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lsutgrfan10
LSU Fan
Member since Jun 2011
221 posts

Life Insurance Question
My Dad approached me recently on the idea of me paying for his life insurance policy until he passes away.

He's 55 and at a point where he no longer really needs the policy with the money he and my Mom have saved up. All the kids are out of the house and doing well.

The policy is for $1 Million. He recommended that I start paying for it, and I would be the lone beneficiary.

Is this a good idea? There's no way I even come close to spending $1 mil on the policy even if he lives to 100 right? Would there be any taxes involved in the payout after his death?


wickowick
LSU Fan
Head of Island
Member since Dec 2006
36466 posts

re: Life Insurance Question
What is the premium amount?


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lsujro
LSU Fan
BR
Member since Jul 2007
2930 posts

re: Life Insurance Question
don't believe life insurance is taxable. in any event, you would be well below the minimum threshold for estate tax. probably a solid investment for you to pay his premiums, assuming he won't age out of the policy (if it's term).


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OysterPoBoy
LSU Fan
BR
Member since Jul 2013
9392 posts

re: Life Insurance Question
Can you trust him?


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30
EA6B
Navy Fan
TX
Member since Dec 2012
6731 posts

re: Life Insurance Question
Do you have a good relationship with your siblings, and if so, do you want to continue having a good relationship with your siblings after your dad passes. If the answer is yes, have your dad name all of you equal beneficiaries, and split the premiums equally.


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Twenty 49
LSU Fan
Shreveport
Member since Jun 2014
8697 posts

re: Life Insurance Question
The premiums will likely start to go up considerably as he ages. I’ve seen mine take a big jump when I passed certain ages.

So don’t assume the premiums he is paying now will be what you might be paying when he is 75.


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DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
Is it whole life? Is your dad a cheap ass?


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YaDigg11
Louisiana Tech Fan
Ruston
Member since Jul 2008
1578 posts

re: Life Insurance Question
First big question is this Term or Whole life.

Also if you pay the premiums you should have him transfer the policy to you so you can be the owner. That would insure that you have all the say in who the beneficiaries are and that you are guranteed the money.


baldona
Auburn Fan
Florida
Member since Feb 2016
5564 posts

re: Life Insurance Question
I would not do it honestly.

There's a reason this isn't done more often and why the insurance companies make money. The biggest way they make money, is once you get over 65-70 the premiums really take a steep jump. We are talking like $10k- 30,000 a year.

The biggest way insurance companies make money is most people stop paying once they reach a certain age. Are you really going to continue paying $12k a year when your dad is 68 and in very good health? Cause that's not chump change.

I have a family member that works for UBS and he does some insurance work for his clients, he makes something like 75% of the first year premium on whole life policies. He only works with high net worth individuals so they do them as estate planning. But he was telling me about a guy that was like 74 and signed up for a $1 mil policy that was like $30k a year, so my family member made like $22k on a couple hours of paperwork.

So sure that guy lives to be 94 and he pays something like $600k for $1 mil of tax free income for his family? Really it's only $400k of income though right, he paid $600k. Plus, if he invested that $600k it would be likely worth well over $1 mil right?

So, if your dad is healthy I would simply take the premiums and put them into a 401k, Roth, etc if you don't max those out.
This post was edited on 12/8 at 6:52 am


Shepherd88
Member since Dec 2013
2039 posts

re: Life Insurance Question
You are making so many assumptions in his case and a separate case that you know nothing about.

OP, This is why it’s important that you sit down with an advisor or estate attorney and let them review the whole situation for you instead of letting a board of idiots fill you with misinformation.

The first thing to know however is what kind of policy this is. No judgment can be made until that’s established, then we need to know your family situation.


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DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
Premium doesn’t change if it’s whole life guy. In addition, whole life has some HUGE benefits, including cash value and dividend accumulation.

OP, find out if it’s term, whole, or universal. If it’s term, forget about it. If it’s whole, find out what the cash value is, what dividend option your dad selected, has he made and withdrawals or taken loans against the cash value?

On a whole life 1 million policy. You’re looking at a big monthly premium depending on how old your dad was when he purchased it. However, you’re never going to pay anywhere close to the value of the policy. If I was you, I’d do it in a heart beat.


DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
quote:

But he was telling me about a guy that was like 74 and signed up for a $1 mil policy that was like $30k a year, so my family member made like $22k on a couple hours of paperwork. So sure that guy lives to be 94 and he pays something like $600k for $1 mil of tax free income for his family? Really it's only $400k of income though right, he paid $600k. Plus, if he invested that $600k it would be likely worth well over $1 mil right?


