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Message
Opinions on life insurance for your kids?
Posted on 1/28/15 at 10:48 am
Posted on 1/28/15 at 10:48 am
Considering getting a small policy on each of my kids. My agent mentioned a plan that's whole life, but you only pay a premium on it for 20 years and then the policy is locked in. It's only 35K in coverage, but I think the premiums are only 20-30 bucks a month. I believe the policy would have a small cash value as well. Is something like this a good idea to at least guarantee insurability on your kid?
This post was edited on 1/28/15 at 11:07 am
Posted on 1/28/15 at 10:56 am to Glock17
I wouldn't think it makes much sense and I'm not sure how it really does this either, outside of the 35k in coverage you're getting:
quote:
guarantee insurability on your kid
Posted on 1/28/15 at 11:03 am to Glock17
This thread is going to get shite on with the quickness. If you're doing it for the insurability aspect, make sure it has a guaranteed insurability rider that will allow them to purchase later in life with no evidence of insurability.
Not a fan of smaller policies on kids in general. Although when you're working with ideas like grandparent gifting and larger premiums, those policies if designed correctly can provide great benefits.
Posted on 1/28/15 at 11:08 am to BigErn
quote:
If you're doing it for the insurability aspect, make sure it has a guaranteed insurability rider that will allow them to purchase later in life with no evidence of insurability.
I believe my agent said if 30 years down the road they wanted to increase the coverage it could be done with out providing any proof of insurability.... I guess the million dollar question is what those premiums would look like.
Posted on 1/28/15 at 11:10 am to Glock17
ALL my kids have a 15k term policy as a rider on my term policy for like 42 bucks a year combined. Like a dollar and change a month per child. I'll save for them on my own, and don't need a life insurance company to do that.
Posted on 1/28/15 at 11:13 am to Glock17
Mind saying what company the guy is with?
The paying them in 20 years probably is referring to the dividend being high enough to pay the premiums after 20 years. I doubt he is showing an actual 20-pay policy, so I don't like how he is selling that because the dividend isn't guaranteed. It would likely be able to pay for itself then, but not guaranteed. If it is a 20-pay policy, then never mind.
Definitely get the insurability rider, a lot of companies call it Additional Purchase Benefit. The cost will obviously be at that time, whatever a policy would cost at that age.
I like them as a nice gift for a child. They can help give them a good starting point financially for not a whole lot of money, but by no means is this the only option to do something like that.
The paying them in 20 years probably is referring to the dividend being high enough to pay the premiums after 20 years. I doubt he is showing an actual 20-pay policy, so I don't like how he is selling that because the dividend isn't guaranteed. It would likely be able to pay for itself then, but not guaranteed. If it is a 20-pay policy, then never mind.
Definitely get the insurability rider, a lot of companies call it Additional Purchase Benefit. The cost will obviously be at that time, whatever a policy would cost at that age.
I like them as a nice gift for a child. They can help give them a good starting point financially for not a whole lot of money, but by no means is this the only option to do something like that.
This post was edited on 1/28/15 at 11:15 am
Posted on 1/28/15 at 11:19 am to Y.A. Tittle
My parents did this for my sister and I when we were born, although it was two $10k policies. The plan was (obviously barring death) to give us the policies when we graduated high school either to pay for college or to use however we wanted. I've kept mine and continued to pay them because they cost me $88 a year apiece.
I know the board's opinion of whole life policies, but it is a big relief knowing I can cash those policies fairly easily if I ever came upon hard times, and I am extremely grateful to my parents for giving me that peace of mind. I plan to do the same for my kids one day.
Also guaranteed insurability is nice as well. If anything ever happens (cancer etc.) that would make me unwritable they cannot deny me a new policy when the option comes up (every 3 years in my case). Well worth the extra dollar a month in my opinion.
TL;DR: I'm happy with mine.
I know the board's opinion of whole life policies, but it is a big relief knowing I can cash those policies fairly easily if I ever came upon hard times, and I am extremely grateful to my parents for giving me that peace of mind. I plan to do the same for my kids one day.
Also guaranteed insurability is nice as well. If anything ever happens (cancer etc.) that would make me unwritable they cannot deny me a new policy when the option comes up (every 3 years in my case). Well worth the extra dollar a month in my opinion.
TL;DR: I'm happy with mine.
Posted on 1/28/15 at 11:21 am to GoCrazyAuburn
I bought a 75k whole life insurance policy for my daughter when she was born. I went with Northwestern Mutual. The premiums are approx 32/month. It has the guaranteed insurability rider and all dividends are used to purchase additional life insurance. After 5 years the death benefits is now approx $75,800 with a cash value of approx $650. I also started a 529 LA Start Savings plan and have additional savings set aside for wedding/etc. The life insurance policy is something to pass along to her when I feel it is appropriate.
Posted on 1/28/15 at 11:25 am to GoCrazyAuburn
Also, if you do end up getting them, get the Disability Waiver of Premium rider on them as well for a couple of reasons:
1. Yes a child can technically be declared disabled and the rider kicks in (I have seen it happen)
2. Generally, when they want to buy insurance later, if they want to add that benefit, it would require underwriting.
3. It is stupid cheap
1. Yes a child can technically be declared disabled and the rider kicks in (I have seen it happen)
2. Generally, when they want to buy insurance later, if they want to add that benefit, it would require underwriting.
3. It is stupid cheap
Posted on 1/28/15 at 11:33 am to Glock17
quote:
I believe my agent said if 30 years down the road they wanted to increase the coverage it could be done with out providing any proof of insurability....
