I need your help...Term life insurance (income, mortgage, medical)

[Mathguy]

Originally Posted by yoshyusmc

There are some great replies to this thread and I have to say I completely disagree with Pilgrim. Term insurance is a stop gap for those who can't afford universal or whole life insurance.

You have to qualify for ALL LIFE insurance with your health. Based on your health you get rated and this table rating affects the cost of your insurance.

Term Insurance is usually for a set length of time up to 30 years, thus requiring you to have to re-apply for a new policy. However, 30years older the new policy will be too expensive, even if you qualify, to purchase.

Universal policies are good as long as you pay the minimum required premium. The great thing about these policies are that they never run out, unlike a term policy. You can also put more than the minimum required like an investment and earn free interest, thus building up a cash value in the policy. You can then take a loan against your own policy, without taxes, and do whatever you want with the loan. It does affect the death benefit.

Now when you take a loan from your self, you can do many things with the money.

Buy a new car every 4 years with cash, and pay yourself back with interest, or don't pay yourself back.

Use the cash accumulation to pay for your children's college like a 529 Plan, however you are not locked in like a 529 plan. With a 529 plan, it can lose value, and what if your kid decides not to go to college, or gets a scholarship?

So there are many advantages to life insurance, and many people are using it as alternatives to other investments, and as a hedge against taxes.

As a previous poster said, yes insurance companies are not FDIC insured, and the safety of the contract is backed up by the financial strength of the issuing company.

I reply to this by saying first, that every state has a separate Department of Insurance that regulates insurance companies, and they are held to a higher reserve than even your local bank.

Each state also has a State Guaranty Association mandated by each DOI to help pay for policies of financial impaired companies.
http://www.annuityadvantage.com/stateguarantee.htm

You can do your research of insurance company ratings at AM Best, and Fitch.

You can by longer-term term insurance than 30 years. You can also buy term policies that let you convert them guaranteed yada yada yada.

You don't pay premium taxes or commissions on contributions to 529 plans...or most other investment vehicles. Basically, you are losing 20-30% of your "investment" right out of the gate....hard to make that up long term eh?

Let's face it, I can buy term life and put the premium savings in secure government bonds and I WILL come out ahead of buying some whole life product.

This really isn't debatable, it's simply the straight math of insurance pricing 101. If anyone wants to read further on this I would direct you to the Society of Actuaries website for futher information.

[joe moving]

I will ask my company about a 35 year term. I do not want to have to worry about a 5 or 10 year term when I'm 58 years old. In terms of taxes... my wife is not going to have to pay any taxes I wouldn't have to pay, as far as I know. that is what is most important?

if my wife and i both die before our children are 18, i dont know how that works (we dont have any kids yet) in terms of their tax liability on a) the life insurance money and b) retirement money.

if we both died, would the next people on the beneficiary list (children under 18?) pay taxes on the term life money?

ok,enough of this.

[Denise M]

Term life insurance is a temporary life insurance policy. The quote that you received from the online site that you used will give you details of the term and the premiums that you would need to pay. You should know that there are several options in term life policies that you may want to consider.

• Return of Premiums (ROPs). This may increase the premium amount but after the term is over, the insurance company will refund the sum of all premiums paid.
• Level term life insurance ensures that your premiums remain steady during the entire period of the term.
• Renewability privileges. Once your term is over renewability privileges allow you to renew your policy at slightly higher premiums, but cheaper than if you were to purchase a new term life policy.
• Convertability options allow you to convert from term life policy to a whole life policy.

I would also recommend that you don’t go for the cheapest policy. Look for free riders, and the options mentioned above. These options may prove to be very useful for you in the future.

I hope this helps you. You may also want to do some further study online through unbiased resources.

Denise

Disclaimer: I work for AccuQuote and this is my personal opinion.

[Pilgrim21784]

This my final post on this topic, though I'll check back once if anyone DM's me; its been interesting but I'm off to Costa Rica for two months and won't be spending much time on the boards.
golfgal and others have introduced legitimate topics concerning tax & estate planning and insurance which are IMO way too complex for this discussion. Your are getting into areas which rightly involve discussion (and a very high learning curve) of such elements as inter vivos & bypass trusts (& others) and related highly complex topics. And no, "yosnymc" you don't need insurance to minimize what the estate tax impact will be on one's assets (and I am not a poor old retiree).
A few parting comments -
1) Some of us did in fact buy term and invest the difference (and I've spent serious money on insurance over the years; as a young father with two munchkins I was carrying around $1+ M 25 years ago, that was back when a M was worth something) of course term only.
2) My need for insurance terminated with the end of the difference between assets and obligations, which occurred prior to my retirement at 57.
3) Beyond the very basics, each individual's situation requires very specific analysis and strategies which get rather too complicated for general discussion.
4) My views on insurance and opinions are predicated on the model of what's best for a young breadwinner who needs to provide wipeout protection for their tribe. For most young families, dollars are in limited supply and their obligations are at maximum. Term is the ideal vehicle to meet that need.
To all, my best wishes, Mr. Spock said best - "May you live long and prosper".

