Thoughts on life insurance?

Discussion in 'Homesteading Questions' started by Jan in CO, Aug 20, 2004.

  1. Jan in CO

    Jan in CO Well-Known Member Supporter

    Messages:
    5,938
    Joined:
    May 10, 2002
    Just wondering how many older people you know who have life insurance? At least in any substantial amounts. My parents have very little, probably enough to cover limited final costs and that's it. My siblings think it's terrible, that our father hasn't adequately provided for our mother, etc. From the older folks I know, in their 80's, very few have large policies, as they got them when funeral costs were about $1000 or so. Now, of course, that doesn't get you much. I know my father carried more when we were younger, but has let those policies lapse now, and hasn't a prayer of getting more life insurance now, even if he wanted it. Jan in Co
     
  2. SteveD(TX)

    SteveD(TX) Well-Known Member

    Messages:
    5,373
    Joined:
    May 14, 2002
    I will probably drop my life insurance in about 3 years, when my daughter finishes college. I had $300K at one time, now it's half that. My wife will be taken care of when I die; so will my kids. But through real estate investments and other assets, not insurance. When you get older, insurance gets so expensive that it's hardly worth it, unless there is absolutely no source of decent income or inheritance for your wife or kids. Many older folks have none, since most people buy life insurance to take care of younger children, pay off the mortgage, etc.
     

  3. countrygrrrl

    countrygrrrl PITA

    Messages:
    1,265
    Joined:
    Aug 4, 2003
    Location:
    Zone Unknown
    I think life insurance is good if you have young children.

    I also think it's useful for paying funeral expenses and sometimes even medical and other bills associated with end of life --- I know my sister and I incurred a huge amount of debt caring for my dad the last six months of his life. We had no idea of his life insurance, til we got checks after his death. It was enough to completely wipe out the debt I'd incurred (which ran in the thousands :no: ) and to help my sister alleviate the debt she'd incurred as a result of caring for him.

    So I think it depends.

    I'm actually planning on getting life insurance here in a couple of years, specifically to pay for funeral expenses and whatever other costs might be incurred, should I up and get deathly ill on everyone. But it won't be enough to make anyone rich --- just enough to pay expenses.

    I'm a big enough PITA in life --- I really don't want to be one in death, too. :D
     
  4. Ana Bluebird

    Ana Bluebird Well-Known Member Supporter

    Messages:
    1,898
    Joined:
    Dec 8, 2002
    Location:
    MO
    I know one couple that have no children but are insurance lovers. They have three life insurance policies on each of them, long-term-care insurance, plus great health insurance, plus CD's, and investments. They really want to be VERY secure. But my folks only had burial insurance---not enough to fully cover the costs now-a-days, but it helped. My husband and I are in our late 50's and we never have had death insurance (oh, life insurance)---don't believe in it, but my folks did pay for me a little burial insurance, but I really would like to cheat the funeral dealers out of any money getting rid of my body. I really do think they've gouged berieved people way too much over the years. I'm thrilled to see Costco is going to sell cut-rate coffins---way to go!
     
  5. the best insurance you can possibly have is assets. cash and real estate. If you spend money on insurance it is money you can't leave your heirs. Also consider that a lot of insurance companies are insolvent and can't pay their claims, could fold before you cash in. Life insurance is one of the worst bets you can make as it is basicly betting on your death. If the house is paid off and your retirements are in order what would you possibly need it for? As to worrying about what you will inherit remember an estate has one function to benefit the estate holder and alow them to spend the rest of their life in comfort not make rich heirs. the heirs should better spend their time aquiring their own wealth.
     
  6. agmantoo

    agmantoo agmantoo Supporter

    Messages:
    10,854
    Joined:
    May 22, 2003
    Location:
    Zone 7
    A wage earner needs disability insurance and married people with dependant children need term life insurance. For retirement and passed the child rearing state, one needs to have provided by investments and savings. Otherwise you are providing for the insurance company's well being!
     
