Ok big decision here so I need some expert advice. Question about Life Insurance?

Question

I'm buying Life Insurance. I have a 8 month old and I'm 28, non smoker and in perfect health. I got a quote that is for 30 years and for a 1,000,000 premium I would pay 70.84 a month. There is another premium where I would pay 104.17 a month and I would get all the money back in 30 years. If I went with the 70.84 a month I would get nothing back. I'm not sure about the time value of money but would it be worth it to go with the 104.17 a month thinking that I will live for another 30 years. Or just go with the 70.84 a month. Also is this a good deal? or are there better options? I have another option thru another guy that will offer me life insurance thru cancer or accidental policy thru aflac. would it be better to get the accidental or cancer policy for a guy my age? He said that 50% of people get cancer at sometime in their life so I was thinking that. Thanks for any input.

Answer 1

If you just run the numbers, you'd have to get about 7% after tax rate to do the same thing yourself.  The main trick is that most life insurance policies don't make it all the way to the end because people change their mind all the time.  If you can stick with it, 7% isn't bad.  If not, there are typically heavy surrender charges along the way.

Now that you know what's up, it's a personal call.  You know the type of person you are and are better equipped to make this decision than perfect strangers.  If you still aren't sure, talk with a fee-only financial planner; the only way they get paid is by you, so their advice tends to be less biased.

Sounds like the Aflac guy is trying to sell you.

Answer 2

Pay $104.17 a month and get the money back in 30 years because it will be worth it,  trust me.

There is a low chance of you getting seriously hurt and even a lower chance of dying so there is really no point in paying for life insurance if you know you're probably not going to get hurt,   instead you could get the 104.17 deal and then get your money back in 30 years when you'll most likely retire.

Good luck!   This is a good deal,  Yes.

Answer 3

Don't buy the return of premium.  It is a suckers bet.  Most term insurance is replaced every 5-7 years anyhow.  Buy the regular term insurance and invest the rest of the money in your company 401-k plan (they may match a %)  If no 401-k plan put the money into a roth IRA in a good solid mutual fund.

The cancer insurance is a difficult decision.  I know people that have had a cancer policy and been diagnosed with cancer.  It really helped.  The cancer policy might be a good idea if cancer runs in your family.  Aflac is a good company.

Answer 4

'm a financial representative and providing life insurance is one of the things I do for clients. God forbids if the breadwinner dies, where would the family be without life insurance? Life insurance can't protect you against harm or death, but it can replace your income. The problem is that many families that own life insurance don't have adequate coverage, but they pay lots of premiums for it. That's because they own the wrong type of life insurance. Take a look at the facts and you decide which product is the best:

Whole life insurance

1) Its level term to around age 100 that builds cash value.

2) Since it builds cash value, premiums are higher than term insurance that doesn't build cash value.

3) There is no cash value growth in the first 2 years because premiums are used to pay for the insurance and commissions to the agent.

4) After first 2 years, you are guarantee a rate of anywhere between 1-4% (varies between companies)

5) If you wish to take money out from the cash value, you have to borrow it and pay loan interest of 6% to 8%.

6) If you die someday, the insurance company keeps your cash value, but pays the death benefit. Death benefit will be reduced by any loans you taken from the cash value.

Universal life insurance

1) Annual renewable term until around the age of 100 that builds cash value.

2) Flexible premiums as long as there's enough cash value to pay for the insurance.

3) While premiums may remain level in the beginning, the internal cost of the insurance goes up every year. That means less and less of your premiums goes into the cash value. Eventually, the premiums you pay will be insufficient in the future to pay for the cost. What would happen is that you would either have to pay more premiums or a portion of your cash value will be used to pay for it.

4) Same cash value features as whole life.

Term insurance

1) Various of level term products to choose from (from 1 year to 35 years).

2) It does not build cash value, so premiums are initially lower than whole life and universal life.

3) Most term insurance are guaranteed renewable to around the age of 95 to 100 without providing a proof of insurability. If your health was to decline because of old age, you can renew your policy without any hassle.

4) When you renew, premiums will be based on your current age. So premiums will go up after the initial level term.

Those are the facts.

