Check your Life Insurance!

[snarlingcoyote]

PSA time.

My DSIL died at the end of January; she was 46 and left a disabled husband and two teenage kids. Thanks to her obsession with having enough life insurance and with her pension, my brother will have enough to be comfortable. DSIL had one huge mamma jamma policy with State Farm and about 4 with her job. The money from the policies has been invested now and my brother will live off the interest and sock a bit away each month for inflation. DB even has one small source of income that will be socked away in its entirety for the kids' education, so they will be able to attend college.

If DSIL hadn't had enough life insurance, they'd be desperate right now.

So check your life insurance and if you have kids, check again. Leave enough so that your family won't have to worry and leave enough to accomodate inflation and periods when there won't be much in the way of interest, even with wise investments.

I am now exiting my soap box and going to do some work. . .

 

[avgeek81]

My dad had 3 life insurence policies also. He was able to double his one thru work for just a few dollars a month. With his insurance my mom was able to pay for his funeral and also pre pay for hers and was able to put some in a money market account. She bought a new car and did some repairs to the house but still has most of it. He also only took half his pension so my mom could still collect after he passed.

 

[tvguy]

The big question is, how much is enough life insurance, how much is too little and how much is too much?
My wife and I have what we consider to be adequate life insurance, but we expect to sharply reduce or eliminate life insurance once our kids are out on their own and we have no dependents or debt. We will, however, at that time look into long term care insurance, which in most cases has a small life insurance component.

 

[snarlingcoyote]

I would say, more than you think you need. Pretend that interest rates on well-invested accounts are extremely low and figure out how much the interest would be on X dollars and go from there.

I would also try to make it so that the survivor could take a break from work or change jobs with a pay cut, as being a single parent after a partner's death is at least 3x the work than being a parent with an active partner and you may find that you need to pay for things that previously the passed partner took care of (for example, dyeing hair and painting nails or keeping an old dishwasher running).

 

[Handbag Lady]

We don't have kids so we have enough on me to cover a funeral, and then five times each of our annual salaries through work.

We don't own a house so we don't have that worry, either.

 

[Imzadi]

Is there a "Life Insurance for Dummies," somewhere? My mom is 80. She would like to leave me something. She keeps looking at those ads on TV, like the one with Alex Trebek. But, I heard they really don't pay out much at all. So I need to know the different kinds of policies there out and how to really figure out what they will pay.

What happens if she goes before a certain period of time? How do we figure out the payout? How can we tell the difference in the kinds of policies that WILL pay as opposed to just raking in bucks from her. Plus, she's 80 now. I kept putting off looking into this with her. I heard the types of policies she could have qualified for change at age 79.

I'm going to be running into someone at a meeting on Tues who is only an insurance salesman. But they are allowed to call themselves "financial advisors," advising people to buy their insurance and annuities. I think he tried to rip my mother & me off before with some policy that just didn't sound right. I really would like to tell HIM what kind of policy my mom wants.

 

[snarlingcoyote]

For seniors, AARP will give you quotes from 2 or 3 different reputable life insurance companies if you fill out information. You can also google "life insurance quotes" and get specific quotes from various companies. An independent insurance agent who handles several insurance company can also give you varying quote. Dave Ramsey reccomends Zander Life Insurance and I know some folks who've had good luck with them. Finally, you can check with the people who insure your house and/or your cars and see what their quotes are.

 

[golfgal]

The big question is, how much is enough life insurance, how much is too little and how much is too much?
My wife and I have what we consider to be adequate life insurance, but we expect to sharply reduce or eliminate life insurance once our kids are out on their own and we have no dependents or debt. We will, however, at that time look into long term care insurance, which in most cases has a small life insurance component.

Keep in mind that life insurance is a great way for wealth transfer and helping with estate taxes. Also, I am not aware of ANY Long Term Care policy that has a life insurance component. There are some blended annuity/LTC products out there but they tend to be more expensive than buying each component separately. Also, don't "wait" to buy LTC insurance, your will actually pay MORE overall waiting AND you may not qualify for it if you wait too long. For people over 50 there is a 50% decline rate in the industry right now. It is great that you are thinking about this now though!!

Is there a "Life Insurance for Dummies," somewhere? My mom is 80. She would like to leave me something. She keeps looking at those ads on TV, like the one with Alex Trebek. But, I heard they really don't pay out much at all. So I need to know the different kinds of policies there out and how to really figure out what they will pay.

