Term Life Insurance??

[grumpy28]

What can you all tell me about buying term life? Hubby and I are 29 and both looking to buy policies. I have no clue on the "insurance lingo"! I know to get term life, but is buying insurance complicated? Also, is the payout a huge hassle or semi-easy? Obviously I am not hoping for a payout, but we are trying to get our affairs in order before the big 3-0!

 

[Chicago526]

"Term" life insurance means you are insured for $X amount for Y years. DH and I each have $250k for 20 years, that should cover the years that we'll have young kids and are still building our net worth. At the end of 20 years we will no longer have insurance and get nothing. But 20 years from now, our insurance needs will decress signifigantly and we will either need less insurance or won't need it at all, because we'll have enough $$$ in the bank to be okay if something happens to one of us.

"Whole" or "Universal" life insurance means you are insured for $X for life, and the policy has a cash value so if say, 20 years from now you decide to cancel because you don't need the coverage any more, you get some of your money back. The trouble is that if you had just invested that money for 20 years, you'd have waaaaay more money than what the cash value of the policy is. Insurance sales people try to pass it off as an investment, but it's a poor investment at best and a money loser at worst.

Term is much cheaper than whole or universal. My 250k policy costs $25 a month, DH's costs $75 a month (his is higher because he is male, is older than I, and has some pre-existing medical conditions that make him a higher insurance risk).

I don't know about payout, since I've never had to collect (and knock on wood, never will...) but if you go with a reputable company it shouldn't be a problem, assuming there is no question about cause of death.

 

[grumpy28]

"Term" life insurance means you are insured for $X amount for Y years. DH and I each have $250k for 20 years, that should cover the years that we'll have young kids and are still building our net worth. At the end of 20 years we will no longer have insurance and get nothing. But 20 years from now, our insurance needs will decress signifigantly and we will either need less insurance or won't need it at all, because we'll have enough $$$ in the bank to be okay if something happens to one of us.

"Whole" or "Universal" life insurance means you are insured for $X for life, and the policy has a cash value so if say, 20 years from now you decide to cancel because you don't need the coverage any more, you get some of your money back. The trouble is that if you had just invested that money for 20 years, you'd have waaaaay more money than what the cash value of the policy is. Insurance sales people try to pass it off as an investment, but it's a poor investment at best and a money loser at worst.

Term is much cheaper than whole or universal. My 250k policy costs $25 a month, DH's costs $75 a month (his is higher because he is male, is older than I, and has some pre-existing medical conditions that make him a higher insurance risk).

I don't know about payout, since I've never had to collect (and knock on wood, never will...) but if you go with a reputable company it shouldn't be a problem, assuming there is no question about cause of death.

Thank you so much for putting it in simpler terms for me! You are terrific!

 

[clh2]

Also, is the payout a huge hassle or semi-easy?

As our financial planner explained to us...life insurance is somewhat of a no-brainer. You are either dead or not. It is far easier to collect from life insurance than disability insurance.

Keep in mind, most life insurance policies may have exclusions. Our policies would not cover much of anything before 2 years had elapsed, nothing related to illness, although it would cover acciental death. It did not cover suicide for a specified period of time, or maybe it excluded it altogether.

Also, the company you go with may require a physical, i.e. weight, height, cholesterol, and a drug screen.

 

[grumpy28]

As our financial planner explained to us...life insurance is somewhat of a no-brainer. You are either dead or not. It is far easier to collect from life insurance than disability insurance.

Keep in mind, most life insurance policies may have exclusions. Our policies would not cover much of anything before 2 years had elapsed, nothing related to illness, although it would cover acciental death. It did not cover suicide for a specified period of time, or maybe it excluded it altogether.

Also, the company you go with may require a physical, i.e. weight, height, cholesterol, and a drug screen.

Thank you for this info! I am a "life insurance newbie", so I am still learning! I just figured all life insurance companies required a physical. Are there some that don't?

 

[mickeyboat]

Thank you for this info! I am a "life insurance newbie", so I am still learning! I just figured all life insurance companies required a physical. Are there some that don't?