Personally, I have sold term insurance 100% of the time. Why? Its because my clients can get lots of coverage for low amount of premiums. Since premiums are low, I help setup investment accounts for my clients so that they can build wealth. If you had lots of money saved right now, would you still need life insurance? Probably not. But you probably don't have lots of money saved right now and if something were to happen to you, would your family be financially ok? As you get older and continue to invest, you may or may not need life insurance when it is time to renew the term insurance. If you were to invest $200/month for the next 30 years and the average rate of return in your portfolio was 12%, you would have about $700k saved for retirement. That's probably not enough to live on, but at least its better than having money sitting in a life insurance policy. If you were to die during the term, your family gets the death benefit and all your savings and investments. If you die after the term, at least you will leave money behind to your family. With the cash value life insurance, in most policies, your beneficiary will only get the death benefit, but the insurance company keeps the cash value.

Answer 5

I dropped your premium difference into an Excel spreadsheet.  The return on the extra premium you would pay each month on the return of premium product ($33.33) was 6.76%.  So the question is, do you want to invest your money in something that returns 6.76% tax free?  

Also remember that unlike most investments you will have to keep this policy and pay these premiums loyally for 30 years.  If you drop the policy prior to 30 years your return will be substantially less.  

I would not recommend an accidental death or cancer only policy for you.  The reason that your term coverage is so inexpensive is because you are healthy.  You may be healthy now, but there is no telling what your health will be like in 10, 20 or even 30 years from now.  Do you think people having heart attacks and cancer in their 50s were all fat and sickly when they were in their 20s?  

Get one of the term life policies you are looking at and protect your family.

Answer 6

MBRCATZ is 100% correct.

I'm 40 and my father purchased a $10,000 policy on me as a baby. If I wanted to cash it out, I'd get a whopping $3000. Not a very good return on my dad's money huh.

If I'm not mistaken, MbrCatz is an agent. She knows her stuff!

Answer 7

First, I would make sure you need $1m of coverage.  If so, just pay for the coverage and invest the difference.  As for the cancer & accident coverage, that's a personal decision.  Most people will tell you not to buy it because you will probably never collect on it and it is a waste of money.  However, if you die sooner rather than than later, the odds are very good it will be the result of an accident.  They happen every day.  As for the cancer, my mother-in-law just recently died from cancer and the amount we collected from her AFLAC policy came in handy paying some bills.  She got a lot more back than she ever paid in.  On the other hand, I had a bout with cancer, did not have a policy and wound up paying over $5000 out of pocket for things not covered by what I thought was a good health plan.  You make the call based on what you want to do and what you think is best in your situation.

Answer 8

OK, the key phrase here is, "I'm not sure about the time value of money".    Here's the calculator you want to use:  http://www.msfinancialsavvy.com/calculat...

If you buy the $70 a month policy, and invest the $34 difference, you would  have $78,000 - $121,000  in your investment account at the end of 30 years.   Or, you can pay the whole $104, and at the end of 30 years, you get $37,000 back.   Is there really a question here?

Run the numbers.  Always do the math.  Any kind of "savings" component in life insurance, or "return of premium", counts on you being dumb at math.    These types of policies make a LOT of money for the insurance company, and a LOT of commission for the agent.

Do you buy car insurance for being hit by blue cars?   Don't buy life insurance for just cancer.  MOST people do NOT die of cancer.  Or of accidents.  THOSE policies are sucker bets.  

You're being sold!!!  Don't be sold.  Define the goal, and pick the tools that hit that goal CHEAPEST.  I like 30 year term, guaranteed renewable and convertable.  Actually, you can probably save $100 or $150 on the premium by paying in full, instead of paying monthly, so that's an even better deal.

And again . . .ALWAYS RUN THE NUMBERS.

Answer 9

I am an insurance agent currently.  In my opinion you are better off buying 20 year term.  You can get a decent policy for about between 35-50$.  You have to ask yourself about the financial strength of the company with your 30 year term product.  Is this company going to be around in 30 years.  Conclusion, buy 1,000,000 20 year term.  Choose a company that is AAA rated.   30 years i think is to long. Cancer and accidental is a waste, just buy your own disability policy.

Answer 10

Do you need a $1m policy?  Does your wife have a policy?  If not, you should get 2 $500,000 policies.  If something happened to her, you would need to hire a nanny +/or cleaning people etc.  

Check out SBLI.  They have the cheapest term life policies (no money back).  You may be better off getting a cheaper policy (We pay $100 per quarter for 2 $250,000 policies and we're in our 40's) then you can invest the savings in a 401(k) or IRA.