I want to TALK about LIFE INSURANCE.

[Dave Rowtree]

Pretty much the whole concept of insurance is a little mystifying - you basically put your trust in multinationals who will make a profit denying your claim. After basic trust issues, I can understand the reasons for protecting huge investments such as house and home, but when it gets down to personal items we have to wonder where all the money is going and if you'll be better off in spending the money on preventions, such as a stable investment - what would happen if all the money you spent on life insurance was spent on investments instead? You're riding the odds but on average, you'll be better off unless you're the one of the million in which a disaster happens to - so I suppose insurance is all related to the amount of risk you are prepared to take. As you get older, you get less risk adverse (as seen by the old drivers who drive 30 mph everywhere - haven't' they got less to lose?)

[Joan.of.the.Arch]

We bought term insurance to cover the time up until our child became an adult. If one of us (husband or self) were to die, we would need money to make up for the loss of the other's contribution while we had a child to support and care for. Once our child was grown, either of us would be able to stand on our own two feet, continue paying the mortgage, etc. So now --after years of reducing the insurance amount as child approached adulthood-- we have zero life insurance. Our money goes to savings and investments instead. I will admit that if my husband were to die now, I could not afford to support my son in school to the extent that we are now doing. But that would be okay. He would not have to drop out, though he might choose to take out a loan. And that is okay, too.

We don't need life insurance for bills, mortgage, funeral expenses, and all that. We are covered through our own savings, investments, and current responsible living already.

[HNorton]

There is only one thing guaranteed after birth and that's death. And no one knows when it will happen. There are also a lot of different ways to accumulate wealth. Is permanent protection the best way to go? That's up to the person buying it. Saying it's a bad move 95% of the time is maybe a little ignorant, especially when you cant know everyone's personal financial situations. The rants about insurance companies and their fees are true to an extent, but EVERY investment has a cost, it just depends on what you are willing to pay. There are people that when faced with information will choose the easier option of the two, not because its the best but just because its the easiest. Can you judge their decisions? No because its THEIR decision.

[tripods68]

If a single person dies with lots of debt, then the creditors have to eat the cost. Having a small (term!) life insurance policy to cover funeral costs usually isn't a bad idea..

This is my point exactly. It is the creditors left hanging the "bag". Then they pass this cost to "consumers" in the form of higher cost (higher rates, fees, etc ). That's not chump change. Even young adult has some financial responsibility (of course not all) to secure "all" debts be repaid no matter how little amount it might be. The amount of coverage is not as important but the financial aspects that isn't covered by savings must be insured. For example, if you owed 30K student loans, $30K car note, no savings, you need at least $60K of death protection + burial cost. This is a more strong compelling arguments to have this protection. It protects the family and consumers. But for someone with no job and debt, I would agree insurance wouldn't make sense.

In many ways, Employers already offers group life insurance protections to many of its employees at very little cost and don't even realize they have it.

[feh]

My wife and I bought term (20 years, I think) insurance a few years ago, even though we have no debt at all. The reason for the insurance would be to cover living expenses until our son is able to support himself (after college). This way, the surviving parent wouldn't have to worry about being a bread-winner and single parent at the same time.

Once the policy expires, we won't be buying any more.

[LuckyJB]

This is a good rule of thumb and a good starting point for calculating how much you need, but it is just a starting point. From there, you need to determine what the actual needs would be upon your death. When I first took out my policy, we had recently bought our house, had a newborn baby and I had 6-figure student loans and not much in savings. My insurance needs were high. Now, my loans are gone, our mortgage balance is smaller, our daughter is almost 13, we have no other debts and our personal savings have grown considerably so my insurance needs are smaller. My first policy was actually for 15 times income. Now, it is for less than 10 times income. A few more years and I'll probably be able to drop it again.

Great you got that all on the right track for your family. I figure the more I can leave my family behind the better they can be well off even if that means more extra money for them to use on other living expenses or so on.

[LuckyJB]

That's what I thought. So the suggestion that a young, single, childless person needs insurance because of debts he owes doesn't make any sense.

Still makes sense to me b/c of the WHAT IF QUESTION? what if they eventually dont qualify b/c of medical reasons...age ..etc/.....might as well pay cheap even if its a small term...lock yourself in on that small premium

[LuckyJB]

when you die what you own covers what you owe your parents and children are not left with your debt so the only reason to have life insurance to cover your debts alone is if you have a spouse and that spouse would not have enough to cover those debts

there are reasons to have life insurance but a single person does not leave debt to others, this is something I believe that life insurance salesmen tell us to make us buy insurance so we do not force our parents into poverty when they are forced to cover our bills

My uncle died with no money and no children that were still talking to him and not only did they not come after his mother the family pulled together and we cremated him and bought a fancy urn for grandma to put him in ,the entire cost was 800 dollars

Yes. ok.....you see I completely understand how most of us agree what Life insurance is for.....BUt im just seeing more to it then most do...its not a common concept to use it for other things than just BILLS>like I said before and most of you seem to disagree or think its wierd. It could be a smart way to use the Death benefit for other reasons than just BILLS, but its definitaley not the ONLY way to do it. Remember it depends on a persons specific situation. Ex. My situation is nothing...no dependents...no bills....but I have bros/sis/mother/father/nephews...and to me whatever money i can leave behind for them ...makes me happy...even if im paying 40 bucks a month for it.