[golfgal]

Originally Posted by joe moving

I will ask my company about a 35 year term. I do not want to have to worry about a 5 or 10 year term when I'm 58 years old. In terms of taxes... my wife is not going to have to pay any taxes I wouldn't have to pay, as far as I know. that is what is most important?

if my wife and i both die before our children are 18, i dont know how that works (we dont have any kids yet) in terms of their tax liability on a) the life insurance money and b) retirement money.

if we both died, would the next people on the beneficiary list (children under 18?) pay taxes on the term life money?

ok,enough of this.

Life insurance benefits are not taxable to beneficiaries, investment products are taxable. Also, do you really want your 18 year olds getting a huge sum of money. When you have kids, set up a will and a trust and make the trust the beneficiary of your life policies and investment accounts.

[yoshyusmc]

Originally Posted by Mathguy

You can by longer-term term insurance than 30 years. You can also buy term policies that let you convert them guaranteed yada yada yada.

You don't pay premium taxes or commissions on contributions to 529 plans...or most other investment vehicles. Basically, you are losing 20-30% of your "investment" right out of the gate....hard to make that up long term eh?

Let's face it, I can buy term life and put the premium savings in secure government bonds and I WILL come out ahead of buying some whole life product.

This really isn't debatable, it's simply the straight math of insurance pricing 101. If anyone wants to read further on this I would direct you to the Society of Actuaries website for futher information.

Obviously you are blind to the current economic conditions, and oblivious to the fact that the stock market has wiped out ten years of gains. On average 401ks are down 40%!! Some economists are also pointing out that as more and more boomers start to retire, the market will come crashing down again due to boomers moving their 401ks off the market.

Numerous brokers tell their retiring clients, "To stay the course". Of course if I were in his shoes, I would want to keep that account so I get fees for "managing" the account.

So I hate it when people put down insurance companies because of the cost of insurance when it is the stock brokers who got ALL OF US in the mess in the first place.

Also using a universal life policy is a great way to fund college, YES EVEN with the cost of insurance, because the principal never goes down! Unlike my current 529 plan which is down 30%. I am just lucky my daughter is not college age yet. Not too mention you are covering the risk of losing one income at the same time. So this mitigates the extra cost.

I would also like to add that we are still able to answer our phones, because we know we will not get a call from a customer asking why his retirement shrank 30-40%. We actually get calls thanking us for not losing any money, and in many cases making them money.

Now of course every person is different based on their retirement goals, the means to reach that goal, and age. This market can be a good thing for younger people able to stay long term to take advantage of a record low market, but a bad thing for those about to retire or are already retired.

[Pilgrim21784]

yoshyusmc: I'm sitting here in the San Jose airport in Costa Rica awaiting my ride, and I must ask: what is your profession/occupation? Your posts tingle my former instincts when I did fraud investigation many years ago.

[Denise M]

Term life insurance is a temporary life insurance policy. The quote that you received from the online site that you used will give you details of the term and the premiums that you would need to pay. You should know that there are several options in term life policies that you may want to consider.

• Return of Premiums (ROPs). This may increase the premium amount but after the term is over, the insurance company will refund the sum of all premiums paid.
• Level term life insurance ensures that your premiums remain steady during the entire period of the term.
• Renewability privileges. Once your term is over renewability privileges allow you to renew your policy at slightly higher premiums, but cheaper than if you were to purchase a new term life policy.
• Convertability options allow you to convert from term life policy to a whole life policy.

I would also recommend that you don’t go for the cheapest policy. Look for free riders, and the options mentioned above. These options may prove to be very useful for you in the future.

I hope this helps you. You may also want to do some further study online through unbiased resources.

Denise

Disclaimer: I work for AccuQuote and this is my personal opinion.

[Mathguy]

Originally Posted by yoshyusmc

Obviously you are blind to the current economic conditions, and oblivious to the fact that the stock market has wiped out ten years of gains. On average 401ks are down 40%!! Some economists are also pointing out that as more and more boomers start to retire, the market will come crashing down again due to boomers moving their 401ks off the market.

Numerous brokers tell their retiring clients, "To stay the course". Of course if I were in his shoes, I would want to keep that account so I get fees for "managing" the account.

So I hate it when people put down insurance companies because of the cost of insurance when it is the stock brokers who got ALL OF US in the mess in the first place.

Also using a universal life policy is a great way to fund college, YES EVEN with the cost of insurance, because the principal never goes down! Unlike my current 529 plan which is down 30%. I am just lucky my daughter is not college age yet. Not too mention you are covering the risk of losing one income at the same time. So this mitigates the extra cost.

I would also like to add that we are still able to answer our phones, because we know we will not get a call from a customer asking why his retirement shrank 30-40%. We actually get calls thanking us for not losing any money, and in many cases making them money.

Now of course every person is different based on their retirement goals, the means to reach that goal, and age. This market can be a good thing for younger people able to stay long term to take advantage of a record low market, but a bad thing for those about to retire or are already retired.

Err....I give you an F for reading comprehesion. My comment was that you can buy term and invest in something like government bonds. You then castigate me for suggesting a stock investment plan? Get some sleep bro.

[Irish Eyes]

1. The commissions on whole life policies are HUGE
2. When I worked in an Insurance Agency ALL agents bought term.