Life insurance good or bad?

[tloonya]

The guy who is 19 now bought insurance that he is paying $54/mo for 20 years and then premium no more.$100K coverage but if he doesn't touch money until 60 - he will get $200K to widthraw no penalty no nothing. he can also get money after 7th year no penalties not taxes. If he wants to return money - just go ahead, no problems.

Another example $205 per month premium for 20 years and you get $500K by retirement age.

Wouldn't you want THAT?

[gregintenn]

Nope. You'd be far ahead to buy the insurance you need as level term, and invest the remainder into a mutual fund.

I have $250k of 30 year level term. It's about $20 per month.

[Deleted]

Let's ignore the life insurance part for the moment- if I put away $54/month for 20 years at 6% I'll have about $25K. Let that sit another 20 years at 6% and I'll have $80K.

The insurance company is raking off commission and expenses and providing a life insurance component as well and giving you $200K at the end? I'd have to say they're banking on most policyholders stopping payment and getting less than a fair return. I suspect that after 7 years if you ask for your money back you get your premium but not any investment gains so that goes into the pot for everyone else.

Few 19-year olds need $100K in life insurance coverage. Buy term if your employer doesn't give you enough, and invest the difference.

[thyme4change]

Are you sure the premium stays at $54/month? The policy my guy always tries to sell me has a scheduled premium increase every 5 years.

[Deleted]

$54.00/mo. @ 11%/ann. for 20 years: $44,042.79

$44,000.00 lump sum @ 11%/ann. for 20 years: $354,741.71



$205.00/mo. @ 11%/ann. for 20 years: $167,199.48

$167,000.00 lump sum @ 11%/ann. for 20 years: $1,346,406.03

[gregintenn]

Loony, if you ever write a book, I'm in for a signed copy!

[lisamomof4]

i think life insurance if you have a family/children is a good idea but term insurance is your best bet...the money back is just a rip off, you would do better to just invest it yourself

[tloonya]

Jan 10, 2016 15:29:12 GMT -5 gregintenn said:

Nope. You'd be far ahead to buy the insurance you need as level term, and invest the remainder into a mutual fund.

I have $250k of 30 year level term. It's about $20 per month.

It is if everyone sure there is no such thing like a sudden death.
Isn't it why insurances are bought?
But they all designed to not to pay you. Here you aren't losing
any money. Your kids will inherited it.

[tloonya]

Jan 10, 2016 15:29:12 GMT -5 gregintenn said:

Nope. You'd be far ahead to buy the insurance you need as level term, and invest the remainder into a mutual fund.

I have $250k of 30 year level term. It's about $20 per month.

But you will never get that $250K!

[gregintenn]

Jan 11, 2016 11:47:51 GMT -5 tloonya said:

Jan 10, 2016 15:29:12 GMT -5 gregintenn said:

Nope. You'd be far ahead to buy the insurance you need as level term, and invest the remainder into a mutual fund.

I have $250k of 30 year level term. It's about $20 per month.

But you will never get that $250K!

I'll get far more than that by investing the difference in premiums between the term life policy and any cash value life insurance policy. The reason salesmen push cash value insurance so hard is that's where they're making the big commissions. This money comes from you!

Keep your insurance and your investments separate.

[Deleted]

Jan 11, 2016 11:47:51 GMT -5 tloonya said:

Jan 10, 2016 15:29:12 GMT -5 gregintenn said:

Nope. You'd be far ahead to buy the insurance you need as level term, and invest the remainder into a mutual fund.

I have $250k of 30 year level term. It's about $20 per month.

But you will never get that $250K!

I hope I don't get the 400K life insurance I have.  It means I died prior to age 60.  After that, it doesn't matter.  My boys won't need it anymore.  Whole life has two components, the "life insurance" part and the investment part...but the investment part is not great at all.  I don't even want to think what 400K in whole life would cost.  I will have paid a total of $7340 in premiums over the 20 years, and yes, hopefully that was money just thrown away, but because it's cheap I am able to invest more, both in retirement savings and college savings for the kids.  If I die before the term is up, the kids get the insurance payout and the investments.  When you die with whole life you only get the insurance payout, not the cash value that you invested.  That is gone. 

