Posted on 12/19/2001 4:38:46 AM PST by Phantom Lord
Alright, before the thread police go crazy, this was posted under Your Opinions. If the moderator finds it worth pulling, pull it.
I know absolutly nothing about life insurance but my wife is demanding that we get some. So I have some questions that hopefully FReepers can answer for me and help point me in the right direction.
Here are the basics. I am 28, my wife is 29. No health problems or medical conditions. We have no children at this time but will probably have some in the near or not so distant future. From what I gather, the reason my wife wants us to get insurance is incase one of us kicks the bucket (or she kills me) that the house payment and other debts will not be a financial burden and basic financial security will not be an issue.
What i understand is there is 3 types of life insurance. 1) Term 2) Whole Life 3) Universal Whole Life
I have heard people such as Clark Howard and others advise against Universal Whole Life for reasons that escape me at the moment other than that the agents like to push it because they make the biggest commissions on it compared to the others.
What are the advantages/disadvantages to the above listed policy types and how does one determine which is best suited for them? Coverage of $250,000 for each of us is what is being discussed.
Again, I am an idiot and know nothing about this stuff. I am sure there is other information needed and if asked I will do my best to provide the answers. And hopefully some insurance people are here on FR and can give some advice. Especially honest advice since they don't have any financial interest in my decision.
Thanks.
Always a bad sign. Are you and the wife getting along these days?
If not you may want to re-think getting ANY life insurance and start searching the house for a book entitled "1,001 ways to kill your husband, collect the insurance and get away with it."
How do I get my cholesteral level down?
If you seek life insurance then purchase term life insurance. If you seek investments then purchase investments. Invest the difference in the cost of the premiums between whole life and term insurance. Live a life based on improvement, develop a good work ethic, build your character while building your net worth, and stop purchasing term life insurance when you find it is no longer needed.
Insurance, n. An ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table. - Ambrose Bierce, The Devil's Dictionary
You don't know me do you. LOL
I think Term coverage would make a lot of sense in your situation, Phantom. The rates for Term coverage have dropped dramatically in the last few years, and you'll be suprised at the amount of coverage you can afford.
I'd suggest you consider a 10 Year or 20 Year Term policy. Generally, you'll find the rates are guaranteed (make sure they are in advance).
The amount in question, $250,000, may or may not be appropriate. Absent children in the household, it's probably enough now, but you may wish to purchase the amount of coverage you'll need in a few years while you're at it - your net rate will be lower, and you'll be guaranteeing your insurability (in case you develop a serious medical condition).
I'd start with the agent that writes your homeowners insurance now, if he or she is an independent agent. They will usually represent several insurers and can offer you a variety of coverages and rates. Most will be less likely to try to talk you into a more expensive policy.
I should mention here that Universal Life can be an attractive alternative - most UL policies are paying 5%-6% interest on cash values, and the interest earned is tax-deferred. They won't beat the equity markets, but they are very secure. The downside, of course, is that they require a higher premium. If you have a good investment plan already, stick with the Term insurance.
Anyway, I'd start there, and plan on reviewing your situation with your agent every year or two. Also, if you haven't done so already, make arrangements with an attorney to write wills for you and your spouse. You might as well get your end-of-life planning out of the way all at once.
Good Luck!
Tony
If you have few assets and light to moderate 'need' for insurance (no kids, healthy spouse able to survive financially after a death) term is again a good option.
If you have moderate or sizable assets and/or income, there may be use for whole life or a variable product.
If you own or are partners in a business, there might be need for variable products.
Typically the 'do it yourself' approach fails most of the time. We tend to be somewhat less than subjective on our abilties to save and our own invincibility. Also, few consumers are aware of the side features of life insurance policies, like viatical agreements, premium disability waivers, and asset protection.
I can answer some specifics privately, but will ultimately probably refer you to a licensed agent in your area.
Sometimes this is true. Most people don't discipline themselves to invest the difference.
Some companies have variable products that are VERY competitive with the term/invest yourself route, in that the minimum premium is only slightly above the term price (some even less) and then offer mutual funds investments that are shielded from taxes. Some of these policies will allow significant amounts of premium to be droped in and will adjust the face amount accordingly. This allows a person to have significant funds that are grwoing at market rates but are not subject to income tax! You access these funds via policy loan at 1% or so, and pay back at your leisure, if at all. IRAs and 401k's don't do that.
An extract will interest you, Insurance Co's. It is entitled "THE PRESENT CRISIS IN STATISTICAL THEORY" "The occasion was the rise of Life Insurance at the end of the 18th century.Superficially, and especially in the same milieu, there was a close similarity between the aims of the promoters of insurance corporations and those of the promoters of Royal Lotteries which accomodated the declining fortunes of the French Monarchs to the rapacity of their mistresses and to popular resentment against the salt tax. Still, the intentions of the promoters should not blind us to a two fold distinction. The lottery is a stochastic system in the classical sense and it's promoters operated it in accordance with the Forward Look, that is to say they stated a rule in advance and stuck to it. There is no prima facie case for the contention that life insurance is like a lottery in either sense.
In what (if any) sense we can rightly speak of life and death as a game of chance is a highly debatable issue. Even if we concede the propriety of relinquishing to the Divine Dealer the responsibility for operating a truly randomizing procedure in the act of shuffling the pack of Doom, any relevance of the classical theory to mortality experience presumes both the unchanging constitution of the pack itself and an unswerving adherence of the player to a betting rule stated in advance. In the context of Laplace, it was perhaps pardonable to dismiss the first of these postulates, because people were not as yet acclimatized to the changing card pack of a declining death rate; but the practice of the first successful life insurance agencies, notably the Equitable, was at no time consistent with adherence to a rule stated in advance and enforced regardless of the fortunes of the investors.
Dr Price, the first actuary of the Equitable, was indeed the first writer on probability to make a decisive breakaway from the classical tradition in notes he appended to a paper communicated in 1763 to the Royal Society after the death of its author. The author himself was Thomas Bayes, like Price a Unitarian minister in the Priestley circle. There is still room for argument about the intentions of a theorem stated in his posthumous memoir, and more especially with respect to a scholium posthumously found amongst the authors notes. Whatever his intentions may have been, the commentary of Price advances a novel idea which Laplace elborated as the doctrine subsequently called inverse probability, i.e. that a calculus of probability entitles us to assign a numerical variable to the credibility of our judgement about antecedent events on the basis of past and present observations."
1956! I read it about 1963.Regrettably my grasp of probability theory was inadequate - it seems to me that Hogben put his finger on the issue and we are now going to see the unravelling of the industry which Mr Price set up. There is a delightful symmetry about the whole thing.That Equitable should be the first to be caught out in their swindling. For those in the US the Equitable Ins Co is in deep doo doo most people losing 27% of their investment in last 6 months with more dire news ahead. Anybody who puts money into insurance is foolish. Full of snake oil salesmen, liars and cheats.
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