  7. Jena

    Jena Well-Known Member

    Messages:
    2,489
    Joined:
    Aug 13, 2003
    Generally, people in their 80's CAN'T get life insurance and many policies will not re-new once you reach that age. It is not always a matter of "letting them lapse" as there may have been no choice in that matter.

    A whole life policy will continue, but usually by the time someone is 80, they have taken the value of the policy as an anuity.

    If your parents are that old, I would assume they no longer work. Whatever one of them has, they both have, so if one dies, the other should not really have a decrease in income.

    I carry $500K. When my kids finish college, I will cut it in half. When pay-off the farm (HA!) or sell-out, I will end the policy. I plan to pay for my own funeral expenses before I need them and it's all done.

    I feel really sorry for the folks who feel they should carry life insurance in order to provide money to heirs. If they want money, let them take a policy out and pay for it.

    Jena
     
  8. countrygrrrl

    countrygrrrl PITA

    Messages:
    1,265
    Joined:
    Aug 4, 2003
    Location:
    Zone Unknown
    Unfortunately, with medical costs what they are, it is no longer unusual for people to go through all their assets in the final months of their life, and then some.

    Furthermore, if there is an estate, it's not unusual for money to get tied up in that estate and not be released for the purposes of purchasing items for basic care.

    Many of the expenses my sister and I incurred on our dad's behalf were not covered by insurance, offered by the medical facility --- nor would his *estate* such that it was) pay for them. These expenses included a million very, very basic things like (sad to say) diapers, slippers and socks suitable for someone with bandaged feet, nutritional drinks and even straws. !!! The diapers and nutritional drinks alone ran us into the thousands of dollars.

    This is not such an unusual scenario. We did not expect to be compensated for it, either, although it was quite a relief when we were.

    However, I do not plan to allow others to carry the burden of similar expenses for me, should I end up profoundly debilitated and on a slow slide to death, like my dad. My own holdings and medical insurance would carry the burden for a while --- but once you get past a couple of months, you're looking at a huge amount of money, even with medical insurance and assets. !

    I don;t intend to burden others with that. And I am grateful to my father that he had the foresight to see we might be burdened in such a way.
     
  9. Shrek

    Shrek Singletree Moderator Staff Member

    Messages:
    11,104
    Joined:
    Apr 30, 2002
    Location:
    North Alabama
    life insurance needs to only be enough to cover the deceased persons final expense and up to 2 years of their salary to give their family a suitable time to adjust to life with out them if the person is pre retirement. With elderly people perhaps enough for 10 years pension would be logical.
     
  10. caroline00

    caroline00 Well-Known Member

    Messages:
    4,473
    Joined:
    Nov 10, 2002
    in a way, he did provide for her. He had at least 3 children, who probobly are adults who can help thier mother out in her last years, even if it takes as much sacrifice as she gave in your first 20 years.
     
  11. BigRyan

    BigRyan New Member

    Messages:
    3
    Joined:
    Aug 21, 2004
    Location:
    Oklahoma
    Wow! Insurance companies love people like you all who pay premiums when they're least likely to die and then lapse or decrease the policies when they get older and are more likely to die.

    I've lurked on this board for quite some time but never felt compelled to post a reply until now.

    Agmantoo, good job on realizing the need to protect your greatest asset, your ability to earn an income, with disability insurance. However, Life Insurance, if done correctly, can be one of the best investments you can make for your family and a fairly good savings vehicle.

    SteveD, life insurance would help your family keep the assets that you've worked so hard for vs. letting Uncle Sam get a huge portion through the Death, I mean Estate, Tax. Historically many farms and businesses have gone under due to the families inability to pay the Death Taxes owed on the estate. In fact, you should consider it Life Insurance but Asset Insurance. Unfortunately, there is a long list of people who want you're money after you die (Internal Revenue Service who screwed you, the Hospital that killed you, the Assisted Living facility that abused you, the Funeral Home that stuffed you, creditors, etc). Where else can your family get a great big tax free check to pay all of these financial obligations?