Every year my insurance needs go down...I'm actually over-insured already, but I bought enough 5 years ago to cover if I died the next day. 

[cronewitch]

At 19 without children he needs enough assets to pay for his cremation or funeral. He doesn't need to leave a small fortune to his friends and family at is costing him $54 a month. When he has children he needs to support then he needs enough term insurance to see them grown, less what SS and a spouse can pay so a term policy of say a half million is good or even a quarter million. If he invested his $54 instead in a few years he might need it for a car repair and would have it where in insurance he would keep needing to pay to keep the policy. What 19 year old knows what his income will be every single month the next 40 years? Some unemployment and the policy is cancelled or used up paying for premiums from the cash value or he can borrow a little on it.
I got a 5K whole live policy at 18 for 100 a year paid 17 years and cashed it out for about 3K so doubled my money and had coverage if I needed to pay for my funeral young so not totally against them just using them as an investment and getting unneeded insurance with it.

[Sam_2.0]

We do whole life. Because cancer runs in my family like our brown eyes, and you just never know what's going to happen down the road. That's the whole reason for insurance. I could be stuck with a dependent well into my retirement years - injured child, late in life child, grandchildren, etc. I could get underwritten at 25 for really good price. Not so much again at 50 yrs old.

It's also one of our strategies for helping the kids pay for college. We can take tax-free loans from the WL policy to help pay for their school and it's $$ that isn't reported on the FAFSA.

[HoneyBBQ]

Whole life policies, in general, are not a good idea. As Sam points out, there are exceptions, but whole life is usually a waste.

[ArchietheDragon]

Jan 12, 2016 10:48:29 GMT -5 Sam_2.0 said:

We do whole life. Because cancer runs in my family like our brown eyes, and you just never know what's going to happen down the road. That's the whole reason for insurance. I could be stuck with a dependent well into my retirement years - injured child, late in life child, grandchildren, etc. I could get underwritten at 25 for really good price. Not so much again at 50 yrs old.

It's also one of our strategies for helping the kids pay for college. We can take tax-free loans from the WL policy to help pay for their school and it's $$ that isn't reported on the FAFSA.

not great reasons, but reasons nonetheless.   

[Shooby]

  I buy term life.   At at least 2 to 3x or more of income.  Whole life or any other type of policy, NO>

[tloonya]

Jan 12, 2016 14:18:17 GMT -5 alwaysbeoptimizing said:

Jan 10, 2016 13:45:00 GMT -5 tloonya said:

The guy who is 19 now bought insurance that he is paying $54/mo for 20 years and then premium no more.$100K coverage but if he doesn't touch money until 60 - he will get $200K to widthraw no penalty no nothing. he can also get money after 7th year no penalties not taxes. If he wants to return money - just go ahead, no problems.

Another example $205 per month premium for 20 years and you get $500K by retirement age.

Wouldn't you want THAT?

According to my Phil Script, a monthly investment of $54.00 bearing an annualized return of 11% with gains compounded monthly could grow to $44,042.79 in 20 years!

Then, he invests that amound from age 39-60 (another 21 years)

According to my Phil Script, a lump sum investment of $44,042.79 bearing an annual return of 11% could grow to $355,086.69 in 20 years!

so, he could get twice as much by age 60 by just buying a broad market index at $54/month for the first 20 years and then leaving it invested until he turns 60

INSRANCE is the thing that you buy in case you wouldn't be living to invest all those money...
In term you are paying and dying without nothing.
With this one you are dying and leaving your family money.
Or using it yourself while NOT PAYING premium anymore.

