Life insurance questions

Discussion in 'Finance, Investments, and Careers' started by Russ Smith, Oct 19, 2017.

  1. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    A family member has a policy that she's trying to decide whether to stay with or not, I'm not that familiar at all with Life insurance.

    She's apparently been paying $55 a month since 2005, the policy is set to expire in 2048 which apparently is at the age of 100 and is standard for this sort of policy.

    It says the current cash value is just over $2300 but if she were to cash out now and stop paying, the actual payout is just over $1700 so I guess there's fees and early termination. apparently she bought the policy from a family friend without really understanding it, it seems to be worth only 25K.

    1) isn't $660 a year awfully high for a 25K policy? Is that because of her age at the time she took out the policy, I think she was 57 at the time.

    2) is there any real reason to keep such a policy, she's already paid almost 8K and the payout is only 25K. She has 3 kids that will be able to help financially should she pass away and her husband is still alive so with the payoff being that small seems kind of pointless to me? If it was 500K yeah, keep paying but 25K at this much a year I just think makes no sense?

    Just trying to see if there's something not obvious that I'm missing that would make it advisable to keep paying on such a policy.
     
  2. 82CardsGrad

    82CardsGrad 7 x 70

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    Seems pointless to me RUSS.. given that her husband and kids appear to be financially sound. And yes, $660 a year for a $25k death benefit is EXTREMELY out of sync. But as you say, her age at the time she took out the policy (did she have any underlying health issues? Smoker? Excess alcohol?) was likely a big factor.
     
  3. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Thanks, that's my guess too it seems pointless. Healthwise at the time she signed up for this I suspect the only possible health risk was taking a statin for cholesterol but I'm not even sure she was on that when she took this out.

    I think she was being nice to a friend who was selling insurance and didn't really have any idea what she was doing. You can get 3 times that insurance for less through AARP for example.
     
  4. puckhead

    puckhead Waxing Gibbous Contributor

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    Some friend. :(
     
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  5. Superbone

    Superbone Phoenix native; Lifelong Suns Fan

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    Yes, she should get out of that policy immediately. That policy benefited her "friend" more than her. Does she even need life insurance? If she were to die, would anybody suffer financially as a result?
     
    Last edited: Oct 20, 2017
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  6. crisper57

    crisper57 Open the Roof!

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    Lots of variables that are probably different but I just signed up for a life insurance policy (or multiple policies, technically) that:

    1. Covers me for $500,000
    2. Covers my wife for $250,000
    3. Covers all children (current and future) for $10,000

    That came out to $104 per month. Based on my coverage vs what you describe, it seems she is paying a lot.
     
  7. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    Turns out the policy pays out 50K not 25 and despite our recommendations she give it up, she's decided to keep it so I guess not my decision.

    thanks for the feedback.
     
  8. az240zz

    az240zz Registered Contributor

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    Based on the premium it sounds like a no physical required policy or automatic issue. These cost more since no health exam or health history is taken..
     
  9. BigRedRage

    BigRedRage badass Contributor

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    It's probably not smart but I have no life insurance, just assets.

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  10. az240zz

    az240zz Registered Contributor

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    It isn't smart as your assets may have to be liquidated to pay for final expenses and estate costs. Cheap term life insurance takes care of that.
     
  11. Linderbee

    Linderbee Let's GO, CARDINALS! Contributor

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    You'd be surprised. My ex husband's dad made close to 6 figures when he passed in 1988, so they were pretty well off. No life insurance, and they lost everything. The emotional damage created from losing their home, horses, vehicles, etc was long-lasting.
     
  12. Russ Smith

    Russ Smith The Original Whizzinator Contributor

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    I don't have it yet either it's on my list to do.

    The thing is if you take care of your will and beneficiaries on things correctly, and have enough cash and funds, the paying for funeral costs part of it can be handled. But if you have debts and mortgages and other things that's where the life insurance makes a big difference.

    My mom had life insurance explicitly to pay for the costs of cremation and spreading her ashes at sea. There was enough there to cover all those costs and a bit more which we used on a memorial bench for her.

    I've always been really good at naming beneficiaries and when my mom died I found out she had been just as good at it and it makes a big difference as that stuff doesn't get delayed in probate. Her probate took nearly 2 years for other reasons,if she hadn't done a good job of declaring beneficiaries and hadn't had that small life insurance policy, we would have had to wait 2 years to get any money to pay for those things.

    From the research I've been doing if you have a mortgage and or kids you're putting through college(I have neither) then it can make a ton of sense to have life insurance that will help pay for those things in case something happens to you before they're paid off.
     
  13. Superbone

    Superbone Phoenix native; Lifelong Suns Fan

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    It totally depends on one's circumstances. Things like who would be impacted if you died? And how much your assets are worth.

    I no longer have a need for life insurance. I'm divorced and have two sons. One of them just graduated from college and the other one is already half way through. If I were to die, they are more than taken care of due to the worth of my assets.
     
  14. Jersey Girl

    Jersey Girl Stand down Contributor

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    Same here. And we just looked into getting some outside of work. Talked to a lot of people and decided that it wasn't worth it.

    Like Superbone said, it depends on your circumstances. Neither one of us is looking for some big fancy funeral. And, if you are able to make it on one income if you have to and you don't have a ton of bills, then, yeah, life insurance isn't really necessary.
     
  15. BigRedRage

    BigRedRage badass Contributor

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    My work has 300k insurance for $30 a month so I added that

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