Whole life insurance pros and cons?

[Eastern]

Don't buy a whole life policy. Term is much cheaper for better coverage.

Here's a basic list of companies but you can easily get quotes from wherever you like https://www.nerdwallet.com/blog/insurance/term-life-insurance/

All of my sons have jobs that offer life insurance. I told them to take the basic coverage that is free (usually 1x salary, have her check that) and if they wanted more to get a term policy.

 

[QueenIsabella]

The $50k should be plenty to cover her final expenses at this point in her life.

Term insurance is the way to go, should she need more coverage in the future (i.e., has a family that would be depending on her).

Disability insurance might be valuable to her, but she needs to look at the actual policy. She's statistically much more likely to be partially disabled, rather than "iron lung disabled", as they call it. Does the policy cover that? Does it cover just her medical bills, or her loss of wages? Rehab? Converting a house, if needed, to meet her disability needs? I know that none of us likes to think along such lines, but the company is counting on you NOT thinking beyond "What if I was in a car accident?"

It wouldn't hurt for her to go over such financial issues with a clear-eyed partner (not necessarily a financial planner, a parent or friend could do this). Looking at a book like, "Now that I'm Dead" or similar might seem grim, but it would help her to see what she should be thinking about in terms of her assets--not just for now, but as she moves through (hopefully, a long and happy) life.

Sorry to be a downer--it's extremely likely that she won't collect on any of this insurance.

 

[CaptainAmerica]

I let her read all your comments and told her it’s up to her.

While she's an adult and it's obviously her final decision, I would reiterate one more time that she's essentially flushing $1,600 per year down the toilet.

I'm 32 and obese and my $1 million 20-year term policy is about $500 per year.

 

[piccolopat]

For most people, term life insurance is the way to go. If you can find one that has a guarantee to continue or convert at the end of the term, that would be good. None of us know if or when we will get a diagnosis for something that will prevent us from getting life insurance in the future. Also look at premium guarantees so you know what that premium will be as you age up.

 

[CaptainAmerica]

For most people, term life insurance is the way to go. If you can find one that has a guarantee to continue or convert at the end of the term, that would be good. None of us know if or when we will get a diagnosis for something that will prevent us from getting life insurance in the future. Also look at premium guarantees so you know what that premium will be as you age up.

A young person who is diligent with saving shouldn't need to renew at the end of their term because they should be self-insured by then.

 

[Kestryl]

For most people, term life insurance is the way to go. If you can find one that has a guarantee to continue or convert at the end of the term, that would be good. None of us know if or when we will get a diagnosis for something that will prevent us from getting life insurance in the future. Also look at premium guarantees so you know what that premium will be as you age up.

Yep. At 28, I signed up for term life insurance to cover the house and some extra for my husband. $682 a year, thanks to melanoma at 26.

 

[mjkacmom]

Term is a cheaper and better option.

 

[MsOnceUponATime]

I have life insurance through my company (and I insure my kiddos for $4/month), but I am assuming that's some sort of group insurance? I actually have an email in to find out because I am closing on my house tomorrow and will defintely need to have term life insurance as a just in case! Thanks for the link to nerdwallet to help me out!

 

[DLgal]

we talked to our daughter. We asked what exactly is she looking for. She said she got the insurance so if she was to die , become disabled or unable to work, that it would cover medical bills, funeral expenses , pay off her bills or house when when she’s older if something was to happen. She doesn’t want me or my husband to carry the burden of those expenses.

right now , she just turned 23. She got a teaching job. She’s not married or have a boyfriend, husband or anyone special in her life . She has no kids.

she earned her BA and credential in four years , so she saved money graduating in 4 years and not having to go additional time for her credential. We paid for housing. She earned some scholarship so that helped with some of her tuition. She took out only subsidized loans. With covid we saved a year and 2 months of housing . The only student loans is about $9500 and she has that saved in her account and just waiting until May to pay it off .

I let her read all your comments and told her it’s up to her. I think she was trying to do the right thing and leave us some money and to take care of us and not leave us with a burden if something was to happen.

Hubby said we can go check out AAA and see if they have any policy’s or to get more info.

she also got a $50,000 life and AD&D insurance policy through her work for free paid by employer . Anyone know what what AD&D stand for?

disability income protection plan through American fidelity for $40.66 per month for 10 months a year pay

Your daughter is worrying about things she doesn't need to be worrying about. Statistically, she will outlive you and your husband. If she owns a home or has debts to pay at that point in her life, her heirs will deal with it. If she was to die young with a house and debts, the debts would be discharged upon her death, for the most part, and you'd simply sell the house and pay off the remainder of the mortgage. People deal with this situation every day.