What happens if she goes before a certain period of time? How do we figure out the payout? How can we tell the difference in the kinds of policies that WILL pay as opposed to just raking in bucks from her. Plus, she's 80 now. I kept putting off looking into this with her. I heard the types of policies she could have qualified for change at age 79.

I'm going to be running into someone at a meeting on Tues who is only an insurance salesman. But they are allowed to call themselves "financial advisors," advising people to buy their insurance and annuities. I think he tried to rip my mother & me off before with some policy that just didn't sound right. I really would like to tell HIM what kind of policy my mom wants.

Legally unless they have passed certain tests they are not allowed to be called financial advisors. What company is he with, that will tell a lot about about reputable they are. It is difficult but not impossible to get life insurance at age 80. Her rates are going to be VERY high. As far as payouts go, unless she commits suicide the policy should pay out whenever. Make sure, if the company allows, that she pays at least the first month's premium while the policy is in underwriting. If something changes with her health or if she passes away during the underwriting process, the policy pays out. If she is still in good health, she will be better off getting some Long Term Care Insurance than Life Insurance--or some of both actually.

In general, $1,000,000 in life insurance will give you about $50,000/year for about 20 years. It is at least a starting point to figure out what you may or may not need. Also, there are many uses for life insurance other than paying for a funeral or leaving income for a spouse. If you have significant assets, property, or own a business, life insurance is a GREAT tool for dealing with the transfer of your assets.

Also, CHECK YOUR BENEFICIARIES on all of your policies, investment accounts, retirement accounts, etc. ESPECIALLY if you have been divorced or your spouse has passed away. It's amazing how people forget to do this and when the time comes, the money doesn't go where it should.

Not to be taken for financial advice though.

 

[golfgal]

For seniors, AARP will give you quotes from 2 or 3 different reputable life insurance companies if you fill out information. You can also google "life insurance quotes" and get specific quotes from various companies. An independent insurance agent who handles several insurance company can also give you varying quote. Dave Ramsey reccomends Zander Life Insurance and I know some folks who've had good luck with them. Finally, you can check with the people who insure your house and/or your cars and see what their quotes are.

Of course Dave recommends them, he gets a split from them for "referring" clients to them. They are a brokerage, not a life insurance company.

Insurance companies are rated through several rating agencies, AM Best, S&P, Moodys are some. Check those sources for the top rated companies in the industry-which are Northwestern Mutual, New York Life and Mass. Mutual (in that order). http://insurancenewsnet.com/ for some more information.

 

[Swan4Me]

We don't have kids so we have enough on me to cover a funeral, and then five times each of our annual salaries through work.

We don't own a house so we don't have that worry, either.

To me-the bigger worry is paying rent until you die.
My house is almost payed for-free housing for the rest of my life and a quarter of a million dollars to do a reverse mortgage when i am very old. Owning a house is a win-win situation.

 

[LuvOrlando]

This is very good advice. A SAHM friend's DH died suddenly at 48 of a heart attack during 'routine' surgery. They were married in their 30's and for some reason he never bothered to change his beneficiary names on his Life Insurance Policy from work. When this friend went to look at it she realized his sisters were named. You guessed it, his sisters took it. Not only that but they tried to take away the house they shared too, and his 401K basing their claims on an old will he made before he got married & had kids. Luckily in Pennsylvania all wills made before marriage are nullified at the point of marriage or they really would have taken the house etc from her too. Thankfully she gets Social Security for her kids but she still had to move and her entire life changed.

We always had insurance but once this happened I realized how vulnerable I am right now so we picked up 2 20 year term life policies for DH and one on me (he'd need lots of household help if something happened to me) that cover the time period we'd be in the most trouble as a single parent, when the kids are little. I like the 20 year term because they allowed us to get very high coverage for a small window much less expensively than any sort of life coverage. Along with the 20 year term I picked up a guaranteed exchange rider that means that when the policy ends we can pick up a new policy as an older person, at those rates, but still be viewed as the same health level regardless of any illnesses that might show up during those 20 years. That gives me 40 years of coverage starting at age 28 that should get us through the most vulnerable years, by the time we hit 68 I can only hope my kids won't need us so much and we'll have other forms of wealth to pass onto them. Both of my children are on our policies too as riders so they will be guaranteed at least some coverage when they age out of my policy. Somewhere along the lines we added Universal life for my kids so my future grandchildren would be protected regardless of my kids health, which is a good thing since the Asthma they now have may make them un-insurable later on, if not un-insurable they certainly won't be able to get what they now have for $15 a month. DH also has coverage for all of us through his job and a solid monthly payment for me too, and disability.

