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Can you help me? Life Insurance


40Rocket
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Looking to get Life Insurance for me +wife.I have a good Insurance company in USAA.The lady I talked to sounded like A used car salesman.Could somebody explain the difference to me. Term life Insurance and what she called permanet Insurance.

Thanks in advance.

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She probably referred to whole life as permanent insurance. The rates will stay the same and will not increase such as term insurance will. Term insurance will eventually get very expensive if you don't replace it with a different one down the road. People that are unable to purchase life insurance down the road would have a big decision to make as to when they would have to dis-continue the term policy for economical whereas with a whole life policy, you are locked in on the premium cost, but mostly the company is also locked in and can't drop you or raise your premium just because they feel like it or if your medical condition changes.

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You only want Term Insurance. It is just insurance to protect your life. Anything else is a complete scam. Whole life, universal life, permanent insurance, or whatever name they use now, is a collasel waste of money. It is essentially you paying for insurance, PLUS an investment vehicle the insurance company keeps when you die! :D I am shocked that its even legal, but fools continue to fall for it. Term insurance is good but shop the rates. And dont even consider any other type of insurance NO MATTER what the rep tells you. The only type of insurance that is worth the money is Term. Period.

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She probably referred to whole life as permanent insurance. The rates will stay the same and will not increase such as term insurance will. Term insurance will eventually get very expensive if you don't replace it with a different one down the road. People that are unable to purchase life insurance down the road would have a big decision to make as to when they would have to dis-continue the term policy for economical whereas with a whole life policy, you are locked in on the premium cost, but mostly the company is also locked in and can't drop you or raise your premium just because they feel like it or if your medical condition changes.

 

This is perhaps the absolute worst advice I have ever read here at the huddle. Seriously, anything but term insurance is a scam and a hoax. I dont care what load of bunk the sales rep tells you.

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Estate planning.

 

Would you please elaborate on that so that we can see how relevant such a concern is to most people here?

 

Let me say this in a slightly less smart-alecky way: I don't think many people will have to worry about using insurance for estate planning.

 

In general, I think most people think of life-insurance as a way to make sure their families can eat if they would happen to die (i.e. to replace the lost income of the deceased not bringing home a paycheck or to make sure that a child-care provider can be paid for if a stay-at-home parent dies). Once you get past your retirement age (and/or have "independents" instead of "dependents") your need to worry about replacing that lost income is greatly reduced. (Funeral expenses and the like can be self-insured.)

 

And if somebody is worried about how to use life-insurance to limit estate tax liabilities, they aren't likely to be seeking advice here.

Edited by wiegie
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I recommend term and take the difference and invest it.

 

 

 

That sounds eerily similar to the Primerica motto!!

 

Although I do agree term is definitely the best way to go. Set it up until you are about 60 or so and then let it expire. At that age you should have enough money invested that you can easily cover funeral expenses. At that point in life what else do you need?

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Term Life Insurance or Permanent Life Insurance: Which One Meets Your Needs?

The term versus permanent life insurance debate has gone on for years, as if it were possible to say that one type of coverage is all good, the other all bad. Sorry, it's just not that simple.

 

Term insurance is designed to help people purchase the protection they need when they can't afford to purchase all permanent insurance or when they only need coverage for a specific period of time. Term life insurance has a guaranteed death benefit but no cash value and the premiums will increase at pre-determined intervals such as 1 year, 5 years, 10 years and 20 years.

 

It is also very often the product of choice when protection needs may be high for a period of time, then drop back, such as when your family is growing. Term insurance can also be an effective way to supplement permanent insurance during high-need years, such as when family and other financial responsibilities are outpacing income.

 

In these situations, term coverage allows you to obtain crucial death benefit protection without breaking your budget. Also, if the coverage is convertible (the coverage can be "converted" to a comparable cash value policy, without the need to provide evidence of insurability), you can get the coverage you need today — with the ability to obtain permanent coverage in the future. In this respect, term insurance meets a valuable need.

 

The True Cost of Term Insurance

However, term insurance has its drawbacks. It certainly isn't right for all people or under all circumstances. Among its weaknesses, be aware of the following:

 

You do have to "die to win." As unpleasant as that sounds, it's true. Term life insurance provides a death benefit only, for a specific period of time. When the term coverage expires, so does your protection. Also, if you stop paying premiums, the coverage ends. Period.

