Whole life insurance pros and cons?

[barkley]

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.

you wouldn't be obligated unless you signed something at some point saying you were the responsible party which you can be unaware you are doing if something like a trip to the e/r happens. i only realized this b/c we had to take our youngest to the e/r a couple of years after he became an adult. he wasn't able to do the initial paperwork so i filled it out and signed it. bill came in MY NAME and when i called they said my signature made me the 'responsible party'. now, he had insurance which paid for it but after that i vowed that while i would fill out paperwork again if needed in that situation i would NOT sign it-it could sit until he was capable of doing so himself.

on a somewhat related topic-we had an estranged family member pass a few years ago. found out from the coroner's office in the county he passed from (they tracked down family through public records search). imagine our surprise to find out that the state he passed in has a law that holds blood related 'family' members responsible for all costs associated with disposition of a body. we were told (and i researched the law) that we had something like 5 business days to make arrangements otherwise the county would do so, at whatever cost they chose (so if the most expensive place in town was the only available/only did burials they got the job)- and we would be financially responsible. failing to timely pay was subject to some crazy fines and penalties.

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.

seems i'm the odd (wo)man out on this thread-i have a whole life policy. dh and i both got one 31 years ago when we bought our first home b/c we figured if something happened to one of us the other could pay off the mortgage. we are mortgage free but i won't cancel the policies b/c the rate we pay, despite one of use being in our 50's/other in our 60's is low and has stayed constant (we pay less than $1000 per year each).

 

[MrsPete]

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.

I'm not sure, but I think the answer is, "It depends". Some debts die with the individual -- I'm pretty sure medical debt is part of that. Student loan debts die with the individual, unless you've co-signed for the person. But what if the deceased owned a nice house, which you were set to inherit? I think the "powers that be" could take the house /sell it to recoup the debt before you'd inherit. If I could pay the medical bills and have the house, I'd probably be willing to pay -- though when we're talking about a 23 year old.
Many moving parts in this question.

Why would you buy life insurance for your kids?

My kids are grown, but -- in general -- I'd say no. Kids are statistically unlikely to die, and -- if they did -- I have money to cover a funeral.
However, when my kids were small, I was able to get a $10,000 policy for all my kids for $1 per month through my work. I was willing to pay that $1 for the remote chance.

Short term disability is a different thing, and typically included in a benefits package.

You are much more likely to be disabled (short-term or long-term) than to die young. Consider, too, that for a young family disability is likely to be more financially devastating than death: Imagine a young family with small children ... mom and dad are both have a job, and they work together to take care of the children and the home. Let's say Dad is hit by a drunk driver; he lives, but he's in the hospital a while. He comes home, but he can't work yet. He has medical bills, physical therapy bills, and he's no longer able to contribute to the household chores as he did ... Mom is still working, but the family's bills are higher, and Mom can't do all of Dad's chores + her chores + take care of the kids. She NEEDS that disability income.

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.

Yes, that's why it's wise to reconsider your coverage every year. What worked for you five years ago may no longer be appropriate.

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.

Yes, in general, insurance specific to one thing is not worthwhile. Think twice before you insure your stove, your watch, your phone. It's smarter to save money and self-insure those items.

 

[MrsPete]

bill came in MY NAME and when i called they said my signature made me the 'responsible party'. now, he had insurance which paid for it but after that i vowed that while i would fill out paperwork again if needed in that situation i would NOT sign it-it could sit until he was capable of doing so himself.

I had no idea, but I do know that -- in an emergency -- they will treat you without being admitted. I entered the hospital in very, very active labor, and my daughter was born 16 minutes later. The receptionist came into Triage later and officially admitted me.

on a somewhat related topic-we had an estranged family member pass a few years ago. found out from the coroner's office in the county he passed from (they tracked down family through public records search). imagine our surprise to find out that the state he passed in has a law that holds blood related 'family' members responsible for all costs associated with disposition of a body. we were told (and i researched the law) that we had something like 5 business days to make arrangements otherwise the county would do so, at whatever cost they chose (so if the most expensive place in town was the only available/only did burials they got the job)- and we would be financially responsible. failing to timely pay was subject to some crazy fines and penalties.

That's crazy -- if you were estranged, you might not even know the person had died.
How far does this "blood relative" thing go? Could I be responsible for my second cousin whom I haven't seen in years?
What if you refuse to pay? Would they dig up the body and leave it on your porch?

 

[mjkacmom]

OP, a nice gift fir your daughter would be an appointment with a financial planner (fee based, not commission). We need to do this for our adult college graduates, one is a CPA, the other in finance, but there is a lot to know.

 

[MsOnceUponATime]

Why would you buy life insurance for your kids?

Why wouldn't I?

 

[ruadisneyfan2]

Why wouldn't I?

Generally, someone buys life insurance when there are people who depend on the income of the insured. Most people don’t depend on their children’s income.
Some people have a small policy on their children to cover funeral expenses if they know they couldn’t afford one if needed.
I get family AD&D insurance through work and it costs around a dollar per biweekly paycheck.

 

[MsOnceUponATime]

Generally, someone buys life insurance when there are people who depend on the income of the insured. Most people don’t depend on their children’s income.
Some people have a small policy on their children to cover funeral expenses if they know they couldn’t afford one if needed.
I get family AD&D insurance through work and it costs around a dollar per biweekly paycheck.

It's only $4/month to insure them. And three of them are adults. I would be able to contribute to, if not pay for all, funeral costs and whatever small debt that they have incurred. To me, it's peace of mind. A no brainer, if you will.

 

[LYSE]

23 and no one depending on her, I have to question what the objective of getting a policy is.

