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My mother recently got a universal life insurance policy and I'm a little concerned that she's getting ripped off. She is 63 years old, currently unemployed, healthy overall. Her main concern is that her burial expenses are covered. The person who sold it let us know this insurance builds cash value after 2 years at 3%. I've always heard financial advisers caution against any life insurance that is not term life insurance. The broker my mom spoke to said that term life insurance would not be available to my mom because of her age. I feel like my mom shouldn't be dipping into her savings to pay for life insurance. But I'm just trying to understand if this even makes sense. I'm thinking maybe this is reasonable since my car insurance costs more than this monthly premium. And this is probably a good alternative to putting money aside in a savings account for the unavoidable.
Also, the broker wants to sell life insurance to myself and my younger brother. I'm 27, he's 23. I work and have life insurance through my work. I understand this is only available while I'm employed with them but shouldn't that be enough. My brother is currently a student and does not have a job. So does it make any sense to get life insurance for either one of us?
My mother recently got a universal life insurance policy and I'm a little concerned that she's getting ripped off. She is 63 years old, currently unemployed, healthy overall. Her main concern is that her burial expenses are covered.
What would be her estimated burial expenses? $30,000? She's paying $1,500 a year right now and if she lives longer than ten years that's $15,000. She could just save the money in a side fund depending upon how much you guys have estimated the burial expenses to be.
Quote:
Originally Posted by mizzlea
The person who sold it let us know this insurance builds cash value after 2 years at 3%. I've always heard financial advisers caution against any life insurance that is not term life insurance. The broker my mom spoke to said that term life insurance would not be available to my mom because of her age.
The cash value aspect (using life insurance as an investment) is just completely efficient in these products, I personally do not believe people should use life insurance for investment purposes, use investment vehicles for investment vehicles and use insurance for insurance.
Term Life insurance is to be used on the side so people that DEPEND on you can have something to bury you and pay for aspects of their living expenses going forward. But by the time those people are adults, you shouldn't need term life insurance anymore.
With that being said, your mother should just use savings at this point if she's just worried about paying for funeral costs. Again, if she lives another 10 years (you said she's not unhealthy so there's a strong chance so won't die in under 10 years) then that's $15,000 spent on the policy that could just be put into a conservative fund.
Quote:
Originally Posted by mizzlea
Also, the broker wants to sell life insurance to myself and my younger brother. I'm 27, he's 23. I work and have life insurance through my work. I understand this is only available while I'm employed with them but shouldn't that be enough. My brother is currently a student and does not have a job. So does it make any sense to get life insurance for either one of us?
If you guys have kids yes, if not, then there's really no point for the life insurance unless you want your beneficiary to just be other family members or charity.
I agree with you. The cost seems way to high. You should be able to get some online quotes to support this assumption.
Why does she need insurance? Probably no need that could be solved with 30,000 at death.
If she wants life insurance, she should get TERM life. She can get more coverage for less money,and a longer term with possible renewal.
Universal/whole life insurance IS a rip off. Her cash benefit after paying that $15,000 over 10 years will probably only be about $5,000!
I Had a whole life $10,000 policy and got rid of it after 4.5 years. I had paid $100 per quarter, $400 a year for those 4.5 years. a total of about $1800. The cash value was $65,which I was not considered vested in until year 5 or some stupid thing, and the company wanted me to upgrade to a higher policy. I said FORGET IT and walked taking my losses.
If she wants life insurance, she should get TERM life. She can get more coverage for less money,and a longer term with possible renewal.
Universal/whole life insurance IS a rip off. Her cash benefit after paying that $15,000 over 10 years will probably only be about $5,000!
I Had a whole life $10,000 policy and got rid of it after 4.5 years. I had paid $100 per quarter, $400 a year for those 4.5 years. a total of about $1800. The cash value was $65,which I was not considered vested in until year 5 or some stupid thing, and the company wanted me to upgrade to a higher policy. I said FORGET IT and walked taking my losses.
I would strongly suggest she do the same.
Your experience should be a "sticky" around here, because there's a LARGE sub-section of people on this forum that promote to others to buy those Universal or Whole Life policies over Term Life, which I think is completely and utterly ridiculous.
My mother recently got a universal life insurance policy and I'm a little concerned that she's getting ripped off. She is 63 years old, currently unemployed, healthy overall. Her main concern is that her burial expenses are covered. The person who sold it let us know this insurance builds cash value after 2 years at 3%. I've always heard financial advisers caution against any life insurance that is not term life insurance. The broker my mom spoke to said that term life insurance would not be available to my mom because of her age. I feel like my mom shouldn't be dipping into her savings to pay for life insurance. But I'm just trying to understand if this even makes sense. I'm thinking maybe this is reasonable since my car insurance costs more than this monthly premium. And this is probably a good alternative to putting money aside in a savings account for the unavoidable.