Tell her that if she were to put that $1600/year into a Roth IRA, after 20 years, it would be worth just over $100,000, and it would be hers to continue growing, she wouldn't have to die to access it, and it would be inherited by anyone she designates upon her death. If she stopped adding to that amount after 20 years and continued to just let it sit there, by the time she is 59, it would be worth over $450,000. If it kept sitting there for another 14 years (to age 73, when she would be required to start taking out a minimum distribution) the amount would have grown to over $1.7M.

So, her $32,000 outlay for premiums nets her beneficiaries $100,000

OR

Her $32,000 investment in HERSELF nets her OR her beneficiaries potentially close to $2M.

Easy choice here.

Whole life policies prey on people who FEAR an early death who are the least likely to actually experience one, and who also don't understand the investment concept of compounding interest.

 

[mjkacmom]

I have life insurance through my company (and I insure my kiddos for $4/month), but I am assuming that's some sort of group insurance? I actually have an email in to find out because I am closing on my house tomorrow and will defintely need to have term life insurance as a just in case! Thanks for the link to nerdwallet to help me out!

When we had kids and bought a house, we got $500,000 on me and $1,000,000 on my husband, this was 20 years ago, it was pretty inexpensive.

 

[MrsPete]

Agreed although is the OP's case no life insurance is needed at all.

Agree. Life insurance is a cold-hearted business, so let's come at it from a purely analytical point of view:

Your 23-year old has no husband and no children. If she were to die tomorrow, who would be worse off financially? Beyond any medical bills and her funeral bills, no one.

Fast forward 5, 10, 20 years down the road: She's married, has a mortgage and two children. NOW if she were to die, people's finances would be affected.
- Her husband might want to take some time off work to come to terms with his loss and to help the children cope.
- Her husband might have a mortgage that would be difficult for him to pay alone.
- Without her input to the family, her husband might need child care, help with housekeeping, etc.
- Reduced to one income, her husband might have trouble saving for the children's college educations.
- At that stage of her life she will need life insurance to take care of her family.

Tell her that if she were to put that $1600/year into a Roth IRA, after 20 years, it would be worth just over $100,000, and it would be hers to continue growing, she wouldn't have to die to access it, and it would be inherited by anyone she designates upon her death. If she stopped adding to that amount after 20 years and continued to just let it sit there, by the time she is 59, it would be worth over $450,000. If it kept sitting there for another 14 years (to age 73, when she would be required to start taking out a minimum distribution) the amount would have grown to over $1.7M.

Good answer. Investing that money, whether in a Roth IRA or other venue, is a much better idea.

 

[DLgal]

Agree. Life insurance is a cold-hearted business, so let's come at it from a purely analytical point of view:

Your 23-year old has no husband and no children. If she were to die tomorrow, who would be worse off financially? Beyond any medical bills and her funeral bills, no one.

Fast forward 5, 10, 20 years down the road: She's married, has a mortgage and two children. NOW if she were to die, people's finances would be affected.
- Her husband might want to take some time off work to come to terms with his loss and to help the children cope.
- Her husband might have a mortgage that would be difficult for him to pay alone.
- Without her input to the family, her husband might need child care, help with housekeeping, etc.
- Reduced to one income, her husband might have trouble saving for the children's college educations.
- At that stage of her life she will need life insurance to take care of her family.

Good answer. Investing that money, whether in a Roth IRA or other venue, is a much better idea.

I just used a Roth because of the tax advantages to both her as well as anyone who inherits it down the road.

 

[MillauFr]

Your 23-year old has no husband and no children. If she were to die tomorrow, who would be worse off financially? Beyond any medical bills and her funeral bills, no one.

Agreed. I'm curious what happens if a 23 year old dies and has medical bills? Who would have to pay? If I was a relative I wouldn't pay them.

 

[MillauFr]

I have life insurance through my company (and I insure my kiddos for $4/month), but I am assuming that's some sort of group insurance? I actually have an email in to find out because I am closing on my house tomorrow and will defintely need to have term life insurance as a just in case! Thanks for the link to nerdwallet to help me out!

Why would you buy life insurance for your kids?

 

[MillauFr]

A young person who is diligent with saving shouldn't need to renew at the end of their term because they should be self-insured by then.

Self insured for what loss?

 

[DLgal]

Self insured for what loss?

Many older adults still have children who depend on them financially. Disabled adult children, for one. We have 2 of those. We will be providing for them until the day we die, and then afterwards, they will need significant money to not have to live in poverty, off of government assistance. It's our job to invest wisely so there will be money even after our term insurance expires at age 69.

 

[ruadisneyfan2]

The $50k should be plenty to cover her final expenses at this point in her life.

Term insurance is the way to go, should she need more coverage in the future (i.e., has a family that would be depending on her).

