life insurance questions

talentdeficit · #1 06-27-2007, 09:52 PM

my mom called me today, and asked me a bunch of questions about life insurance. i am totally clueless and google hasn't been much help (i don't really know where to start, ldo), so i turn to you, oot.

my parents are asset rich but cash poor. they have a 1.2 million dollar home with about 250k left on their mortgage. my dad is 61 and had open heart surgery two years ago. his insurance premiums were just increased from ~60 per month to ~290 per month (he has about 400k in coverage) my mom is 57 and has about 150k in life insurance. they're both semi retired and working part time. their yearly income is about 85k.

anyways, $230 a month is a lot of money for them, and they're looking for options where it comes to their life insurance. my mom's big concern is that she be able to afford her house if anything happens to my father. my mother's life insurance is less of a worry, as my dad is fine with selling the house and moving somewhere cheaper.

where should i be looking for information so i can help my mother with her questions? thanks.

cbloom · #2 06-27-2007, 10:01 PM

Life insurance is super super -EV and the classic sucker scam; it really exploded in America after WW2 when life insurance salesmen traveled the country and sold it to lots of working stiffs as an "investment".

In the modern age the only reason you should have any life insurance at all is as part of your tax planning for estate transfer.

talentdeficit · #3 06-27-2007, 10:09 PM

cbloom,

i hear (and read this) a lot, but what is the alternative? my parents are not fiscally responsible and i have zero hope they will be at any point, so paying down their mortgage as quickly as possible is not an option.

captZEEbo · #4 06-27-2007, 10:09 PM

you could probably start with what kind of questions does she have?

talentdeficit · #5 06-27-2007, 10:10 PM

zeebo,

basically, she told me their premiums are going up, she doesn't really want to pay the extra $230 a month, and then asked what she should do. i am just looking for general advice with regards to life insurance for people close to retirement.

CletusVanDamme · #6 06-27-2007, 10:14 PM

[ QUOTE ]
Life insurance is super super -EV and the classic sucker scam; it really exploded in America after WW2 when life insurance salesmen traveled the country and sold it to lots of working stiffs as an "investment".

In the modern age the only reason you should have any life insurance at all is as part of your tax planning for estate transfer.

[/ QUOTE ]

Pretty much wrong on all points. Firstly, you should HOPE life insurance is -EV. That means you didn't die prematurely.

Its no more of a "sucker scam" than automobile or home insurance. If you ever need it, you are thrilled you had it. If not, you wonder why you pay for it.

Permanent forms of insurance may be pitched as an "investment.". Maybe they are, maybe they aren't, but its my understanding you don't buy life insurance as an investment. I bought mine to know that if I do die early, my wife and daughter will still have the benefit of me providing for them.

As for only using life insurance for estate planning...geez. First of all, in "the modern age", 99.9% of "estates" are exempt from taxation. Maybe the tax will come back in a few years, but who knows. Second, estate planning was about the last thing on my mind when I bought what I have.

captZEEbo · #7 06-27-2007, 10:14 PM

[ QUOTE ]
zeebo,

basically, she told me their premiums are going up, she doesn't really want to pay the extra $230 a month, and then asked what she should do. i am just looking for general advice with regards to life insurance for people close to retirement.

[/ QUOTE ]I'm not sure what she is expecting, but usually insurance doesn't pay off unless you die earlier than the insurance company expects by a decent margin. This will just add even more money to the $230 she doesn't want to pay unless she dies early.

CletusVanDamme · #8 06-27-2007, 10:17 PM

[ QUOTE ]
my mom called me today, and asked me a bunch of questions about life insurance. i am totally clueless and google hasn't been much help (i don't really know where to start, ldo), so i turn to you, oot.

my parents are asset rich but cash poor. they have a 1.2 million dollar home with about 250k left on their mortgage. my dad is 61 and had open heart surgery two years ago. his insurance premiums were just increased from ~60 per month to ~290 per month (he has about 400k in coverage) my mom is 57 and has about 150k in life insurance. they're both semi retired and working part time. their yearly income is about 85k.

anyways, $230 a month is a lot of money for them, and they're looking for options where it comes to their life insurance. my mom's big concern is that she be able to afford her house if anything happens to my father. my mother's life insurance is less of a worry, as my dad is fine with selling the house and moving somewhere cheaper.

where should i be looking for information so i can help my mother with her questions? thanks.

[/ QUOTE ]

I would be surprised if you mom can find an answer she is going to like. If you dad is 61 and recently had open heart surgery, I doubt he has any other options for life insurance. No offense, but he probably isn't what the insurance companies are looking for.

That said, they could always shop around and hope to find something.

Honestly, maybe mom needs to be a little less attatched to the 1.2M home, and consider downsizing, especially if its just her.

bobman0330 · #9 06-27-2007, 10:20 PM

How much do each of your parents bring in? How much would they need to continue supporting themselves if the other died? That gap (plus funeral expenses) is the amount that needs to be covered by life insurance.

captZEEbo · #10 06-27-2007, 10:20 PM

[ QUOTE ]
[ QUOTE ]
Life insurance is super super -EV and the classic sucker scam; it really exploded in America after WW2 when life insurance salesmen traveled the country and sold it to lots of working stiffs as an "investment".

In the modern age the only reason you should have any life insurance at all is as part of your tax planning for estate transfer.

[/ QUOTE ]

Pretty much wrong on all points. Firstly, you should HOPE life insurance is -EV. That means you didn't die prematurely.

Its no more of a "sucker scam" than automobile or home insurance. If you ever need it, you are thrilled you had it. If not, you wonder why you pay for it.

Permanent forms of insurance may be pitched as an "investment.". Maybe they are, maybe they aren't, but its my understanding you don't buy life insurance as an investment. I bought mine to know that if I do die early, my wife and daughter will still have the benefit of me providing for them.

As for only using life insurance for estate planning...geez. First of all, in "the modern age", 99.9% of "estates" are exempt from taxation. Maybe the tax will come back in a few years, but who knows. Second, estate planning was about the last thing on my mind when I bought what I have.

[/ QUOTE ]I wouldn't lump homeowner's insurance and car insurance under the same bracket. Most people pay too much for their car insurance by over-insuring their car. In your case life insurance probably makes sense. When you are retired and have no dependents and live in a 1.2million dollar house, life insurance doesn't make as much sense.