He’s lying to you. Also, I can tell you don’t know how insurance works. If it’s whole life. A 1 million dollar policy would be worth over 2 million IF you don’t access the cash value and let the dividends accumulate or pay up additional benefits. Hell, he could probably pay out the policy solely of the dividends.


baldona
Auburn Fan
Florida
Member since Feb 2016
5564 posts

re: Life Insurance Question
quote:

Hell, he could probably pay out the policy solely of the dividends.


Lol, I'm sure that's the case since the OP's dad doesn't want to make the payments anymore.

Sure I don't know exactly how whole life works because I'm not worth over $11 mil and it's a terrible product for 99% of people.

And no, I may not know insurance great but I know damn well that a $1 mil policy is exactly that: $1 mil. The cash value goes up, but the insurance value does not. You don't get both, you get either that cash value or the $1 mil at death. Again, not a good product.

Chances are it's not term or the OP's dad would have to have like a 50 year term to last until death. So even if it's whole life and he's talking about having it for years since let's say 40, that's probably a $10,000 a year policy. And it's so great with the dividends and every other smoke screen BS the salesman sold the dad on, that the dad doesn't want it anymore.
This post was edited on 12/8 at 12:17 pm


DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
quote:

And no, I may not know insurance great but I know damn well that a $1 mil policy is exactly that: $1 mil. The cash value goes up, but the insurance value does not. You don't get both, you get either that cash value or the $1 mil at death. Again, not a good product.




You're absolutely incorrect. 1 million is the face value of the policy.

For reference, see this 250k whole life illustration. 30 yr old male by age 65 would have a death benefit of 329,001. notice how if dividends aren't touched, they accumulate at 3.6% interest. the interest on this illustration is extremely conservative btw. Also note that the premium NEVER changes.

Also to note that this same 250k policy, if left untouched, would have a death benefit of 505,316 at age 85.

Now tell me oh wise one, where else can you have tax deferred growth and have instant access to the money. tell me where you can take out a loan and NEVER have to pay it back? By all means though, continue being uneducated about the importance and value of whole life



DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
quote:

So even if it's whole life and he's talking about having it for years since let's say 40, that's probably a $10,000 a year policy. And it's so great with the dividends and every other smoke screen BS the salesman sold the dad on, that the dad doesn't want it anymore.


Okay Dave Ramsey.... Maybe the dad is secure financially but wants the son to enjoy the benefit of the policy since he doesn't feel he needs it anymore.


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lsutgrfan10
LSU Fan
Member since Jun 2011
221 posts

re: Life Insurance Question
Sorry for the late response guys.

Apparently my Dad has an Annual Renewable Term Policy. He’s had it for the last 20 years.

It’s through the ADA, so he said his premiums are pretty low. He pays every 6 months. His last payment at age 55 was $750 (so $125/month).

It pays out $1 million until he hits age 82. The day he hits 82, the plan is canceled.

Knowing all this, would it be a good idea to start forking up the money for the policy?

I’d rather not start betting on my Dad to die...


DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
If it's term, I wouldn't do it.


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Shepherd88
Member since Dec 2013
2039 posts

re: Life Insurance Question
If it can not be converted to a whole life policy without going back into underwriting then no I wouldn’t pick up the tab for it, it’s gonna get expensive soon.


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baldona
Auburn Fan
Florida
Member since Feb 2016
5564 posts

re: Life Insurance Question
Whole life pays the death benefit, universal life pays the death benefit plus dividends.

Lol at bringing the investment aspect and tax savings on a $1 mil policy for the avg person. Those are completely negligible.

With the update, no I wouldn't do it unless he's in terrible health as he is likely to live beyond that age. Is he retired or otherwise have a high enough net worth that if he dies your mom will be fine financially? I'd assume that's why he no longer needs it. Good for him.


DCtiger1
LSU Fan
Pensacola Beach
Member since Jul 2009
2336 posts

re: Life Insurance Question
Holy hell man. You’re wrong Again. I just fricking posted a whole life illustration from a policy. Please stop talking out of your ass.

quote:

You may receive dividends. The insurer may pay dividends to whole life policy owners, depending on the company's financial performance.2 Although dividends are not guaranteed, the possibility of earning dividends is an attractive feature of whole life policies.


Most life insurance companies have never missed a dividend payment on whole life.
This post was edited on 12/8 at 9:05 pm


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