It will depend on the company, and also the amount of insurance you want, your age, health, pre-existing conditions, family history, etc. DH and I bought 20 year policies, $300k each last year and both had to have a physical. A nurse came to our home to weigh, measure, take blood pressure, take blood and urine samples, and to ask a bunch of questions.

Denae

 

[grumpy28]

It will depend on the company, and also the amount of insurance you want, your age, health, pre-existing conditions, family history, etc. DH and I bought 20 year policies, $300k each last year and both had to have a physical. A nurse came to our home to weigh, measure, take blood pressure, take blood and urine samples, and to ask a bunch of questions.

Denae

Thank you for this info!

 

[mikehn]

I would also add, if you're going to buy term life, you should be completely committed and get a looong term policy. If you are 30, it doesnt make any sense to just buy a 10 year term policy, that is just money down the drain. You should lock into a policy much longer than 10 years. You want to lock in a low rate for a real long term now while you're young and healthy.

 

[Bob NC]

Also, is the payout a huge hassle or semi-easy?

Some might consider it a HUGE hassle. Especially since you have to die first.

 

[ZachnElli]

I'm in an insurance office and we don't have many exclusions the first couple of years. Really just suicide and any serious preexisting conditions and infants 15 days and younger are restricted to a small amount. Pay out is, well easy, but hard at the same time. We just need an official copy of the death certificate and a signature from the beneficiary. But who likes bringing in the death cert. So it's an awful, but easy chore.

 

[clarabelle]

I bought term life insurance online last year (sort of anyway)
I went to a ccu quote.com and put it our info (ages, what we wanted ect..)
and then someone called us and asked a few questions. We went with companies that were rated at least a A.
A nurse came out to the house and asked a bunch of questions and weighed us -did a little mini physical. Some of the questions were almost silly.
They test for nicotine -so there is no fibbing if you are a smoker.
Then they fed exed us paper work and we sent them a check.

 

[golfgal]

"Term" life insurance means you are insured for $X amount for Y years. DH and I each have $250k for 20 years, that should cover the years that we'll have young kids and are still building our net worth. At the end of 20 years we will no longer have insurance and get nothing. But 20 years from now, our insurance needs will decress signifigantly and we will either need less insurance or won't need it at all, because we'll have enough $$$ in the bank to be okay if something happens to one of us.

"Whole" or "Universal" life insurance means you are insured for $X for life, and the policy has a cash value so if say, 20 years from now you decide to cancel because you don't need the coverage any more, you get some of your money back. The trouble is that if you had just invested that money for 20 years, you'd have waaaaay more money than what the cash value of the policy is. Insurance sales people try to pass it off as an investment, but it's a poor investment at best and a money loser at worst.

Term is much cheaper than whole or universal. My 250k policy costs $25 a month, DH's costs $75 a month (his is higher because he is male, is older than I, and has some pre-existing medical conditions that make him a higher insurance risk).

I don't know about payout, since I've never had to collect (and knock on wood, never will...) but if you go with a reputable company it shouldn't be a problem, assuming there is no question about cause of death.

Actually, with a good company a whole or variable policy is LESS expensive over time then a term policy because of the cash value of the policy--especially if you buy the policy young and give it time to build. It is a good back up to your portfolio actually--especially since your cash value is liquid and you can borrow against that cash value in the event of a serious financial situation--say like the flooding that is going on now. People are still going to have to pay their mortgages on homes they no longer have (or default on them and ruin their credit). Having access to that cash value could really come in handy. You don't even need to repay the loan, you just receive a lowered death benefit when the time comes. Yes, a lot of financial planners say they aren't a good investment because they don't sell them and they want you to spend your money with them. Are they good as an 'only' investment, no, but then nothing is.

Term is a good way to start. Do NOT go with an 'internet' company that has no real history. If they aren't around in 20 years to pay out your policy then you have just wasted your money. Go to a company that specialized in life insurance and has a good financial standing. You will find that their premiums are at or less then your internet quotes.

 

[clarabelle]

I went with the internet to get quotes. The actual insurance was from Prudental.
I have always understood whole life to be a bad investment. That with the commisions you pay that you could to better with other options.