    Unregistered, spending money on Life Insurance allows you to give more money, tax free, to your family. Life Insurance companies don't go insolvent and not pay life claims. If an Insurance company goes under, another company always buys their block of business and potential claims. The Insurance Industry couldn't survive if policy holders had any doubt that their life claims would be paid in the event of death. Life Insurance is one of the best investments you can make for your family if you do it right. Insurance companies count on the majority of policy holders lapsing their policies before they die.

    Jena, of course it's difficult to purchase Life Insurance when you're in your eighties. Insurance companies make their money off the float, the time value of investing your premiums. When you're in your eighties there isn't much of a float left. Planning early and buying a certain amount of Whole Life, whose premiums are fixed and level to age 100, when you're young and the rates more affordable is the key.

    Everyone else, when's the last time you heard a someone say "Uncle John had too much life insurance. I don't know what we're going to do with all that money"? With the rising cost of Medical care and assited living facilities you can absolutely drain any assets and retirement that your spouse or family may be relying on when you're gone. The only sure way to protect those assets is to insure them with a Life Insurance policy.

    Buy cheap term insurance for the short term obligations (college, mortgage, retirement hedge) but have a certain amount that's permanant, a good Whole Life policy. All this being said, you have to be smart about your purchase and the company you choose.
     
  12. BooBoo

    BooBoo Member

    Messages:
    7
    Joined:
    May 18, 2003
    Location:
    idaho
    I work for a funeral Home in Rural Idaho. There are inexpensive policies tat are designed especially for final expences. They are called Pre-need policies. Contact the funeral home where you or your family member may want there servies to go through. If you have not yet pre arranged your services it may be a good idea for you to do so. Age does not matter, In fact the younger you are the easier to pay for it. We have had people come in who were in their late 80's early 90's and get their serives paid for. A great company to work with is Great Western insurance. they are out of Utah. To summarize how it works, you sekect the serivices you want for your self or family member ( pre arrange) then you can either pay for it up front or have a payment plan. If you do a payment plan and you die for some reason after the plan is in effect after 2 years then the pre arranged services are covered. (there are some strings attached, and since I am not a sales person I can not say for sure exactly hoow it works, but this is about the best explaination I can give). It is a really great way to pay for a funeral or cremation with out much burden. Also, if your loved one is going to a nursing home or is on assistance and the govt. wants their assets when they pass on, make the policy irrevocable assignment to the funeral home and then the funds set aside for that funeral and other final expenses will be covered. I think that a headstone and other related expenses can also be worked into the pre nee policy. It is ilegal for a funeral home to keep the funds in their own bank account. The funds must go into some sort of trust so as not to pay for their operating expenses. That is why they go thru insurance companies such as Great Western. Also as the years go by and you do not die... the policy value growsa at a certain rate. So as the cost of goods and serivice increase so does your ppolicy. The funeral goods and services are guaranteed so the charges can not exceed the percentage of growth of the policy. So the only thing that may grow that a family member may be left with are cash advance items such as headstone, death certificates, grave spaces ect. This is because the funeral home has no control over how much those prices may inflate in time.
    Reagrdless, pre arranging a funeral is probably the best thing someone could do for themselves or thier family. It gives everyone guidelines as to what your exact final wishes are and that at least the majority of the final expenses are covered. If anyone has questions contact your funeral director of the Funeral home you wish to select to do your services and they will lead you in the right direction. 99% of the Funeral directors out there are ethical and fair. it is the 1% that get the news time to make them all look bad.
     
  13. BooBoo

    BooBoo Member

    Messages:
    7
    Joined:
    May 18, 2003
    Location:
    idaho

    also, if you set up a trust an dmake your family members the beneficiaries of that trust then no one can touch you hard earned assets... there is a time frame though in some states. I believe here it is 2 years before death. I think a trust must be inforce for at least 2 years before you die in order for no one but the beneficiaries to have access to it. Check with an attourney or someone who is more versed inthis area then I.
     