Let's say that you own $500,000 of term insurance. You've kept the coverage in force for ten years, and the policy expires at midnight on December 31. If you die at 11:59 on New Year's Eve, your beneficiary receives the full $500,000 in death benefit proceeds. However, if you die at 12:01 on January 1, your beneficiary receives nothing under the policy, since the contract has expired.

Purchasing term insurance is often compared to renting a house. When you rent, you get the full and immediate use of the house and all that goes with it, but only for as long as you continue paying rent. As soon as your lease expires, you must leave. Even if you rented the house for 30 years, you have no "equity" or value that belongs to you.

There is the very real danger of becoming uninsurable when the term coverage expires. While many term policies are convertible to permanent coverage, others may not be. Most of all, even if the coverage is convertible, there are time limits. If the policy is allowed to expire, you may be required to reapply. If you are found to be uninsurable at that time, you will be without coverage.

Since premiums increase at each renewal, the long-term cost of term can be burdensome. Many people buy term coverage when they're in their 20s because it seems more affordable when compared to a cash value life insurance policy with the same death benefit amount. By the time they're in their 40s, the coverage seems a bit pricey, as the rate goes up. In their 50s, the cost has generally outstripped the cost of permanent coverage. Finally, in their 60s, if not sooner, they drop the policy — not because they no longer need the protection, but because they usually can't afford it. Meanwhile, the person who may have paid more for that permanent policy in his or her 20s may still be paying the same premium. That's why the term policy's conversion privilege is so important. This valuable feature is usually available in the first few years of the policy, and allows you to convert to permanent insurance without submitting evidence of insurability. Converting to a permanent policy lets you "lock in" a fixed and level premium, and your coverage can never be canceled provided premiums are paid.

The Value of Permanent Life Insurance

Cash value life insurance is often the best long-term solution for many people. The reasons:

 

Cash value life insurance provides life-long insurance protection, provided premiums are paid. With few exceptions, once you have been approved for the coverage, your policy cannot be canceled by the carrier. Regardless of your health, the insurance will remain in force.

Despite higher initial premiums, cash value life insurance can actually be less expensive than term in the long run. Most permanent policies are eligible for dividends, which are not guaranteed, if and when they are declared by the insurance company. Many companies offer the option to apply current and accumulated dividend values towards payment of all or part of the premiums. If dividend values are sufficient, out-of-pocket premium payments may end or be reduced after several years, yet coverage can continue for life. So while premiums must be paid under both the permanent and term insurance plans, long-term out-of-pocket cost of permanent life insurance may be lower compared to the total cost for a term policy.

It can eliminate the problem of future insurability. Cash value life insurance does not expire after a certain period of time. Also, some policies contain guaranteed purchase options, which allow you to buy additional coverage at specified times, regardless of your health.

It builds cash value. This amount — part of which is guaranteed under many policies — can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children's education or to provide income for your retirement. (Note: Borrowing cash value from your policy requires the payment of loan interest and will affect your total policy values.) Plus, if you decide to stop paying premiums and surrender your policy, the guaranteed policy values are yours.

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Would you please elaborate on that so that we can see how relevant such a concern is to most people here?

 

Let me say this in a slightly less smart-alecky way: I don't think many people will have to worry about using insurance for estate planning.

 

In general, I think most people think of life-insurance as a way to make sure their families can eat if they would happen to die (i.e. to replace the lost income of the deceased not bringing home a paycheck or to make sure that a child-care provider can be paid for if a stay-at-home parent dies). Once you get past your retirement age (and/or have "independents" instead of "dependents") your need to worry about replacing that lost income is greatly reduced. (Funeral expenses and the like can be self-insured.)

 

And if somebody is worried about how to use life-insurance to limit estate tax liabilities, they aren't likely to be seeking advice here.

 

 

 

You asked why somebody would need insurance when they're 80 and I gave you a reason. You can consult somebody for estate planning to see what's right for you. Getting advice in a FF forum may be right for some, but telling people that there's no use for whole life to anybody here is just plain wrong and definetly stupid.

