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Maybe not a scam, but certainly misleading. You have probably seen the ads for senior life insurance- no physical, no health questions- no problem protecting loved ones for $9.95 per month with premium guaranteed for life as long as you are not over age age 80. What the ads don’t shout about is the $9.95 is “per unit”. Once you learn that, you need to find out what a unit of insurance represents.
What $9.95 a month will buy in terms of coverage varies by your age and the insurer. The short answer is that for an 80-year-old, $9.95 a month typically buys less than $650 in total coverage, sometimes even less. It also varies between male and female.
But there is more. The 2-Year Waiting Period. These “guaranteed acceptance” policies don’t ask health questions, but they usually won’t pay the full death benefit if you die of natural causes within the first two years. If that happens, your family typically only gets back the premiums you paid plus a small amount of interest.
To get a meaningful amount of coverage—say, $10,000 for a funeral—an 80-year-old man would need about 15 units. That would cost roughly $150 per month assuming $650 in coverage per unit.
I guess this coverage fills a need for people who have not planned ahead, but you need to proceed with eyes open.
Insurance may not be a good investment, but I see it as essential for most people as part of protecting survivors, especially spouses. I elected to retain my employer group coverage plus after investing in universal coverage for many years, I used the assets to convert to a paid up policy. Combined they will cover Connie’s basic expenses for at least two years income tax free. I sleep better knowing that.
10K for a funeral? Our families, both my wife’s and mine, are way too frugal for that kind of extravagance. My plan is to be cremated, then residing in the cheapest plastic container available until my ashes are (most likely illegally) placed in the stream where the grandfather, who I was named after, resides and the other half in a tidal river near a particular rock, which is is visible at low tide, where my twin brother resides. As to a get together that is up to my wife and children if they so desire one, I myself really don’t care.
As to the insurance aspect of your article, we dropped our life insurance in our sixties when our portfolio exceeded seven figures, and our children were out of the nest.
I think I read here about how someone has a 10 year TIPS bond ladder set up that is reinvested as the bonds mature. I think this is a brilliant idea where the money stays in my control. I am planning to bring this up with our fee only advisor once we claim Social Security at 70 and plan to undergo a full review of our finances for the first time in about five years. This is partly to consider how to best set us up for moving into a CCRC somewhere around the end of the decade.
According to the ads $10k is the average cost of a funeral.
I hesitate to ask this, but with seven figures in assets and no need for life insurance, why delay SS to age 70? I guess the logic for many people is higher survivor benefits, but that’s where a see the value of insurance while not draining assets as much before age 70.
I’d like to hear what an advisor says about it all. 😁
Personally, I don’t carry life insurance. It’s not that the cost is prohibitive — it’s that we simply don’t need it. Between our own resources, we can cover funeral expenses without issue, and my wife has her own portfolio to sustain her while the estate is being settled.
The idea of insurance is that everyone pays a little (in premiums) so that nobody has to pay a lot (in order to cover a catastrophic loss). If the cost of a funeral doesn’t represent a big hit to your resources, insurance isn’t necessary.
Makes sense, but why use your own resources if insurance at a good price could do the job? Are their tax advantages for insurance proceeds as there are here?
Why in the world does this question deserve five down arrows? Is it a game? At least have the honesty to comment and explain.
The financial logic just doesn’t add up for me. A 20-year term policy runs about $125 a month, and since I’m optimistic I’ll still be around at the end of that period, I’d essentially be spending $30,000 in total premiums to cover a $10,000 expense I could easily handle out of pocket.
The tax-free payout is the one angle that might have changed my thinking , specifically if I were worried about capital gains liability, but since spousal inheritance transfers are already tax-free, that benefit doesn’t really move the needle.
Does life insurance play an important role in your financial plans?
The life insurance question: For me, at a youngish 55, depending on who is judging, I have several low cost term policies that were purchased at different times as our circumstances changed. One will lapse at 61 and the last will lapse at 65. The money we saved was invested and has grown quite nicely. The Missus will likely retire in the next two years, and maybe three for me.
We do not need the insurance proceeds should the worst happen, but 20 years ago, with three young children and limited assets, it helped me sleep better. I also have coverage through work.
I need to discuss with my planner what makes sense with these policies strictly from an optimization standpoint, and not simply because we would need the payout to maintain our lifestyle. Yet still, if there is the opportunity to further optimize, I’ll take it.