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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.
Dick, I always wondered what the catch was for the 9.95 policies. I appreciate your explanation and am sure you helped people with it. We never know who is reading HD that might need to hear what you said.
We did what most have done here about the term insurance until our kids were gone/house paid off. I have read before about older people who have a lot of assets keeping their life insurance so that it can pay the taxes on the estate. That makes sense to me. We don’t have enough assets to do this so we will self insure for burial. Chris
We don’t have enough assets to worry about estate taxes either, but my employer group life is cheap and I used cash value in a universal policy to convert to paid up coverage. Together they will provide near instant cash for Connie to use until survivor annuities start, then what’s not needed will go to grandchildren. Should Connie predecease me the money goes to our children.
I see value in life insurance for one purpose or another at any age and under most circumstances. Assuming of course, premiums are not a burden.
Thanks for the info, but NO WAY. Insurance is Term when you are Young, but rarely needed when you are 80 years old. I dumped mine around age 65. I put that money in a S&P fund and took my chances. Life expectancy after 80 and you are expected to live another 8.4 years! Seems the S&P is a much better choice.
There is no limit to the number of marketing ideas to sell you expensive products. This is #1 with a bullet on my list of over priced insurance.
The $9.95 plans are whole life policies and there is minimal cash value until about 10 years out making the $9.95 policy one of the most expensive plans of all.
Let’s also not forget about the $1 plans for the new baby. Equally ridiculous costs for whole life insurance.
When you leave a company with a life insurance benefit, you cna convert that to whole life. If you have a medical condition that prevents you from purchasing more insurance, this might be worth it. Otherwise, you are now paying for whole life instead of the term that your employer provided. An expensive trade off.