Ask the Pack....Life Insurance

[HotMop]

Since we seem to have some gambling degenerates on the board, what say thee about the type of life insurance I should get outside of work?

I spoke with a broker last night and we discussed AD&D, Term Life, ROP, and Whole Life.

What's the best option to get for a good health, 50+ year old couple with 2 kids?

 

[patdog]

Term life to provide for the kids until they reach adulthood, then just enough to pay off the mortgage & other debts.

 

[8dog]

Since we seem to have some gambling degenerates on the board, what say thee about the type of life insurance I should get outside of work?

I spoke with a broker last night and we discussed AD&D, Term Life, ROP, and Whole Life.

What's the best option to get for a good health, 50+ year old couple with 2 kids?

Term.

 

[LordMcBuckethead]

Whole life is a waste. I would say term life. My wife and I have a combined maybe 2 million in coverage.

 

[horshack.sixpack]

Since we seem to have some gambling degenerates on the board, what say thee about the type of life insurance I should get outside of work?

I spoke with a broker last night and we discussed AD&D, Term Life, ROP, and Whole Life.

What's the best option to get for a good health, 50+ year old couple with 2 kids?

I did term but did it way younger. Mine will expire around retirement age and I hope that I'm self-insured at that point. Let us know what rate you get from starting it now. I would consider getting another term policy if it were reasonable in my 50's.

 

[The Peeper]

Yep, listen to Horshack, Term is the answer and only until retirement age. If you are saving like you should, you will be self insured by then and won't need it.

Don't be scammed by Whole Life, if you are looking for an investment put your money in a real investment, not one shared with insurance. With AD&D you are actuallly betting that you will only die from an accident, it sually doesn't cover natural death or disease when real life insurance covers both.

Edited to say if you have doubts, listen how hard of a sales pitch you will get when you tell an agent you don't want the Whole Life but instead want the Term.

 

[greenbean.sixpack]

I did term but did it way younger. Mine will expire around retirement age and I hope that I'm self-insured at that point. Let us know what rate you get from starting it now. I would consider getting another term policy if it were reasonable in my 50's.

Great advice. I have 60 year old coworkers who are spending money to get life insurance after they retire and are no longer covered via work. Use your 401k/IRA to be self insured for retirement. One note of caution, if you or a spouse ever have to go into a NH, medicaid isn't going to pick up the tab until your financial resources are expended. My wife and I agree that if either needs to go into a NH, the other one will slip a pillow over the NH home bound one's head.

 

[AstroDog]

Whole Life or Universal Life have savings features built in that increase a cash value portion of the contract while still covering you for a death benefit. However, the amount of face value you get for the premium is less than what you'd get for an equivalent term policy. And beware that in some whole life policies, if you were to die, you only get the death benefit. You don't get the cash value also. Only one or the other will ever pay out, not both. Whole life is like the name says.....it will remain in effect until age 100 (basically cover you for life). Just depends on what you want whether you choose whole life or term. For only pure insurance, term gives you the best bang for your buck. I know a lot of people who have both. I would recommend a term policy and you can still get a good coverage amount & premium at age 50. If you can afford it, later, you might want to also add a small whole life policy to cover burial and final expenses...... that will cover you no matter how old you get. Term starts getting pretty expensive after age 60.....so if you renew a term policy, it will cost a lot more at later ages..... Almost unaffordable for many.

 

[Boom Boom]

Since we seem to have some gambling degenerates on the board, what say thee about the type of life insurance I should get outside of work?

I spoke with a broker last night and we discussed AD&D, Term Life, ROP, and Whole Life.

What's the best option to get for a good health, 50+ year old couple with 2 kids?

You should create a spreadsheet with your family's expected annual expenses, incomes, and assets. For a scenario of your death, include SS survivor benefits as an income stream. That will help you know how much insurance you would need now and in the future.

As another said, NH care is the one that will blow up a ton of careful saving and planning if not accounted for.

 

[Cantdoitsal]

I've always heard go term vs whole life and invest the monthly savings into something else.

 

[HotMop]

Good advice everyone.