[tloonya]

Jan 11, 2016 20:00:05 GMT -5 cronewitch said:

At 19 without children he needs enough assets to pay for his cremation or funeral. He doesn't need to leave a small fortune to his friends and family at is costing him $54 a month. When he has children he needs to support then he needs enough term insurance to see them grown, less what SS and a spouse can pay so a term policy of say a half million is good or even a quarter million. If he invested his $54 instead in a few years he might need it for a car repair and would have it where in insurance he would keep needing to pay to keep the policy. What 19 year old knows what his income will be every single month the next 40 years? Some unemployment and the policy is cancelled or used up paying for premiums from the cash value or he can borrow a little on it.
I got a 5K whole live policy at 18 for 100 a year paid 17 years and cashed it out for about 3K so doubled my money and had coverage if I needed to pay for my funeral young so not totally against them just using them as an investment and getting unneeded insurance with it.

He will stop paying at 39 and have money sat for himself and invest into something else but those money will grow somewhere...

[Deleted]

Jan 13, 2016 16:13:16 GMT -5 tloonya said:

Jan 12, 2016 14:18:17 GMT -5 alwaysbeoptimizing said:

According to my Phil Script, a monthly investment of $54.00 bearing an annualized return of 11% with gains compounded monthly could grow to $44,042.79 in 20 years!

Then, he invests that amound from age 39-60 (another 21 years)

According to my Phil Script, a lump sum investment of $44,042.79 bearing an annual return of 11% could grow to $355,086.69 in 20 years!

so, he could get twice as much by age 60 by just buying a broad market index at $54/month for the first 20 years and then leaving it invested until he turns 60

INSRANCE is the thing that you buy in case you wouldn't be living to invest all those money...
In term you are paying and dying without nothing.
With this one you are dying and leaving your family money.
Or using it yourself while NOT PAYING premium anymore.

You're not getting what people are trying to tell you.  You can get the insurance for way cheaper to cover the time when you don't have enough assets, invest the difference and come out ahead.  I have 400K of term insurance.  It's $356/year.  I just did a quick google search to get a ballpark rate on 400K of whole life and found it's around $3600/year for a 40 year old woman (age I was when I bought the term).   TEN TIMES as much!  So, I can put $30/month into a term policy in case I die and then invest the $270/month.

In 20 years my term policy is up, which is fine because I don't NEED the insurance anymore, but I've also been investing $270/month for 20 years.


According to my Phil Script, a monthly investment of $270.00 bearing an annualized return of 11% with gains compounded monthly could grow to $220,213.95 in 20 years! 

So, the day my term expires I still have 220K just in investing premium difference.  Now, I'm only 60 at this time, so lets assume I live to 80 and never invest another dime into that account.


According to my Phil Script, a lump sum investment of $220,000.00 bearing an annual return of 11% could grow to $1,773,708.54 in 20 years!

So, I threw away $7200 to cover the years when the kids were young when I would have been short in assets to get them launched and at 80 have close to 2 million instead of 400K.  Even if the returns are only half of Phil's 11% you're coming out way ahead of the whole life investment.

[tloonya]

First of all what kind of insurance and where did you find such a premium - 400K of term insurance. It's $356/year?
My husband's term is $122 for $200 coverage! Bought at about same age as you were.

And do you think there lots of people who are investing and as money smart as you all here?

How many people out there just sit pay chek to pay check having no idea about savings and
investing? So for the majority who is just like me - that kind of insurance is a way out.

[Deleted]

Jan 14, 2016 10:54:15 GMT -5 tloonya said:

First of all what kind of insurance and where did you find such a premium - 400K of term insurance. It's $356/year?
My husband's term is $122 for $200 coverage! Bought at about same age as you were.

It's term insurance.  It's freaking cheap.  Ex husband's policy is the one on top, mine is the 400K one below.  I was 41-42 when we got it, he was 36.  If your husband is paying $122/month for term he must have had health issues.

And do you think there lots of people who are investing and as money smart as you all here?

How many people out there just sit pay chek to pay check having no idea about savings and
investing? So for the majority who is just like me - that kind of insurance is a way out.

What's the difference if you send $250/month off to the insurance company or $250/month off to an investment account?  You still have to be disciplined enough to make the payment.  And guess what?  A LOT of whole life policies are cashed in early by these paycheck to paycheck people and never paid out. So, crappy investment and no guaranteed death benefit either.