[LuckyJB]

In many ways, Employers already offers group life insurance protections to many of its employees at very little cost and don't even realize they have it.

YES!....I actaully got more insurance through my job with no cost. And most poeple have it and dont even know how it works...or how much protection they need.

[disneysteve]

My situation is nothing...no dependents...no bills....but I have bros/sis/mother/father/nephews...and to me whatever money i can leave behind for them ...makes me happy...even if im paying 40 bucks a month for it.

That's where we fundamentally disagree. Unless I was currently supporting all of those people, I wouldn't feel the need to give them money when I die? I have insurance to cover those who I do support - my wife and my daughter and that's it.

[Scanner]

I agree with DisneySteve and Sweeps here.

It sounds like you are a budding salesperson, Lucky. . .and let me give you some advice.

If you are going to target the uninformed and unmotivated on finances, then go about what you are saying and beleiving the way you are. Don't change a thing. I am sure managers and meetings have filled your head with this.

Unfortunately, sales managers often don't "change with time" and with the advent of the internet. . .the times - they are "a'changing" as they say.

If you are going to want to get clients like DisneySteve, myself, and other professionals here, you are going to have to attack us differently.

Term insurance has an important role in a good financial plan.

Universal and whole life may (<------ operative word, may) have a role in college planning and estate planning.

But to suggest we buy something just because it's cheap and efficient (and I agree - term life insurance is an amazing product - $1000's of dollars of coverage for pennies). . .or just to bequeath random relatives some dough. . .just doesn't make sense.

I find it rather puzzling actually.

Why would I want to bequeath Cousin Jeffro or Uncle Billy Bob anything?

It's like suggesting I buy something I don't need at the dollar store just because it's cheap.

I had a disability insurance salesman cold call me the other day. Disability is a product I could actually use. . .but unfortunately, the hours I put in on my business are under 30 per week immediately disqualifying me (no part-time policies). Trying to salvage a sale from a lead, he asked if he could handle my investments.

While I admire his brevity for asking that question of someone I don't know from a common criminal. . .what a large leap. . .from selling an insurance product to advising me on my financial plan.

I politely told him all of my investments are with Charles Schwab, a discount brokerage and wished him luck.

I wish you luck too.

[sweeps]

Loved your comment, Scanner.

When all you have is a hammer, everything is a nail. Lucky's hammer is universal life insurance.

Seriously though -- I think this is a good thing. I think it's better for people to see the pitch here and discuss the flaws in it, rather than being forced into a high pressure sales pitch at home.

[disneysteve]

I think it's better for people to see the pitch here and discuss the flaws in it, rather than being forced into a high pressure sales pitch at home.

Don't EVER, EVER, EVER invite an insurance agent to come to your home to discuss your insurance "needs". That is a recipe for disaster. By the time they're done, you'll be ready to sign anything just to get them to leave.

If you want to meet with an agent, go to the agent's office so that if you don't like what you're hearing, you can get up and walk out.

[JimInOK]

If a single adult dies, what happens to his debts? If John Doe owes money on a credit card in his name only, what happens when he dies? Can the credit card company go after John Doe's parents to pay that bill? I don't believe so but maybe I'm wrong. Same question for personal loans and hospital bills. As for a mortgage, that would be repaid by the proceeds of the sale of the property.

The only argument that makes sense to me is burial expenses, but all that requires is a minimal policy of about $10,000. And that's only if the family doesn't have any savings to cover an expense like that on their own.

I agree that there is no one-size-fits-all answer. It depends on the situation. I just think selling insurance as an investment product isn't such a great idea. I also think a lot of people are convinced into buying insurance out of fear rather than out of logic and solid financial planning.

It's not only a bad idea (for an actual agent) to pitch insurance as an investment product, it's actually illegal. That tells me all I need to know about whether or not it's a sound "investment."

[Joan.of.the.Arch]

Tripod, if you are recommending that people have life insurance in order to pay off debts when they die, that would mean that we would have to name our own estate as the beneficiary of the insurance. Leaving it to our parent, or brother, or cousin, or best friend does nothing to get the bills paid. Those people have no obligation to pay your bills. Of course, in most cases, our spouses do have legal obligation to pay our bills.

But if you think it is so important to pay your bills after you are dead, then it seems to me that the amount of life insurance you have should be a fundamental limit on the debt you take on. Want to finance a car whose resale value is going to decline faster than you pay off the debt? Make sure to increase your life insurance before making the purchase. (!?!?) Thinking of allowing a credit card issuer to increase your available credit? Better up the life insurance accordingly, just in case you actually use that credit. (!?!?)

Besides, if your estate --aside from life insurance-- has enough value, your estate will pay your bills when your are dead.