  14. RAC

    RAC Guest

    I agree with Caroline00--it is up to the children to look after their parents when they need it, even if it means sucking up some of those expenses. However, I do think that if a person wants a fancy funeral, they should provide for it through a dedicated insurance policy or specify an amount in the will. Imho, fancy funerals are a total waste of money, especially when the survivors (often young children) NEED that money.

    As to life insurance, I came across an interesting book at the library called Beyond the Grave, by Gerald and Jeffrey Condon (both lawyers) and one thing it talks about is using life insurance proceeds to pay estate taxes (so that you didn't have to sell what you just inherited), and also as a way to "even up" inheritances between children.

    I did not agree with all of their advice--one case they mention involved 3 kids, one went to Stanford, one to the local college, and the last didn't go. Parents leave everything equally, and the hubby of the one who didn't go to college calculated (while the will was being read, probably) how much the Stanford education cost, and tried to get the Stanford grad to part with some of his share to "even things up". He refused, and now the siblings don't speak to each other--supposedly an insurance policy might have prevented the estrangement. But what about the one who went to Stanford? It's not easy going through med school, and I'm sure he probably answered diagnosis questions, etc. for his family when needed. There was nothing in the story to indicate that the parents were playing favorites. I think most parents would do the same thing if all the children had shown equal promise....

    I honestly do not think you can do any better than leave equal amounts to all children, unless you are leaving more to much younger children (many people these days are having essentially two families, with children 10 or more years apart) to pay for college, for example, if you paid to send the older children through--keep to your plan. You have to adjust somewhat for inflation. But you can't adjust for the fact that the younger children will not have had the opportunity to know their parents in THEIR younger days--they may only have memories of when they were very ill, for example. You can't compensate for high or low interest rates, cheap beach property, etc.

    Sorry to get 'way off topic. I recommend the book because it does cover interesting situations which may exist in your family, like trying to find a trustworthy executor, and how sad it is when you leave grandkids money, bypassing the kids who (who are usually left in charge of it) resent it and spend it anyway....

    It also has a serious discussion of why you should use insurance as an estate planning tool. Your library may have it.

    If you planned things right, by 80 you should essentially be self-insured, because you shouldn't have any debt.
     
  15. Jena

    Jena Well-Known Member

    Messages:
    2,489
    Joined:
    Aug 13, 2003
    I would hope anyone who has any type of substantial assets will not go buy life insurance thinking they just allowed their family to keep it! Pay a lawyer instead and do some estate planning so there aren't any estate taxes to worry about!

    I knew a guy who was a loser. He was always hitting grandma up for cash. Grandma was wealthy and he knew she also had a nice life policy. Grandma finally died and he was salivating over the thought of that big check.

    Grandma had a lawyer and a will. When it was all said and done, this guys siblings got a check...he got an itemized statement of all the money he had "borrowed" over the years, plus about $1000 (the balance left to make it all even). He was floored.

    I think that was a very wise granny!!!

    My mom is the beneficiary to my life policy so that she can distribute it as needed to my kids. They range from 11-20 and obviously have different needs. I have told her to pay for care, pay for college, reimburse those for college who have already gone (pay off student loans), then divide the rest (if there's any left). If some of them don't go to college, they get less, but then that's an extra incentive to go to school (something I really want them to do). Of course there are always things that can happen that I can't foresee. What if my little one is injured in the crash that kills me and needs special care??? Stuff like that. I feel letting mom dictate things gives more flexibility to meet needs.

    My husband is not the father of my kids, or I would leave it to him.

    Jena
     
  16. countrygrrrl

    countrygrrrl PITA

    Messages:
    1,265
    Joined:
    Aug 4, 2003
    Location:
    Zone Unknown
    Exactly. No one can anticipate what will happen. That money in your estate that you assume will pay for your final costs very well might not --- in fact, it likely won't.

    This isn't about leaving an estate. It's about ensuring you don't leave those who assisted you the most in your final weeks out in the cold and holding the bag.
     
  17. RAC

    RAC Guest

    "This isn't about leaving an estate. It's about ensuring you don't leave those who assisted you the most in your final weeks out in the cold and holding the bag."

