• Go to page :
  • 1 2
  • Text Only
Voting History
rated:
I HATE the idea of paying for term life premiums if no benefits are ever paid out. Saw an interesting product on insure.com "term life with return of premium" Basically you pay more for the insurance, but if you dont use it, theyll refund your premiums at the end! Of course, the premiums are higher.


Heres my options (male 29years old):
1million 20 year term life $490/year
with return of premium: $813/year

1million 30year term $840/year
with return of premium $1178/year

Would the return of premiums plans be worth it? Anyone have a financial calculator which would calculate if I invested the difference in the reduced premium as compared to just getting a refund at the end?? Any other comments about this type of life insurance?

Also, any opinions on Banner Life and Empire General insurance companies??

Also, a local agent quoted me term rates (similar to those on these websites) but also there was an add-on called "waiver of premium"..what does this mean? I know that with other types of insurance (disability, long term care), "waivers of premium" usually mean you dont pay a premium if you are receiving benefits, but if you die, there is no further premiums, so I dont really get it... It cost about $100 extra per year...I havent talked to him yet but was wondering if anyone is familiar with that term as it applies to term life insurance...

ok wait, i'm still on the age of 29 yrs. and sooo much knowledge....forgive my babbling.

tami123 said:

<< ok wait, i'm still on the age of 29 yrs. and sooo much knowledge....forgive my babbling. >>

huh??

SUCKISSTAPLES:

Do I understand you correctly, you're 29 years old?

i turned 29 in november

Well I must say, you are such an asset to this thread it's hard to believe you're such a *youngster.* This old woman just turned 41.

thread, meaning the Finance forum.

thanks, I *wish* I was still a youngster...unfortunately its time I need to start thinking about these crazy things like life insurance! <img src="i/expressions/face-icon-small-wink.gif"border=0>

hope my age doesnt lessen your (or anyone's) opinions of my posts here, it definitely does impact me in my profession. Oh and BTW 41 certainly isnt considered old... <img src="i/expressions/face-icon-small-wink.gif"border=0>

SUCKISSTAPLES said:

<< I HATE the idea of paying for term life premiums if no benefits are ever paid out. Saw an interesting product on insure.com "term life with return of premium" Would the return of premiums plans be worth it?

Anyone have a financial calculator which would calculate if I invested the difference in the reduced premium as compared to just getting a refund at the end? Any other comments about this type of life insurance?
>>


I haven't done the actuarial calculations, but rest assured that they have. They expect to make a profit on the extra premium they charge you for the "return of premium" option. Skip it. Don't worry about "throwing your money away" should you live. Except for possible tax advantages, one expects to lose money doing business with an insurance company. The reason you do business with them is to transfer a risk - namely, death, and loss of financial support for your loved ones - that you have no way of covering on your own. This is why you don't want to over-insure - it's a losing "expected value" proposition so you only want to have enough to cover your risk.


<< there was an add-on called "waiver of premium"..what does this mean? It cost about $100 extra per year... >>


I suspect this rider covers your premium should you become disabled... if this is the case, don't bother. Your annual risk exposure is only the cost of the policy, and I'm sure you already have disability insurance to cover that... right SIS?

FYI - in general, for young professionals, disability insurance is even more important than life insurance.

this must be a fake SIS afterall the real SIS would just know that a waiver of premiums for term life insurance means that the premium payment is waived if you experience a qualifying disability and are thus unable to make your payments.... or at least the real SIS would have known to just put "waiver of premium life insurance" in google and looked it up... <img src="i/expressions/face-icon-small-happy.gif"border=0>

and the real SIS would have known to just go to bankrates.com and click on the calculators icon to get access to all kinds of financial calculation programs..

just bought mid term disability ($60/year premiums, $2000/month for 5 year benefit..is that pretty good?) and in the process of looking for long term disability.... any tips regarding carriers to check out who cover individuals are appreciated! It seems most LTD policies are through one's employer...