 

[AstroDog]

I've always heard go term vs whole life and invest the monthly savings into something else.

That's true, but most people in our country don't have the discipline to save regularly. That's why the insurance industry came up with the whole life product. If you can and will save regularly into a decent investment vehicle, then I would absolutely recommend term. And then an amount you can afford into some sort of savings account. If you have trouble saving on a regular basis, then whole life might be an option. For young families, I would recommend no less than a 300K term policy on both husband and spouse. Would prefer a 500K+ policy if the budget allows though.

 

[Bulldog from Birth]

General rule of thumb is to buy a term policy with a value of 10-12x your income. That way the survivor can invest it upon your death and replace your income in perpetuity with the growth and dividends that it generates each year. Exceptions to this rule would be if you begin to approach the point where you can self insure and don’t need that much life insurance to maintain the survivor’s lifestyle or if you just make significantly more money than you spend. If you make $120k but live on $60k, you’re probably ok with 5-6x your income instead of 10-12x.

 

[Yeti]

Well it depends on what you want to accomplish. If you want to cover your family if you die at a young age (less than 60) term. If you want to leave something for family and cover some end of life expenses buy a whole policy as well. Whole has some benefits. Pay 15 yers of term and live you wasted your money. If you had put it in whole it may be more expensive but you have some benefit. Another thing to think about is a long term care policy that if not used converts to a life benefit Whatever you think you need buy more ..inflation is real final advice is buy something

 

[horshack.sixpack]

That's true, but most people in our country don't have the discipline to save regularly. That's why the insurance industry came up with the whole life product. If you can and will save regularly into a decent investment vehicle, then I would absolutely recommend term. And then an amount you can afford into some sort of savings account. If you have trouble saving on a regular basis, then whole life might be an option. For young families, I would recommend no less than a 300K term policy on both husband and spouse. Would prefer a 500K+ policy if the budget allows though.

One note, since you sound like you may be pretty close to the industry. My agent is always telling me I'm under insured based on income. That might fit a formula somewhere, but realistically, I got used to having little discretionary spending for the majority of my life, and my wife is more frugal than I am, so if I kick the bucket, she will be fine with how I'm insured. I'm the one that buys stupid crap, she just shakes her head. My point is, there are formulas and then there is knowing yourself, spending habits, expectations, etc.

 

[HotMop]

Yep, listen to Horshack, Term is the answer and only until retirement age. If you are saving like you should, you will be self insured by then and won't need it.

Don't be scammed by Whole Life, if you are looking for an investment put your money in a real investment, not one shared with insurance. With AD&D you are actuallly betting that you will only die from an accident, it sually doesn't cover natural death or disease when real life insurance covers both.

Edited to say if you have doubts, listen how hard of a sales pitch you will get when you tell an agent you don't want the Whole Life but instead want the Term.

Well, the broker pushed Whole Life like it was a game changer, pushed it at every chance. Looks like I'll let her know I'm getting a new broker that doesn't push trash policies.

 

[YesIAmAPirate]

Well, the broker pushed Whole Life like it was a game changer, pushed it at every chance. Looks like I'll let her know I'm getting a new broker that doesn't push trash policies.

Unless I'm mistaken, agents get paid a percentage of the first year's premium, so they are going to push you to what makes them the most money, not necessarily what is best for you

 

[patdog]

Unless I'm mistaken, agents get paid a percentage of the first year's premium, so they are going to push you to what makes them the most money, not necessarily what is best for you

Generally, the agent will get at least 100% of the 1st year premium in commission for a whole life policy. First year term commission is about 60%-70%. Then in future years, about 5%-10% for both. Not hard to figure out which one the agent is going to push.

 

[Boom Boom]

One note, since you sound like you may be pretty close to the industry. My agent is always telling me I'm under insured based on income. That might fit a formula somewhere, but realistically, I got used to having little discretionary spending for the majority of my life, and my wife is more frugal than I am, so if I kick the bucket, she will be fine with how I'm insured. I'm the one that buys stupid crap, she just shakes her head. My point is, there are formulas and then there is knowing yourself, spending habits, expectations, etc.