    Do parents owe the children money for doing what is right and proper now? How sad. If so, then children owe them back for 20+ years of diapers, clothes, babysitting, ferrying around to this and that, plus interest over all those years.

    As for "holding the bag", if there is no estate, the debts end there, unless you personally incurred debt in your name. If the parent has no assets, that is where the state comes in, and you can get guardianship/tax deductions/etc. If there is more than one sibling, they should share in the costs, or document everything and try taking them to court (some parents avoid this by paying a wage to the child actively looking after them, or leaving them more money, but often the other child hires a lawyer to fight it).
     
  18. countrygrrrl

    countrygrrrl PITA

    Messages:
    1,265
    Joined:
    Aug 4, 2003
    Location:
    Zone Unknown
    No, they don't. However, I know I was extremely grateful to receive something for the thousands of dollars of debt I incurred --- and my sister incurred even more. For the simplest and most basic things.

    It is your choice to say *too bad* about any debt your final caretakers may incur. It's my choice, however, to say I've dealt with insurance companies when it comes to catastrophic illness at the end of life --- I've dealt with medical facilities when it comes to catastrophic illness at the end of life --- I shared the responsibility of care WITHOUT ANY EXPECTATION OF RECOMPENSE ---- but when it turned out I was able to pay those debts, I was very grateful.

    And I fully plan to return the favor.

    WHICH IS EXACTLY WHAT HAPPENED. You might be very surprised to learn exactly what your so-called good insurance or those medical facilities will not and do not pay for.

    It's also your choice to refuse to buy it yourself. We chose not to let our father sit around b*tt naked in his own sh*t, however. Once again, YMMV. :)

    Sounds real good on paper. Even with assets, however, which my father DID have --- you would be very surprised to discover what the estate will and will not pay for, if there is a *neutral* party holding it. We certainly were. :)

    Which is exactly what my sister and I did, with no expectation of help from the other siblings (which we did not receive).

    :no: You have no clue, do you?

    This is sad. Been there --- chose not to go to court, for reasons including the fact that THERE WAS NOT TIME FOR COURT --- had other siblings and the bank in charge of my father's estate refuse to pay my sister (who took an unpaid leave of absence from her job to be primary caretaker --- and did so with no compensation and a refusal to compensate after the fact).

    :no: Had we used *paid* caretakers, the cost would have run around $85,000.
     
  19. SteveD(TX)

    SteveD(TX) Well-Known Member

    Messages:
    5,373
    Joined:
    May 14, 2002
    Right now, the estate tax threshold is $1.5 million. This goes to $2 million in 2006. I really don't have to worry about that, but thanks for the advice. Doubt if many homesteaders are faced with that dilemna. The rest of your paragraph makes sense, and I have provided for those eventualities.

    Do you sell insurance? Been a long time since anyone recommended buying a whole life policy. Even my insurance agent and financial advisor know better than to bring up that subject. :no:
     
  20. Mudwoman

    Mudwoman Well-Known Member

    Messages:
    528
    Joined:
    Dec 18, 2002
    Few people buy whole life insurance anymore since the invention of term life insurance. Once a person reaches the age of 60, premiums can double or triple and many policies become null and void after the age of 70 or the face amount of coverage is cut. Here is an example of life insurance that is offered through my employer at a discount. A $100,000 of term life insurance is $5.90 per month for someone under 25. For someone in the 50-54 age bracket, that same amount of insurance costs $32.20 per month. At age 70, the coverage becomes $50,000 and the premium is $254. per month. At age 80, the benefit becomes $20,000 and it is $537 per month. After age 85, the benefit is null and void. Few seniors can afford that kind of money. They would be better off putting that kind of money in an investment each month if they have it to invest. Some of the older whole life policies had fixed monthly premiums for life, but the premiums were extremely high when a person was young to offset what the premiums would be if they were older. In the end, the cost over a lifetime was about the same.

    Always remember that insurance companies (regardless of what they are covering) are in the business of making money, not paying benefits. The odds are always stacked in their favor to keep more than they pay out.