Derffie said:

<< this must be a fake SIS afterall the real SIS would just know that a waiver of premiums for term life insurance means that the premium payment is waived if you experience a qualifying disability >>

nope, this is the real SIS <img src="i/expressions/face-icon-small-wink.gif"border=0>

that waiver of premium is BS, why would I pay $100/year to waive a $500/year insurance premium? I could buy a LTD policy for $100/year and collect $2000 a MONTH if I became disabled!

lets see ..

for 20 year term you would pay $9800
with premiums back option you would pay $16260

the difference would be $6460 paid or $323 per year or $26.90 per month

if you invested the $26.90 per month yourself for 20 years you would need to earn 8.15% annual interest (monthly compounding) to have $16260.. ( it would have to be a tax free investment )


for 30 year term you would pay $25200
with premiums back you would pay $35340

the difference would be $10140 paid or $338 per year or $28.16 per month

if you invested the $28.16 per month for 30 years you would need to earn 7.11% annual interest (monthly compounding) to have $35340 (again it would have to be a tax free investment )

of course if you die before you've made all the payments you win sort of <img src="i/expressions/face-icon-small-happy.gif"border=0>

SUCKISSTAPLES said:

<< just bought mid term disability ($60/year premiums, $2000/month for 5 year benefit..is that pretty good?) and in the process of looking for long term disability.... any tips regarding carriers to check out who cover individuals are appreciated! It seems most LTD policies are through one's employer... >>


There are only two kinds of disability policies worth having... long term disability (LTD) and short term disability (STD). I've never heard of mid term. LTD is the important one... typically paying out ~80% of your earnings after you've been disabled for at least X days. X is known as the elimination period and is typically 90 days (think of this as a deductible). STD is a stopgap policy that covers you during this 90 day period. You don't need STD if you can afford to cover the 90 days of earnings on your own.

A decent individual LTD policy (not to be confused with employer group policy) would be:
- guaranteed renewable and non-cancelable (this means the insurance co. can't dump you)
- provides for a benefit of 80% of earnings until age 65
- residual disability benefit: pays partial benefits in the event of partial disability
- "own occupation" definition of disability for at least Y years. After Y years you will only get benefits if you can't work in "any occupation for which you are suited by education and experience". IOW they can force you to take almost any job for which you are qualified and able to perform. In your case, being an attorney, Y should be the length of the policy.
- includes cost-of-living-adjustment (COLA) in benefits so inflation doesn't eat away at you.
- "waiver of premium" so you don't have to pay premiums while disabled

EDIT:
Ask other lawyers for recommendations and find an insurer who offers "executive" policies aimed at attorneys and doctors.

Here's a basic LTD guide.

I'll say it again: not everyone needs life insurance, but almost everyone needs disability insurance.

SIS - Why would a hypothetical twenty-something year old single male with no dependents need a million dollars of term life insurance?

Btw SIS - I've been assuming you understand the basics of evaluating your insurance needs, but if that's not the case, pick up any good financial planning book and review the insurance chapter. Before you shop for a policy you should know what you need.

SiS my man!
"Return of premium" is just marketing wordage for a variation of WHOLE LIFE. It "returns" an accumulated cash value at the end of the investment period.

Put down the bottle and the pills and just say no.

I'm willing to believe that someone has hijacked SiS's account. Possibly loggia's crazy lady.

edit: FWIW, both companies are S&P AA

unknownshopper said:

<< SiS my man!
"Return of premium" is just marketing wordage for a variation of WHOLE LIFE. It "returns" an accumulated cash value at the end of the investment period.

Put down the bottle and the pills and just say no.

I'm willing to believe that someone has hijacked SiS's account. Possibly loggia's crazy lady.

edit: FWIW, both companies are S&P AA
>>




Excuse me.. but do YOU know of anyplace else you can get 7% or 8% equivalent guaranteed on a tax free investment? along with a windfall for your heirs should you unfortunately die? Seems to me that if you are going to buy the insurance anyways.. you might as well use the insurance companies investing leverage to get it for free eventually..