Maybe when we get older I'll drop some of this stuff but for now it protects us all. I don't have any family to help me if I end up alone so in my case all of this is very necessary.

Oh, and ladies BTW, make SURE you are named on the mortgage because if you are widowed and are not named on the loan you will need to try and get a loan all by yourself and if you are a SAHM that will be impossible. Loans are not assumable so it is only tied to the person whose name is on it, when they go the full sum is due and payable. When we refinanced they tried to kick me off since I no longer work, I got up and was willing to walk out over it so they added me. Whatever you do don't let this happen. Check everything, make sure your name is on everything including utilities.

 

[Christine]

Interesting thread.

I was always "advised" that you only need life insurance during the time, well, when you need life insurance. Life insurance is not there to make someone rich or comfortable upon your death.

My husband and I have two, 25 year policies that will end around the time we are 60.

By that point, my kids should be WELL on their own, the house paid for, and that sort of thing.

Both of us work and neither of us are overly dependent on the other's income. Currently, if one of us were to die today, the other could actually carry the bills. The tough part would be helping the kids with college. One of us could not do that.

So I'm left to wonder if I will continue to need it when my term is up?

Certainly I would if I one of us were disabled or one of us had never worked. I'm just not sure anymore about my own personal case.

 

[golfgal]

Interesting thread.

I was always "advised" that you only need life insurance during the time, well, when you need life insurance. Life insurance is not there to make someone rich or comfortable upon your death.

My husband and I have two, 25 year policies that will end around the time we are 60.

By that point, my kids should be WELL on their own, the house paid for, and that sort of thing.

Both of us work and neither of us are overly dependent on the other's income. Currently, if one of us were to die today, the other could actually carry the bills. The tough part would be helping the kids with college. One of us could not do that.

So I'm left to wonder if I will continue to need it when my term is up?

Certainly I would if I one of us were disabled or one of us had never worked. I'm just not sure anymore about my own personal case.

What do you have in place if you should have a serious drain on your retirement accounts from say catastrophic medical bills or your house is wiped out in a flood? On the flip side, what do you have set up to transfer your retirement accounts and other assets to your children so they don't get taxed at 55%? What do you have in place to pay for funerals (which run $15,000-20,000). What if one of you ends up in a nursing home, what do you have in place to pay for all of that?

 

[golfgal]

This is very good advice. A SAHM friend's DH died suddenly at 48 of a heart attack during 'routine' surgery. They were married in their 30's and for some reason he never bothered to change his beneficiary names on his Life Insurance Policy from work. When this friend went to look at it she realized his sisters were named. You guessed it, his sisters took it. Not only that but they tried to take away the house they shared too, and his 401K basing their claims on an old will he made before he got married & had kids. Luckily in Pennsylvania all wills made before marriage are nullified at the point of marriage or they really would have taken the house etc from her too. Thankfully she gets Social Security for her kids but she still had to move and her entire life changed.

We always had insurance but once this happened I realized how vulnerable I am right now so we picked up 2 20 year term life policies for DH and one on me (he'd need lots of household help if something happened to me) that cover the time period we'd be in the most trouble as a single parent, when the kids are little. I like the 20 year term because they allowed us to get very high coverage for a small window much less expensively than any sort of life coverage. Along with the 20 year term I picked up a guaranteed exchange rider that means that when the policy ends we can pick up a new policy as an older person, at those rates, but still be viewed as the same health level regardless of any illnesses that might show up during those 20 years. That gives me 40 years of coverage starting at age 28 that should get us through the most vulnerable years, by the time we hit 68 I can only hope my kids won't need us so much and we'll have other forms of wealth to pass onto them. Both of my children are on our policies too as riders so they will be guaranteed at least some coverage when they age out of my policy. Somewhere along the lines we added Universal life for my kids so my future grandchildren would be protected regardless of my kids health, which is a good thing since the Asthma they now have may make them un-insurable later on, if not un-insurable they certainly won't be able to get what they now have for $15 a month. DH also has coverage for all of us through his job and a solid monthly payment for me too, and disability.

Maybe when we get older I'll drop some of this stuff but for now it protects us all. I don't have any family to help me if I end up alone so in my case all of this is very necessary.