Exactly, your own personal situation is whats most important.

In my view, I plan to make another half million before I retire. If I died today, my wife would pull in more than that in SS survivor benefits. But if I went into long term care today, not only would I not make half a mil, nor pull in survivor benefits, nor cash a life insurance policy....but I'd be shelling out a ton to pay for the care. I'd pull in some disability, but that's far less than survivor benefits, and in like 1 fifth of what long term care costs. That's the gap I need to insure against.

Now, if you expect to live paycheck to paycheck for the next 10 to 20 years....yeah you need some life insurance.

 

[Mobile Bay]

Everybody I listen to on money says term. At your age you should also start to consider long term care in a few years.

But that is all I can tell you because I am apparently the one guy on the planet who doesn't need life insurance.

 

[houstonutsack]

If you are a professional with moderate to high income you also need to seriously consider disability income insurance. A disabling injury or accident could cut off your ability to be a future wage earner. In banking, they’re the 3 D’s when you are banking executives and professionals-death, divorce, and disability. You can only insure for 2 of the 3.

 

[Boom Boom]

If you are a professional with moderate to high income you also need to seriously consider disability income insurance. A disabling injury or accident could cut off your ability to be a future wage earner. In banking, they’re the 3 D’s when you are banking executives and professionals-death, divorce, and disability. You can only insure for 2 of the 3.

From my limited experience, disability insurance is mostly a scam. It claims to cover say $50000 a year....but in the fine print that's only above what SS gives, which is like $30k. So it's really only paying $20k. And that's before getting into whether it requires you to go get any job you could, like grocery checker at MW.

 

[GloryDawg]

Theres a place of Whole Life and Term. It all depends on what you need.

Pat is right. If you just coverage until your kids are grown, home paid for and you are retired go for term!

There are reasons to buy Whole Life.

Example myself. I bought a 20 Pay Whole life 19 years ago for 700K. I have a pension plan with my company. The 20 pay is being used for pension maximation plan. I am not going to take a life and joint settlement. I am going to take a life settlement which will give me maximum retirement out of my define benefit plan. I will get that income until the day I die when I die my wife will not receive any income from pension plan however, I have a 20 pay 800K Whole Life paid for that will give my wife income until she dies. It is participating and has grown to almost 800k. If she dies before me I can either cash it in, annuitize the cash value and have more income or change beneficiary to my kids. I also have two 20-year terms that equals 1.2 million. They both are on the verge of becoming ART's. I will keep them a few more years before the premiums start to get too expensive. I am 58 and plan on doing a reverse mortgage when I turn 62. By the end of the year, I am going to buy a 10 term for 400K. When I reach 62 years of age, I am going to convert it to a Whole Life. Rather than leave my kids the head ach of fixing up and selling the house, owing taxes on it, paying commissions to a realtor, I am going to take the equity out and once both my wife and I are dead let the bank take it and leave 400K to my kid's income tax free from the Whole Life.

Here is another example: Copied and pasted.

[Jim Harbaugh’s Life Insurance​

Not only is Jim Harbaugh being paid $5 million a year as a coach for the Michigan Wolverines, but Michigan is also helping him start a life insurance policy as part of his benefits. They’ve loaned him $4 million to start a policy and $2 million a year for the following 5 years.

The ability to leverage his policy means he can take loans without incurring income tax. And as long as he keeps his policy in-force, he does not have to repay the loan from the school until he passes on. A portion of the death benefit will pay it off.

This is what we call a win-win situation—where the school has a near-guarantee to receive their money back, they’ve secured Harbaugh as a coach, and Harbaugh gets the benefit of a policy.

Of course, there are stipulations to this contract. If Harbaugh leaves his coaching position before the contract is up, he will have to repay the premiums loaned to him upon termination or resignation.

Benefits for Harbaugh’s Heirs​

Not only will Harbaugh benefit, but this arrangement actually acts as significant protection for his heirs. If Harbaugh were to pass on while Michigan is paying for the policy, they won’t be disinherited. They will receive no less than 150% of the premiums paid on the policy.