Can he really bind himself to that, though, 30 years down the line? I'm not sure how that would work exactly.
I'm not really meaning to "shite on" anything, and I suppose there are plenty of worse things to with such a small amount of money, but I still don't really see a decent point of doing this versus just setting that money aside in another vehicle for them.
Posted on 1/28/15 at 11:34 am to Y.A. Tittle
If that was how the guy put it, he was really doing a bad job of selling it. I'm assuming the kids are real young, so he is saying when they are in their 30's they can buy more. He just was not getting very specific. Most Insurability Riders allow for purchases every couple of years starting at a certain age.
Posted on 1/28/15 at 11:47 am to Glock17
virtually ALL whole life policies are terrible 'investments' and only useful in VERY special circumstances. Children certainly don't need life insurance and you're just throwing away money that could turn into something substantial if saved instead.
Alternatively, put $25 per child in a full market ETF like VTI (call discount broker like Fidelity to find out which one) in a UTMA account or 529 if for college and here's what happens:
$24/month at
8% return
becomes
$15,000 in 20 years or
$37,000 in 30 years or
$445,000 in 60 years or
$992,000 in 70 years
good luck
Alternatively, put $25 per child in a full market ETF like VTI (call discount broker like Fidelity to find out which one) in a UTMA account or 529 if for college and here's what happens:
$24/month at
8% return
becomes
$15,000 in 20 years or
$37,000 in 30 years or
$445,000 in 60 years or
$992,000 in 70 years
good luck
Posted on 1/28/15 at 11:59 am to Ole War Skule
quote:
virtually ALL whole life policies are terrible 'investments' and only useful in VERY special circumstances. Children certainly don't need life insurance and you're just throwing away money that could turn into something substantial if saved instead
Silly statement. They can be useful in lots of very un-special situations. Define "terrible investments"
quote:
$24/month at 8% return becomes $15,000 in 20 years or $37,000 in 30 years or $445,000 in 60 years or $992,000 in 70 years
You are going to get 8% after taxes every year for 70 years in the market? okie dokie.
Posted on 1/28/15 at 12:22 pm to Glock17
About a year ago, I was discussing some things with my mom - she is single, doesn't have a lot of savings, has a paid off house, and will probably work until she drops. We did some POAs and stuff like that in case we need it down the road. She told me that my grandparents (now deceased) bought a life insurance policy for her when she was like 6 months old. There hasn't been a premium payment due in 30 years, she gets an annual statement. The death benefit is something like $17,000 and grows a bit each year. Not much, but enough to go towards final cost. She has group life through work but is probably uninsurable (at least at reasonable cost) with a private policy.
My wife and I both have riders on our group term policies at work for our two kids... I think mine is for 20K term per kid and hers is 10K term per kid... combined... we might pay a total of $5 per month.
About a year and a half ago, we started putting $50/month in a savings account at the local credit union for each kid, in addition, we put half of any monetary gifts they receive into that account (they can spend the other half). Obviously that's not going to be a lot of money by the time they turn 18. We've also thought about buying a couple of small life insurance polices for them as well.
My wife and I both have riders on our group term policies at work for our two kids... I think mine is for 20K term per kid and hers is 10K term per kid... combined... we might pay a total of $5 per month.
About a year and a half ago, we started putting $50/month in a savings account at the local credit union for each kid, in addition, we put half of any monetary gifts they receive into that account (they can spend the other half). Obviously that's not going to be a lot of money by the time they turn 18. We've also thought about buying a couple of small life insurance polices for them as well.
Posted on 1/28/15 at 2:18 pm to GoCrazyAuburn
quote:
Silly statement. They can be useful in lots of very un-special situations. Define "terrible investments"
It is not a 'silly' statement, but the consensus of the VAST majority of financial planners, advisers, and other experts not selling insurance. Whole life is a flat out scam loaded with fees, commission, and risk that is only useful in very, very few tax planning situations.
quote:
You are going to get 8% after taxes every year for 70 years in the market? okie dokie.
The S&P has returned 9.75% (dividends reinvested) over the last 50 years, so I think 8% is very reasonable. Who said anything about 'every year' and who said anything about 'after tax'?
If you think whole life is a good investment vehicle for the OP, you either sell insurance or have no idea what you're talking about (or both).
okie dokie....
Posted on 1/28/15 at 2:33 pm to Ole War Skule
quote:
Whole life is a flat out scam loaded with fees, commission, and risk that is only useful in very, very few tax planning situations.
Are we talking about UL's or traditional WL? Very different products with very different fees, structures, and objectives. What risk are you talking about? What fees and commissions are too much? Are the commissions not loaded on term policies then too?
quote:
Who said anything about 'every year
Well, doesn't your calculation not assume an 8% rate of return over those years?
quote:Well, considering we are talking about whole life insurance, it would make sense to use after tax rate of return if we are going to be comparing things.
who said anything about 'after tax'?
quote:
If you think whole life is a good investment vehicle for the OP, you either sell insurance or have no idea what you're talking about (or both).
I never once said it was a good investment. I just asked why is it a bad investment. What rate of return on your money would make a WL policy a "good" investment?
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