Oh, and ladies BTW, make SURE you are named on the mortgage because if you are widowed and are not named on the loan you will need to try and get a loan all by yourself and if you are a SAHM that will be impossible. Loans are not assumable so it is only tied to the person whose name is on it, when they go the full sum is due and payable. When we refinanced they tried to kick me off since I no longer work, I got up and was willing to walk out over it so they added me. Whatever you do don't let this happen. Check everything, make sure your name is on everything including utilities.

Just something to consider-if your DH dies and you have to go back to work, what kind of job can you realistically get? Same questions to you as I stated to Christine. Often when you least expect to need life insurance is when you need it.

Good point about the mortgage too. My aunt was never added to the Deed (which is what you really want, not so much the mortgage) of their house that my uncle bought before they were married. It took over $10,000 in probate costs to get the house she lived in for over 40 years into her name.

As far as work policies go-they are only good as long as you work there. If you ONLY have a work policy, what happens if you don't work there any longer?? What happens if you have to quit your job due to health problems and can't GET life insurance any longer. Same with disability coverage at work. They are very general policies and may not cover as well as you think they do.

I am very pro insurance, obviously, mainly because I have seen too many people without coverage and the bad things that have happened to them. One former teacher at our kids' old school's husband died at age 35 leaving 3 LITTLE kids, no life insurance. They have a benefit golf tournament to help them with living expenses each year. Is that what YOU want for your family? Or the reverse, another family I know where the Dad died at age 33 of a HEART ATTACK leaving 3 girls under the age of 6. They had good life insurance on him and his family was able to stay in their house, maintain their style of living and did not have to suffer financially because they prepared.

No one gets "rich" off life insurance because the industry caps what you can take out. Getting a $1,000,000 life insurance policy payout is like an income of $50,000/year-hardly rich.

 

[Christine]

What do you have in place if you should have a serious drain on your retirement accounts from say catastrophic medical bills or your house is wiped out in a flood? On the flip side, what do you have set up to transfer your retirement accounts and other assets to your children so they don't get taxed at 55%? What do you have in place to pay for funerals (which run $15,000-20,000). What if one of you ends up in a nursing home, what do you have in place to pay for all of that?

As I aged, I would carry a smaller policy than what I have now.

I am banking on health insurance to cover medical bills. Both of us (at least as of this date) are able to carry our current health insurance into retirement.

 

[bettymae1121]

I'm a big believer in life insurance!

DH and I each have $250k 20 year term policies, on top of that I get 2x my annual salary from my company and DH gets 4x his (unless he dies in an accident, then it's 8x). I also have a $50k policy I had from back when I was single, I didn't want my parents to have to pay for my funeral. Don't really need it now but for $8 a month, I may as well keep it, I'll spend $8 on lunch at Panera!

We don't have kids so that's more than enough, once we do have kids we shouldn't need to add any (we both plan on working once we have kids, the insurance will be enough for day care if needed). Even though the 20 year term will be up before our future kid(s) are out of high school (we've had the policies for 5 years now, only 15 left) we shouldn't need it past then, we'll be on better financial footing by that time. Although we may see about getting new 20 year terms writen once we have kids, if we can get it cheap enough.

 

[diesel]

As far as work policies go-they are only good as long as you work there. If you ONLY have a work policy, what happens if you don't work there any longer?? What happens if you have to quit your job due to health problems and can't GET life insurance any longer. Same with disability coverage at work. They are very general policies and may not cover as well as you think they do.

Most insurance companies will let you continue the policy if you leave your employer. It may cost more.

 

[golfgal]

Most insurance companies will let you continue the policy if you leave your employer. It may cost more.

Maybe yes, maybe no. Depends on what you take out. It is rare that you can continue any "free" coverage you may have have but if you bought more and underwent any underwriting, you can most likely take that with you. Also, because they are a group life insurance policy, there are tax implications on those policies for anything above $50,000 for the beneficiaries too. The benefit will come taxed where a personal policy usually doesn't come to the beneficiaries taxed. You need to plan for that loss of income due to taxes too.