Disability insurance might be valuable to her, but she needs to look at the actual policy. She's statistically much more likely to be partially disabled, rather than "iron lung disabled", as they call it. Does the policy cover that? Does it cover just her medical bills, or her loss of wages? Rehab? Converting a house, if needed, to meet her disability needs? I know that none of us likes to think along such lines, but the company is counting on you NOT thinking beyond "What if I was in a car accident?"

It wouldn't hurt for her to go over such financial issues with a clear-eyed partner (not necessarily a financial planner, a parent or friend could do this). Looking at a book like, "Now that I'm Dead" or similar might seem grim, but it would help her to see what she should be thinking about in terms of her assets--not just for now, but as she moves through (hopefully, a long and happy) life.

Sorry to be a downer--it's extremely likely that she won't collect on any of this insurance.

Why do you say this?
When I first started my career at 23, the cost of disability insurance through our hospital was low. It gradually increases as we age and also depend how many sick hours we had banked at renewal time. People with a thousand sick hours are less likely to burn through it and start collecting from the insurance company.

Anyway, after 2 c-sections, sinus surgery, a herniated disc/sciatica, Epstein-Barr virus with related Reactive Arthritis and then chronic fatigue, I think I've been paid out more than I paid into it over the 31+ years I've worked there.
When it seemed the chronic fatigue wouldn't end, and my doctor signed me out of work for 1 year, our long-term disability would have kicked in after 6 months of short-term disability insurance. Luckily I was able to build up my strength and return to work part time and gradually return to FT.

My point is, being out of work for childbirth falls under disability. You don't have to be permanently disabled with some horrible disease, such as qualifying for SSDI, to submit a claim for short term disability. Any time we'll be missing more than 1 week of work we are expected to put in a ST claim.

 

[ruadisneyfan2]

For most people, term life insurance is the way to go. If you can find one that has a guarantee to continue or convert at the end of the term, that would be good. None of us know if or when we will get a diagnosis for something that will prevent us from getting life insurance in the future. Also look at premium guarantees so you know what that premium will be as you age up.

We thought this too at first.
When the 20 year term policy we had on dh expired, it also was guaranteed to continue but not at the $25/month rate we had. They jacked it up to like $400/month without even asking any health questions whatsoever. We quickly dropped it.

 

[QueenIsabella]

Why do you say this?
When I first started my career at 23, the cost of disability insurance through our hospital was low. It gradually increases as we age and also depend how many sick hours we had banked at renewal time. People with a thousand sick hours are less likely to burn through it and start collecting from the insurance company.

Anyway, after 2 c-sections, sinus surgery, a herniated disc/sciatica, Epstein-Barr virus with related Reactive Arthritis and then chronic fatigue, I think I've been paid out more than I paid into it over the 31+ years I've worked there.
When it seemed the chronic fatigue wouldn't end, and my doctor signed me out of work for 1 year, our long-term disability would have kicked in after 6 months of short-term disability insurance. Luckily I was able to build up my strength and return to work part time and gradually return to FT.

My point is, being out of work for childbirth falls under disability. You don't have to be permanently disabled with some horrible disease, such as qualifying for SSDI, to submit a claim for short term disability. Any time we'll be missing more than 1 week of work we are expected to put in a ST claim.

Short term disability is a different thing, and typically included in a benefits package. I have no idea if that's the case with the OP's daughter, which is why I said to check the policy. Long term disability is a separate policy (again, what I'm used to), that kicks in after everything else has been exhausted--like you said, after 6 months. This appears to be a a policy, on top of what the OP's daughter is being offered as part of a regular benefits package.

We never had long term disability on me when I worked, because we had no kids and DH also worked full-time. We did/do have it on him (I don't even know if we still do--probably don't need it now). But, that was after we had started our family and I was home full-time. The calculus changes under those circumstances. I know I was out on short-term disability after childbirth.

 

[ruadisneyfan2]

Our first home was a condo. (In my name only.) At some point Chase Mortgage offered me disability insurance in case I was unable to work, our monthly mortgage payments would still be made on my behalf. If I were to become permanently disabled it would pay off the mortgage.
I was in my 20’s and saw a LOT of horrible accidents & spinal cord injuries in our trauma center. Boy, THAT can really skew one’s view on odds, luck, etc. So we signed up for it. IIRC it was like $30/month on an $800/month mortgage.
After a around 6 months I started realizing that as our mortgage balance gets paid down, the amount of our insurance “benefit” keeps decreasing along with it, like I’m paying the same amount for less coverage.
I decided that if I was going to worry about becoming disabled, I might as well buy a private plan where the benefit amount stays at a constant level. I started to look into it but then decided to just choose the higher payout options of our short and long term disability insurance through work.

There are so, so many offers out there to be insured for every little thing. Stop to think about what really needs to be insured.
Even back when buying my kids toys or video games at Toys R Us, I was asked to buy their insurance for a $20 game. It's such a racket when people feel the need to be insured for everything.