 

[golfgal]

I went with the internet to get quotes. The actual insurance was from Prudental.
I have always understood whole life to be a bad investment. That with the commisions you pay that you could to better with other options.

By doing that you paid a fee to the internet company that is brokering the policy to Prudential and to Prudential. You would have spent less in fees by just going to Prudential.

You pay commissions on term policies as well. If you are talking fees, you pay fees on every investment. They are no different in whole life policies. The big benefit with whole/variable policies is that the cash value for the most part is tax free since it is an insurance payout. You take out the 'premiums' you paid over time first and then when you get down to the end of what is left and have to start paying tax your taxable income is generally very small thus you pay less tax on the payout. There are a LOT of advantages to whole/variable policies that people overlook, someone just told them once they aren't a good investment and they believe them without checking into that. If you hear that from someone more then 5 years ago, look again because policies have changed over time. They do the exact same thing as your IRA.

 

[SeeVee]

Actually, with a good company a whole or variable policy is LESS expensive over time then a term policy because of the cash value of the policy--especially if you buy the policy young and give it time to build. .

Bull! Bull! And more BULL! It is a TOTAL rip off must be avoided at all costs. That extra money in cost invested in an IRA or 401 will pay MUCH more.

And never, NEVER, NEVER EVER , take out insurance on a child.

You should take enough insurance to cover all your existing debts and no more.

 

[HelenePA]

OP I'm going to Hijack for a second.. anyone know how long it takes from the time the insurance gets the death certificate until they "pay out". I finally got my dad's DC (he's only dancing because I was on the verge of getting a lawyer for them to finally get off their a$$ and get that to me!) and now I"m just waiting on a check... I need to get stuff paid... its been over a month he's dead.. stuff is due NOW!

 

[golfgal]

Bull! Bull! And more BULL! It is a TOTAL rip off must be avoided at all costs. That extra money in cost invested in an IRA or 401 will pay MUCH more.

And never, NEVER, NEVER EVER , take out insurance on a child.

You should take enough insurance to cover all your existing debts and no more.

Bull, bull and MORE bull. You should ALWAYS take life insurance out on your children and as much as you can afford--why, because it guarantees that they will HAVE life insurance when they are adults. It has nothing to do with 'profiting' from their death but protecting THEIR future. Say you have a 5 year old that is diagnosed with diabetes, forget ever getting life insurance now. Some day that 5 year old will have a family and will never be able to get life insurance.

As for only covering your existing debt, what about a SAHM with 3 small children, Dad is killed in a car accident. What does the mom do to survive after that? Yes, she can get a job but then she has daycare and a whole host of other expenses that she never had before and what kind of income will she now have??

I am glad you care so much about your family that you want to make sure they are taken care of if you die.

 

[golfgal]

OP I'm going to Hijack for a second.. anyone know how long it takes from the time the insurance gets the death certificate until they "pay out". I finally got my dad's DC (he's only dancing because I was on the verge of getting a lawyer for them to finally get off their a$$ and get that to me!) and now I"m just waiting on a check... I need to get stuff paid... its been over a month he's dead.. stuff is due NOW!

You should get the check soon--as long as it takes to file the claim and get the check mailed out to you. Every company is different but once they get the death certificate it should be within a couple weeks.

 

[clarabelle]

Golfgal-are you in the insurance business?

Anyway -I liked doing it over the internet-but I didn't realize I was paying for the privilege.
I do however resent that just "someone" told me that whole life was a bad investment.
I read money mags and listen to financial podcasts ect...
I have never heard or read anyone strongly recommend whole life.
It wasn't just a rumor I heard once -I promise.

 

[HelenePA]

I was told NOT to get life insurance for any of my kids ONLY because DD#1 was born with a heart defect and required open heart surgery when she was 6months old... They told me if I put her on my account as a "rider?" they would deny her coverage and black ball her for the rest of her life... anyone know if this is true??

OH and DH has WAYYYYYYYy more life insurance than what is needed to cover the bills because I am a SAHM.. we are up close to 500k I think... I wish it was more.. (not that I'm money hungry or anything but I would like to feel secure if he was gone being able to pay for 4 kids, college, cars ect ect)