 

[Disney Doll]

see below

This is very good advice. A SAHM friend's DH died suddenly at 48 of a heart attack during 'routine' surgery. They were married in their 30's and for some reason he never bothered to change his beneficiary names on his Life Insurance Policy from work. When this friend went to look at it she realized his sisters were named. You guessed it, his sisters took it. Not only that but they tried to take away the house they shared too, and his 401K basing their claims on an old will he made before he got married & had kids. Luckily in Pennsylvania all wills made before marriage are nullified at the point of marriage or they really would have taken the house etc from her too. Thankfully she gets Social Security for her kids but she still had to move and her entire life changed. There is a special spot in Hell for people who do this to someone who has just lost a loved one.

We always had insurance but once this happened I realized how vulnerable I am right now so we picked up 2 20 year term life policies for DH and one on me (he'd need lots of household help if something happened to me) that cover the time period we'd be in the most trouble as a single parent, when the kids are little. I like the 20 year term because they allowed us to get very high coverage for a small window much less expensively than any sort of life coverage. Along with the 20 year term I picked up a guaranteed exchange rider that means that when the policy ends we can pick up a new policy as an older person, at those rates, but still be viewed as the same health level regardless of any illnesses that might show up during those 20 years. That gives me 40 years of coverage starting at age 28 that should get us through the most vulnerable years, by the time we hit 68 I can only hope my kids won't need us so much and we'll have other forms of wealth to pass onto them. Both of my children are on our policies too as riders so they will be guaranteed at least some coverage when they age out of my policy. Somewhere along the lines we added Universal life for my kids so my future grandchildren would be protected regardless of my kids health, which is a good thing since the Asthma they now have may make them un-insurable later on, if not un-insurable they certainly won't be able to get what they now have for $15 a month. DH also has coverage for all of us through his job and a solid monthly payment for me too, and disability.

Maybe when we get older I'll drop some of this stuff but for now it protects us all. I don't have any family to help me if I end up alone so in my case all of this is very necessary.

Oh, and ladies BTW, make SURE you are named on the mortgage because if you are widowed and are not named on the loan you will need to try and get a loan all by yourself and if you are a SAHM that will be impossible. Loans are not assumable so it is only tied to the person whose name is on it, when they go the full sum is due and payable. When we refinanced they tried to kick me off since I no longer work, I got up and was willing to walk out over it so they added me. Whatever you do don't let this happen. Check everything, make sure your name is on everything including utilities.

 

[LuvOrlando]

Just something to consider-if your DH dies and you have to go back to work, what kind of job can you realistically get? Same questions to you as I stated to Christine. Often when you least expect to need life insurance is when you need it.

Good point about the mortgage too. My aunt was never added to the Deed (which is what you really want, not so much the mortgage) of their house that my uncle bought before they were married. It took over $10,000 in probate costs to get the house she lived in for over 40 years into her name.

As far as work policies go-they are only good as long as you work there. If you ONLY have a work policy, what happens if you don't work there any longer?? What happens if you have to quit your job due to health problems and can't GET life insurance any longer. Same with disability coverage at work. They are very general policies and may not cover as well as you think they do.

I am very pro insurance, obviously, mainly because I have seen too many people without coverage and the bad things that have happened to them. One former teacher at our kids' old school's husband died at age 35 leaving 3 LITTLE kids, no life insurance. They have a benefit golf tournament to help them with living expenses each year. Is that what YOU want for your family? Or the reverse, another family I know where the Dad died at age 33 of a HEART ATTACK leaving 3 girls under the age of 6. They had good life insurance on him and his family was able to stay in their house, maintain their style of living and did not have to suffer financially because they prepared.

No one gets "rich" off life insurance because the industry caps what you can take out. Getting a $1,000,000 life insurance policy payout is like an income of $50,000/year-hardly rich.

You are right about the deed, DH and I started out young so I tend to forget that some people have money and possessions before they got married. Even if a person is on the deed they can be off the mortgage and unless the widow has the balance for the mortgage floating around &/or a job with declarable income she won't get a new loan on her own, especially these days when families with 2 incomes have a hard time refinancing due to skittish lenders. Both issues are really important.

I guess I should have specified. My DH's insurance from work is completely independent from the term life & universal life for the kids I described. While the work stuff is a nice buffer its not something I rely on, we have policies with a well rated company and those policy premiums are paid with direct pay out of my checking account so it is never in any danger of lapsing. I used to work for a commercial insurance company and if a policy lapses and a loss occurs guess who isn't obligated to pay a dime?

I agree, my coverage is not about getting rich, the policies are intended to make sure I can still care for my kids in a way DH & I agreed upon

Disneydoll, yep, they'll burn doing this to their brothers kids.