That means, if Harbaugh were to pass, and Michigan had paid $10 million until that point, his heirs would receive at least $15 million. The payout would also help the university recover what they had loaned him and be able to cover the cost of replacing him.}

Last week I dealt with a guy who was setting up an intentionally defective trust. Short definition, it is defective in the fact it is irrevocable and it outside the grantors estate if he dies but he still controls what is in the trust. The Grantor pays tax on the growth as his personal income, not the trust paying the tax. Personal income is taxed at a lower rate and comes with deductions. He added a 10-million-dollar Whole Life policy to help build the trust value over the years and if he dies his wife is the beneficiary of the life insurance and his kids are the trustees. Also having the 10 million inside the trust keeps it out of the grantors estate when he dies. Little known fact death benefit regardless to who the beneficiary is, becomes part of the estate. I was not the agent. I was helping the agent. I am not a financial planner or agent anymore.


You buy what you are comfortable with. I rationalize the premiums for my Whole Life this way. Figure the premiums you pay over 20 years on the term and on the Whole life. Then subtract the cash value out of the premiums paid on Whole Life and the cost of insurance and policy fees are about the same. The difference is you have Whole Life as long as you need. Things changed in your life. Term is exactly what it is, For a Term". Yes, I could buy term and invest the difference but what investment is guarantee and what investment will pass death benefit onto my spouse income tax free?

As I said everyone has their own opinion and do what you feel comfortable doing. I have both and see the need for both. You may not so buy what you want but regardless have life insurance. It's not for you it's for your family.

 

[patdog]

Theres a place of Whole Life and Term. It all depends on what you need.

Pat is right. If you just coverage until your kids are grown, home paid for and you are retired go for term!

There are reasons to buy Whole Life.

Example myself. I bought a 20 Pay Whole life 19 years ago for 700K. I have a pension plan with my company. The 20 pay is being used for pension maximation plan. I am not going to take a life and joint settlement. I am going to take a life settlement which will give me maximum retirement out of my define benefit plan. I will get that income until the day I die when I die my wife will not receive any income from pension plan however, I have a 20 pay 800K Whole Life paid for that will give my wife income until she dies. It is participating and has grown to almost 800k. If she dies before me I can either cash it in, annuitize the cash value and have more income or change beneficiary to my kids. I also have two 20-year terms that equals 1.2 million. They both are on the verge of becoming ART's. I will keep them a few more years before the premiums start to get too expensive. I am 58 and plan on doing a reverse mortgage when I turn 62. By the end of the year, I am going to buy a 10 term for 400K. When I reach 62 years of age, I am going to convert it to a Whole Life. Rather than leave my kids the head ach of fixing up and selling the house, owing taxes on it, paying commissions to a realtor, I am going to take the equity out and once both my wife and I are dead let the bank take it and leave 400K to my kid's income tax free from the Whole Life.

Here is another example: Copied and pasted.

[Jim Harbaugh’s Life Insurance​

Not only is Jim Harbaugh being paid $5 million a year as a coach for the Michigan Wolverines, but Michigan is also helping him start a life insurance policy as part of his benefits. They’ve loaned him $4 million to start a policy and $2 million a year for the following 5 years.

The ability to leverage his policy means he can take loans without incurring income tax. And as long as he keeps his policy in-force, he does not have to repay the loan from the school until he passes on. A portion of the death benefit will pay it off.

This is what we call a win-win situation—where the school has a near-guarantee to receive their money back, they’ve secured Harbaugh as a coach, and Harbaugh gets the benefit of a policy.

Of course, there are stipulations to this contract. If Harbaugh leaves his coaching position before the contract is up, he will have to repay the premiums loaned to him upon termination or resignation.

Benefits for Harbaugh’s Heirs​

Not only will Harbaugh benefit, but this arrangement actually acts as significant protection for his heirs. If Harbaugh were to pass on while Michigan is paying for the policy, they won’t be disinherited. They will receive no less than 150% of the premiums paid on the policy.