Also, the broker wants to sell life insurance to myself and my younger brother. I'm 27, he's 23. I work and have life insurance through my work. I understand this is only available while I'm employed with them but shouldn't that be enough. My brother is currently a student and does not have a job. So does it make any sense to get life insurance for either one of us?
Cancel it. If she can spend $130 a month she can also save it on her own.
the problem with universal life is what ever you gain is taken back by expenses and fees .
it is also designed to pretty much self extinguish just as the odds of dying get heigher and higher .
the cost of insurance internally gets higher and higher as you age . eventually unless you keep pumping money in it expires before you do .
i bought a met life universal policy 30 years ago . i rolled 20k in to it in a lump sum for 250k coverage .
i have not added another penny in 30 years , with the 4% minimum floor today it is worth 19k and just keeps feeding itself . .
not bad for 30 years coverage. but now that i am 63 internal costs of insurance start to take big jumps . odds are around average life expectancy (82-84) the policy will run out of money and expire .
but i can't complain since i would have had 50 years coverage .
if you really want coverage until death then go whole life . the premiums are high because you are buying a 100% guaranteed pay off . but if you don't need that guarantee then you likely don't need universal either since without feeding the policy it may not be there when you die .
term insurance is priced with the idea that there is a 99% chance the policy will never payout , whole life is priced based on the fact you will get a 100% chance of pay out .
not sure in op's case why they want universal at age 63 but i think this is likely the wrong thing to do .
a single premium whole life policy can have lots of reasons and use's even at 63 , but not universal life , it is to unpredictable .
there are some really good integrated strategy's in retirement that utilize whole life , single premium annuity's and your own investing to build a comprehensive retirement package that has guarantee's , pension like income and amazing tax efficiency that is not 100% dependent on the market's whims or interest rates but that isn't the case here .
Last edited by mathjak107; 01-26-2016 at 03:31 AM..
If she wants life insurance, she should get TERM life. She can get more coverage for less money,and a longer term with possible renewal.
Universal/whole life insurance IS a rip off. Her cash benefit after paying that $15,000 over 10 years will probably only be about $5,000!
I Had a whole life $10,000 policy and got rid of it after 4.5 years. I had paid $100 per quarter, $400 a year for those 4.5 years. a total of about $1800. The cash value was $65,which I was not considered vested in until year 5 or some stupid thing, and the company wanted me to upgrade to a higher policy. I said FORGET IT and walked taking my losses.
I would strongly suggest she do the same.
That was not a whole life policy if that is how it was structured.
Financial planners often suggest staying away from whole life policies because they make more money from your investment accounts. If you look into the investments their companies invest in, they are heavily invested in corporate owned whole life insurance policies from companies like Northwestern Mutual, New York Life, etc.
Having said that, UNIVERSAL life is not a good way to go. At 63, term life may not be an option, or if it is, it's very expensive. A GOOD whole life policy is worth it if she really wants to cover her funeral expenses. "Saving" for a funeral works if you live long enough.
galaxyhi--if you ever really looked into a good whole life policy, you would see your suggestions are flawed...now, if you buy a universal policy from your State Farm guy, that is probably why your experience was what it was. Whole life policies are long term investments, which people often forget. After 10 years of our whole life, our cash value was far greater than $65. We've gotten about 10% rate of return on our policies thanks...
whole life is priced so that all your interest , dividends and premiums are the actual cost of the policy coverage .
there is no savings component as some are led to believe . the whole life is structured like a boss who pays you a great salary but since you live with your boss he takes it back as your cost of living expenses for staying in his house . .
all of the above are calculated to be the cost of insurance coverage until death and are fed back in to the policy ..
in fact all of the above are figured so by age 100-105 you are basically self insuring on your own money . all your premiums , interest and dividends equal the death benefit . many company's call the policy endowed at that point and mail you back a check for the death benefit amount alive or dead . the policy ends when the cash value = the death benefit .
the so called cash value is really an agreed upon refund amount for the un-used insurance like a gym membership you cancel . the cash value is only a refund they agree to give you for not going full term .
that money you feed in from all sources is all 100% premium for coverage , there is no such thing as any saving component . you are insuring on the insurance company dime until you feed in enough money to self insure . at that point the insurance company puts up no money on your behalf .
that is why with whole life you don't get the cash value at death or the interest , you only get the death benefit . there is really no such thing as a cash value account .
many policy's will take any extra money left over from what comes in from your payments , interest and dividends and buy you more insurance so the death benefit grows . nothing special here , they are just using over payments to sell you more insurance .
so basically except for some fees and commission whole life ends up giving you back what you put in if you live long enough . it just fronts you the money while you are working on getting enough money in to the policy to self insure from your premiums , interest and dividends ..
Last edited by mathjak107; 01-26-2016 at 04:09 AM..
MathJak ....Tell you what, I'll let Dave Ramsey and Suze Orman handle this one. People please don't buy any Life Insurance other than Term for goodness sakes....
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....Tell you what, I'll let Dave Ramsey and Suze Orman handle this one. People please don't buy any Life Insurance other than Term for goodness sakes....
