiums, and one day, I'll take it over.

Anyway, with that said, both insurance policies have their own unique advantages and disadvantages, and to be honest, I am most definitely not qualified to explain why you would pick one over the other (nor would I imagine any wolfwebber would be). I suggest you call my life insurance agent, Dave Woody at 919-755-3205 or send him an email at dave.woody@nmfn.com

He's a great guy and did a great job of explaining all the variaties of life insurance to me. Additionally, he's been in the life insurance game for a while, so he knows what he's talking about.

1/25/2007 9:27:09 AM

Life insurance agents are salesmen. They are the last people you want to take advice from.

1/25/2007 9:42:55 AM

Why did you parents purchase you life insurance when you were 19?

1/25/2007 10:02:27 AM

Quote :

"Life insurance agents are salesmen. They are the last people you want to take advice from."

a good life insurance agent should be able to explain the differences between whole and term as well as give you financial advice on a wide variety of topics without 100% pushing for the sale. people have become cynnical and sales people know this. good life insurance agents are all about developing life-long relationships, they will certainly not take the chance of turning off someone right off the bat by just pushing for a sale that can easily be seen as needless. dave woody is a good guy and a good agent, and i stand by suggestion of giving him a call

Quote :

"Why did you parents purchase you life insurance when you were 19?"

because my parents plan on killing me and reaping the rewards...hahaha

no. there are many reasons why my parents purchased a life insurance policy when i was 19. i guess a big one is that it was basically a financial gift that they could give to me that would help in contributing to my long-term financial security instead of just giving me $100 to go spend on CDs. Another is that when you are 19 you are able to purchase life insurance policies that have much better terms and advantages then when you are 30. And finally my parents are people who grew up very poor, put themselves through college while having a kid that they had when they were teenagers, and have since worked their asses off to make a lot of money. because of that they have become very interested in asset management and wealth accumulation and often look back and see all the places that they could have made even more money if they had known a little more when they were younger.

so yeah, they bought one because they were looking out for me and my best interests

1/25/2007 10:50:04 AM

How does this contribute to your long term financial security?

1/25/2007 10:57:28 AM

when i retire, i can take payments out of it like a 401k plan. additionally i can borrow against it, or from it when i want to buy property, or if god forbid i loose my job and need some money to carry me through the hard times.

its basically just another vehicle to build wealth, like a 401k or a roth ira (both of which i have)

1/25/2007 11:04:37 AM

So, what type of return percentage does your insurance produce?

1/25/2007 11:06:16 AM

dont know off the top of my head - i have the projected returns in a file at home (like i said, my parents still handle this policy i really dont have much to do with it. the only reason why i actually know this much is because they recently upped the amount which meant that i had to sign some papers and had a meeting with the insurance agent to learn about it as a teachable moment)

however, the returns are definetly not what you would expect from a 401k or an ira. this is because its supposed to be your "safe" money. i have aggressively invested my 401k and ira money while my life insurance will just chug along with its moderate accumulation. its all about diversifying

1/25/2007 11:14:51 AM

What are the advantages of that vs having your safe money in a high interest money market account?

1/25/2007 11:20:43 AM

dont know. this is what my parents decided. i'm going to go with that for now since at this time, its free money for me.

never claimed to be an expert, in fact, i suggested that people go talk to experts rather then talk to me

1/25/2007 11:23:12 AM

Quote :

" I am most definitely not qualified to explain why you would pick one over the other (nor would I imagine any wolfwebber would be). I suggest you call my life insurance agent, Dave Woody"

haha, plenty of people on here are very knowledgeable.

also, my father is in the insurance business, and handles a lot of life insurance. what i've determined about insurance products in general (particularly life insurance and annuities, which are basically income insurance) are that they are not inherently bad products, but they aren't the best tool for the job for everyone. people have different financial needs and different investing philosophies. in other words, a life insurance salesman can be selling you what he truly thinks is a viable investment, but you may be better suited otherwise.

for those of us who are young, have minimal to moderate financial commitments, and invest very heavily, insurance may not be the best route. there is an opportunity cost associated with it, because it will never offer the same returns as other investments (and it's not designed to directly benefit YOU, anyway).

Quote :

"no. there are many reasons why my parents purchased a life insurance policy when i was 19. i guess a big one is that it was basically a financial gift that they could give to me that would help in contributing to my long-term financial security instead of just giving me $100 to go spend on CDs."

what he's asking is why they didn't set up, say, a Roth IRA for you at age 19 and fund it for you at the same rate they're spending on your life insurance (or the same, minus a few bucks for a minimal term policy just to cover your burial expenses, etc).

1/25/2007 11:29:58 AM

insurance isn't an investment. You get insurance to protect against unmanageable losses. You insure your home, you insure a car you owe money on, and you insure yourself for liability while driving. If you are rich you insure yourself against personal liability (umbrella). If you have children or a non-working spouse, you insure your life with term insurance. Outside of that, you probably should be self insured.

1/25/2007 12:02:52 PM

insurance is most certainly an investment...it just isn't a very good one if all you are concerned with is the absolute bottom line in terms of return on investment.

1/25/2007 12:46:24 PM

I guess we are talking semantics. As an investment, it is somewhere between beanie babies and commemorative plates.

They can be a legitimate investment for estate planning if you are wealthy, but for us young working stiffs, whole life isn't a valid investment.

http://www.smartmoney.com/insurance/life/index.cfm?story=lifeterm

[Edited on January 25, 2007 at 1:31 PM. Reason : ?]

1/25/2007 1:28:33 PM

^ yeah, i doubt any of us (as of now) are worth enough that it would be worth using life insurance to pass down an estate tax-free. that's a special case.

1/25/2007 3:06:10 PM

I heard whole life insurance for your child from Gerber is a good deal.

































Because you want to buy insurance from a company that sells baby food.

1/25/2007 10:23:10 PM