That means, if Harbaugh were to pass, and Michigan had paid $10 million until that point, his heirs would receive at least $15 million. The payout would also help the university recover what they had loaned him and be able to cover the cost of replacing him.}

Last week I dealt with a guy who was setting up an intentionally defective trust. Short definition, it is defective in the fact it is irrevocable and it outside the grantors estate if he dies but he still controls what is in the trust. The Grantor pays tax on the growth as his personal income, not the trust paying the tax. Personal income is taxed at a lower rate and comes with deductions. He added a 10-million-dollar Whole Life policy to help build the trust value over the years and if he dies his wife is the beneficiary of the life insurance and his kids are the trustees. Also having the 10 million inside the trust keeps it out of the grantors estate when he dies. Little known fact death benefit regardless to who the beneficiary is, becomes part of the estate. I was not the agent. I was helping the agent. I am not a financial planner or agent anymore.


You buy what you are comfortable with. I rationalize the premiums for my Whole Life this way. Figure the premiums you pay over 20 years on the term and on the Whole life. Then subtract the cash value out of the premiums paid on Whole Life and the cost of insurance and policy fees are about the same. The difference is you have Whole Life as long as you need. Things changed in your life. Term is exactly what it is, For a Term". Yes, I could buy term and invest the difference but what investment is guarantee and what investment will pass death benefit onto my spouse income tax free?

As I said everyone has their own opinion and do what you feel comfortable doing. I have both and see the need for both. You may not so buy what you want but regardless have life insurance. It's not for you it's for your family.

There are some situations, mostly with high income people who will have estate tax issues, where whole like can make sense as part of an estate plan. But for most people, term is the way to go every time.

 

[GloryDawg]

There are some situations, mostly with high income people who will have estate tax issues, where whole like can make sense as part of an estate plan. But for most people, term is the way to go every time.

Not going to disagree. I like both.

 

[AstroDog]

General rule of thumb is to buy a term policy with a value of 10-12x your income. That way the survivor can invest it upon your death and replace your income in perpetuity with the growth and dividends that it generates each year. Exceptions to this rule would be if you begin to approach the point where you can self insure and don’t need that much life insurance to maintain the survivor’s lifestyle or if you just make significantly more money than you spend. If you make $120k but live on $60k, you’re probably ok with 5-6x your income instead of 10-12x

Sadly, most of middle America make between 30K - 75K.

Unless I'm mistaken, agents get paid a percentage of the first year's premium, so they are going to push you to what makes them the most money, not necessarily what is best for you

Yes, term pays a lesser commission and likely why agents try to push whole life policies first. Thats wrong because they are putting themselves ahead of their client's needs. As I said before, I would highly recommend a term policy and then later on maybe add a small whole life policy to help your kids clean up some of your estate messes you left behind. Hopefully, by the time you retire, your investments will have accumulated to the point where you need no insurance. However, most of us on this board are not like middle America. A large part of our society are just not saving anything.

 

[goodknight]

Since we seem to have some gambling degenerates on the board, what say thee about the type of life insurance I should get outside of work?

I spoke with a broker last night and we discussed AD&D, Term Life, ROP, and Whole Life.

What's the best option to get for a good health, 50+ year old couple with 2 kids?

Depends on your situation. I have some through work AD& D. Dropped all else based on my situation. Kids both out of the house and have carreers, wife passed 5 years ago, no debt etc. Told my kids I’m dropping it all since they are self-sufficient so no golden parachute when I pass other than my house, investments etc. Wife had enough thru work, she was uninsurable, without a physical to pay off mortgage when she passed. Funny how you get insurance stuff in the mail about policies and offers when you refinance but they all politely hang up when you mention the C word. I despise insurance companies has a whole

 

[WilCoDawg]

Well, the broker pushed Whole Life like it was a game changer, pushed it at every chance. Looks like I'll let her know I'm getting a new broker that doesn't push trash policies.

There are good WL policies that are beneficial. There’s no denying that and I won’t argue with people here about it. It is like insurance and savings bundled up. They’re especially good to get for your kids.

 

[garddog]

Don't buy whole life for final expenses. Ask about a prepaid funeral, especially if you intend to stay put when you retire.