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I used to sell life insurance about 4 years back. Commissions on term were low compared to whole life(and all the other names used). If your under 40 term is the way to go and you can lock in on a 25 year if need be. The thing to remember about life insurance is it really is just income protection to protect the lifestyle of your family. Usually you like to have a policy worth 7-10 your annual income. What I recommend is find out what a policy would cost for term and whole life then invest the difference into a mutual find(IRA).

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You asked why somebody would need insurance when they're 80 and I gave you a reason. You can consult somebody for estate planning to see what's right for you. Getting advice in a FF forum may be right for some, but telling people that there's no use for whole life to anybody here is just plain wrong and definetly stupid.

 

Ah-hem... Perhaps I can be of some assistance. :D

 

Life insurance is, indeed, and common estate planning tool. Virtually all my clients have some form of life insurance that is intended to be used by the next generation to pay for estate tax liability, provide a source of cash to buy out old business partners, fund projects, or just transfer wealth to the next generation in a tax-efficient manner.

 

No, a whole life policy doesn't make sense for most people. But despite Spain's overly-simplistic comments, whole life policies are very commonly used. However, his overall point has some truth: a middle class american probably doesn't need whole life. What they need is a term policy that basically protects your family in the event the primary wage earner gets whacked while the spouse and kids are still dependent on him (or her). Because after your kids are grown and the house is paid for, you are basically then free to die without making your family homeless. And that's what term insurance is designed to protect against (i.e., you want to select a term that covers the period of time your family would be financially vulnerable if you died).

 

If you are, or foresee becoming, a wealthy person with a substantial estate then I can provide you more info on how whole life can be used effectively. Otherwise, just forget about whole life for now.

Edited by yo mama
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Mike,

 

Can you provide the source of that article?

 

Its obviously the marketing boilerplate from some insurance company that peddles that crap called Whole Life. I have NEVER seen a situation where whole life/universal life/permanent life were a good deal for anyone except the insurance company and its sales reps who get HUGH commissions for selling that garbage.

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I have NEVER seen a situation where whole life/universal life/permanent life were a good deal for anyone except the insurance company and its sales reps who get HUGH commissions for selling that garbage.

 

Maybe that's because you don't hang out with multi-millionaires with family-run businesses. Whole life is a useful tool for folks in that situation. And there are several Huddlers in that situtaion, so you actually do know some folks for whom whole life makes sense. But it's certainly not for the average bear, that's for sure.

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So, can we all basically agree that unless 40Rocket has something unusual going on that the following was pretty sage advice?:

 

Unless you have something really interesting going on in your life, you should probably only get term life. You can get long-term term (20 even 30 years) with fixed payments.

 

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Maybe that's because you don't hang out with multi-millionaires with family-run businesses. Whole life is a useful tool for folks in that situation. And there are several Huddlers in that situtaion, so you actually do know some folks for whom whole life makes sense. But it's certainly not for the average bear, that's for sure.

 

You may be right. But I HIGHLY doubt that Whole Life is good for anybody under any circumstances and I am just shocked that people are stupid enough to fall for that scam...

 

Edit: I am by no means a multi-millionaire, but I have had every single insurance rep that I have ever spoken with about life insurance try to talk me into some incarnation of whole life/universal life/permanent life. The reason being is that their commissions are infinitely higher if they can sucker someone into actually "investing" in that product. And make no mistake, they position it as an investment. It is the biggest scam since Ponzi and they always use the same sort of crappy arguements that I have seen in this thread. I understand that the first $700k of your estate is tax free and folks with assets greater than that are attempting to get around estate taxes. But at what friggin costs to go through a dam whole life policy? If you are advising people to utilize that vehicle I would be very very careful and make sure my malpractice was up to date.

Edited by spain
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You asked why somebody would need insurance when they're 80 and I gave you a reason. You can consult somebody for estate planning to see what's right for you. Getting advice in a FF forum may be right for some, but telling people that there's no use for whole life to anybody here is just plain wrong and definetly stupid.

 

Okay, saying that there is NO use for whole life is just plain wrong. And I'd use misinformed as opposed to stupid.

 

However, saying there are VERY FEW uses for whole life for the average person is pretty much correct.

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