Life insurance

[catherine]

[I feel like I've already posted this information, but maybe not. Apologies if I'm repeating myself.]

A couple of months ago I did some focus groups with women who had breast cancer. It was a group on the financial impact of a breast cancer diagnosis. They were all basically pretty young and healthy before being diagnosed. So they hadn't thought of life insurance before but their diagnosis rendered them uninsurable.

So, I decided to get life insurance, and got a good rate (even for my age) for a 10-year term policy.

Because my children are secondary beneficiaries, I told my eldest son about the policy today. He then told me that he had also bought a hybrid whole/term policy in the amount of $3M. It costs him $600 a month. I had a lot of questions about this. Why does his wife, who earns $130k a year, need 3 million dollars? He said that each of his two kids would get $250k. OK. So that's a half a mil.

Also, couldn't at least part of that $600 go toward better investments? $600/month is a lot of money. Apparently when he's 60 he gets a payout of $100,000, but I don't think that is that great.

I typically keep my mouth shut when it comes to my kids' decisions, but I just don't think this is a great decision and I suggested as much.

What do you guys think? Where does life insurance fit into a sound simple living financial plan?

[bae]

I have never bothered with it.

[catherine]

I have never bothered with it.

I wouldn't have either, if I had no debt. I got just enough to cover all outstanding debt.

Do you feel life insurance is "the poor man's savings account"? If your net worth is such that your family might have a lower quality of life if you passed before retirement age, would you consider life insurance a good idea? Would you ever spend $600 a month for a $3M payout? To me, putting yourself in a position where you are "worth more dead than alive" is gambling against your life, and it's NOT a good reason for life insurance.

I started out with a practical question but maybe it's more philosophical.

[Yppej]

I think you need it if you have dependents, and you should have enough to pay for disposition of your remains even if you don't.

I get 2x my salary at work and pay a small amount of taxes on it.

[frugal-one]

From everything I have read a term life policy would be better???

[iris lilies]

Yes, life insurance is the poor man’s saving account.
I used to think it was fairly useless for grown adults who should be able to earn their own way in life unless they have children of course, and then the average family should have it until the kids are raised, but –


Then I learned that life insurance is a way to leave money to your heirs that nanny government doesn’t snatch away in Medicaid/nursing home reimbursement fees. So that there is a methodology for end of life asset management.

But the insurance tool that your son bought is not a good one and seems like a poor way to invest. I wonder how much straight term insurance would have cost him.

[ToomuchStuff]

I have a small policy on me (25K), that is paid up, because when we were younger (don't remember age, but under 18), parents had larger policies on us. When I was older and moved out, it was dropped to a prepaid less amount above, to cover funeral expenses and lawyer for estate purposes, for their benefit if something happens to me.

We had a celebration of life a few weeks back for the woman who was in Iowa, and the tornado hit and killed her mother, spouse and two kids (leaving her and one). Some work insurance of her late husbands came and presented her a 7 figure check, as one kid was special needs and they had a mortgage etc. That amount made sense if he was the only one to die, not so much in the scenario she ended up in.

After/if the other guy gets off his rump and does what he says he is going to, I will have a mortgage on this house. Until that is done and I sell the other house, and put that amount on this one, I don't know what size mortgage I will have. I might just swap my policy into a term one, for term (mortgage) and a couple thousand (cremation), so my family wouldn't have to rush to sell the house.

[jp1]

catherine, does your son have a term life insurance benefit from his employer? Since I don't have dependents and SO earns as much as I do I've never needed to worry about supporting people if I die unexpectedly so I've always assumed that the benefit SO would get from that is sufficient. Especially now since current employer pays for 4x my annual salary. That would be enough to pay off our mortgage. We have no other debt.

$3M seems excessive, and $600/month seems expensive. I'm just wondering if he can get a more reasonable plan by buying the higher benefit on his employer's term life plan if he has one from them.

All that said, I'd tread cautiously when bringing up this topic because yes, he's an adult and you should be letting him make his own decisions. If you do decide to bring this up I'd be prepared with examples of financial decisions you made that you regret so that you don't come across as the older person who is trying to adultsplain to the less experienced young person.

[catherine]

catherine, does your son have a term life insurance benefit from his employer? Since I don't have dependents and SO earns as much as I do I've never needed to worry about supporting people if I die unexpectedly so I've always assumed that the benefit SO would get from that is sufficient. Especially now since current employer pays for 4x my annual salary. That would be enough to pay off our mortgage. We have no other debt.

$3M seems excessive, and $600/month seems expensive. I'm just wondering if he can get a more reasonable plan by buying the higher benefit on his employer's term life plan if he has one from them.

All that said, I'd tread cautiously when bringing up this topic because yes, he's an adult and you should be letting him make his own decisions. If you do decide to bring this up I'd be prepared with examples of financial decisions you made that you regret so that you don't come across as the older person who is trying to adultsplain to the less experienced young person.

I didn't ask him about the details, for the reason you mentioned....I did suggest that both the 3M and the monthly fee seemed excessive, but told him I wasn't there to second-guess his decisions. He is definitely old enough to make up his own mind.

[Tybee]

I have never had life insurance, having read that if you did not have dependents, you did not need it. My kids are grown so there is no need there. I would not take out insurance to pay bills after I am gone--or to pay off a mortgage.

If I were the breadwinner and I had children under 21, then I would have it. I know there is one type that is considered good and one that is considered not good, but I don't really understand the differences.