 

[MillauFr]

It's only $4/month to insure them. And three of them are adults. I would be able to contribute to, if not pay for all, funeral costs and whatever small debt that they have incurred. To me, it's peace of mind. A no brainer, if you will.

But if they die and are adults their debts generally die with them. Why not put the $4 month into a Roth IRA?

 

[mjkacmom]

It's only $4/month to insure them. And three of them are adults. I would be able to contribute to, if not pay for all, funeral costs and whatever small debt that they have incurred. To me, it's peace of mind. A no brainer, if you will.

If they are adults, do they have jobs? Are they single? My adult unmarried working kids get life insurance through their employer with us as the beneficiaries. I could see keeping it until they get their own insurance or get married.

 

[MsOnceUponATime]

If they are adults, do they have jobs? Are they single? My adult unmarried working kids get life insurance through their employer with us as the beneficiaries. I could see keeping it until they get their own insurance or get married.

Keeping in mind that one is a minor -
Three adults, all have jobs. One is in the military (so I guess that I could drop her). Two are single (both engaged) and one is married (that's my military kiddo).

But if they die and are adults their debts generally die with them. Why not put the $4 month into a Roth IRA?

That's true. I see it as "only $4/month" though. I will think on this. Thanks for the input!

 

[barkley]

You are much more likely to be disabled (short-term or long-term) than to die young. Consider, too, that for a young family disability is likely to be more financially devastating than death: Imagine a young family with small children ... mom and dad are both have a job, and they work together to take care of the children and the home. Let's say Dad is hit by a drunk driver; he lives, but he's in the hospital a while. He comes home, but he can't work yet. He has medical bills, physical therapy bills, and he's no longer able to contribute to the household chores as he did ... Mom is still working, but the family's bills are higher, and Mom can't do all of Dad's chores + her chores + take care of the kids. She NEEDS that disability income.

on disability insurance-be careful and read how they determine the benefit amount. many policies read that they will only pay a percentage of your 'reported w-2 wages' so if you have an illness or injury that you've been dealing with for awhile that created intermittent unpaid leave from work but ultimately has you off for a long period of time you could see a much lower payment. my personal example-i had health issues on and off for a year or so that i was trying to deal with/continue working during but i would have days up to weeks off that exhausted all my accruals. by the time my doctor finaly said 'no, you will be off at minimum 6 months' my reportable w-2 wages were significantly lower than my normal salary but that's what they based my insurance benefit on (they are doing the same w/a family member who is having surgery in the near future to address an issue that's caused extensive use of unpaid fmla over the past year).

there are policies that take these issues into consideration and establish a dollar range of coverage. they cost more but they can be much better coverage.

That's crazy -- if you were estranged, you might not even know the person had died.
How far does this "blood relative" thing go? Could I be responsible for my second cousin whom I haven't seen in years?
What if you refuse to pay? Would they dig up the body and leave it on your porch?

nuts huh? i was shocked esp. b/c i had worked for social services in that state and one of my duties entailed arranging for 'county burials'. the county i worked for had contracts with certain funeral homes w/ a set dollar amount for cremation (the default unless the person requesting it knew to say the person had a religious objection in which case we paid a higher amount for a no frills/basically cardboard casket in an unmarked grave). i looked at the law and it reads-California State law requires blood relatives of the deceased to provide for the disposition of the remains. Failure to act in a timely manner is a criminal misdemeanor violation and could result in the next of kin being required to pay up to three times the cost of the disposition. the law extends to any blood relative they can track down going in certain order of relatedness.

never in my life did i think i would be google searching 'cheapest cremation options' (note-it's not the neptune society).

 

[dreamin_disney]

But if they die and are adults their debts generally die with them. Why not put the $4 month into a Roth IRA?

How does the Roth IRA work when someone inherts it? Do you have to pay taxes on it or is it payment on death tax free?

 

[ruadisneyfan2]

How does the Roth IRA work when someone inserts it? Do you have to pay taxes on it or is it payment on death tax free?

You fund a Roth IRA with after-tax dollars (take-home pay). You are not taxed when you withdraw. You are also free to withdraw your deposits without penalty but you can't withdraw earnings without penalty until age 59.5 IIRC.

 

[MillauFr]

How does the Roth IRA work when someone inserts it? Do you have to pay taxes on it or is it payment on death tax free?

If you transfer upon death the heirs can generally withdrawal the money tax free.

 

[DrummerBoy523]

<duplicate>

 

[DrummerBoy523]

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

unless you are the co-signer on her debt/loans/mortgage, almost all of her debt will die with her. She has absolutely no need whatsoever for ANY type of life insurance at this point in her life. Have her put this money in a ROTH IRA.

 

[tvguy]

unless you are the co-signer on her debt/loans/mortgage, almost all of her debt will die with her. She has absolutely no need whatsoever for ANY type of life insurance at this point in her life. Have her put this money in a ROTH IRA.

As they say....."it depends". In some states and circumstances that debt could be passed on to relatives. https://consumer.ftc.gov/articles/debts-deceased-relatives

 

[MillauFr]

As they say....."it depends". In some states and circumstances that debt could be passed on to relatives. https://consumer.ftc.gov/articles/debts-deceased-relatives

As I read that advice is basically says no you don't have to pay the dead person's debts out of your own funds. Of course with the usual caveats that I think most people understand, if you were married to the person or if you co-signed on a loan.

 

[DrummerBoy523]

As they say....."it depends". In some states and circumstances that debt could be passed on to relatives. https://consumer.ftc.gov/articles/debts-deceased-relatives

that's why I said "almost all"