SIS,

If you need life insurance, consider a no-load VUL policy that allows you to invest the premium overage, take loans against that account, and also have a life insurance policy. I remember Fortis has a no-load VUL that looked reasonable, but I'm sure there are other ones as well. Shop around if you need insurance, because you have many options. In a VUL policy, for example, you can let the separate account pay for your premiums when you are older, so you have a way to hedge yourself against estate tax if you grow exceedingly wealthy before you die.

Of course, another solution to dispose of your assets and avoid estate tax is transferring ownership to a LLLP or corp. Or, and I think this is the best solution, you can give them to me <img src="i/expressions/face-icon-small-wink.gif"border=0>

Cheers!

Derffie said:
"lets see ..
for 20 year term you would pay $9800
with premiums back option you would pay $16260
the difference would be $6460 paid or $323 per year or $26.90 per month
if you invested the $26.90 per month yourself for 20 years you would need to earn 8.15% annual interest (monthly compounding) to have $16260.. ( it would have to be a tax free investment )"

I believe this is incorrect...

If you pay the marginal $323 per year for the right to have your full premium repaid at the end of 20 years, then you are facing a negative real interest rate...

The proper calculation is to compare the marginal extra premium to the cash surrender value...for most plans this reaches a maximum when there is approx. 1/3 of the term remaining, but every plan will be different.

The plan I purchased was a 30 year plan, and the maximum cash surrender value occurs in year 22. The rate of return was calculated by analyzing what interest rate would be required to allow the marginal difference in the premiums (return of premium plan vs. traditional term) to achieve the "profit" of turning the policy in at year 22.

For my plan this was 4.34%...still, not bad for a guaranteed return.

dcwilbur said:

<< SIS - Why would a hypothetical twenty-something year old single male with no dependents need a million dollars of term life insurance? >>

#1 to put a policy in force in case I become uninsurable later
#2 to help elderly parents payoff mortgages if they inherit property unexpectedly early

aynrandnovel
you may be right in your case SIS only said "they return your premiums" which I took to mean they return the total dollar amount of all the money you paid them

assuming the $9800 in premiums are going to be paid for the insurance coverage anyways and you are not getting that money back...

the question then becomes can I do better with that extra $6460 than they can ... ie what rate of return do I have to get on a monthy deposit of $26.90 over a 20 year period that I am investing on my own to have a final balance of $16280 to match what the insurance company is going to give me at the end of the 20 years

using a financial calculator to do the math as if it was a simple period deposit in a saving account... it shows you would need a return of 8.15% annually and this return has to be in a non taxed account or you would have to earn much much more to have $16280 at the end...

Derffie said:
"you may be right in your case SIS only said "they return your premiums" which I took to mean they return the total dollar amount of all the money you paid them"

Correct, if they return the premiums you paid over the twenty years, you have earned a negative real rate of return...

For example, take year one... He pays $813, they return the $813 after 20 years. Not only did you not earn anything, you have also incurred the opportunity cost of what you could have done with the $323 marginal difference. The advantage only comes if there is a way to cash out early for more than the marginal amount of premiums paid to that point...

aynrandnovel

you are ignoring the value of the life insurance policy protecton that is purchased..

that value is real just because you dont die it doesnt mean you didnt receive that protection

so while its true you only get back what you put in dollarwise. you also got that protection...

if he only pays $9800 then he gets an even return ie 0 dollars and the value he puts on the protection he bought... which he values at $9800 since he was willing to pay that much for it.. it is true he lost the possibility of putting that $9800 into an investment but then again he wasnt investing he was purchasing life insurance protection...whixh his lost investment opportunity doesnt give him

the only issue is paying $6460 more... so that the equation is $9800 and $6460 deposited over 20 years = 20 years of insurance protection and $16260 in 20 years
since $9800 and 20 years of insurance protection are equivalent then it simplifies to
$6460 deposited over 20 years = $16260 in 20 years and thats where the need for a 8.15% return is shown

8% is basically a long term whole life investment payoff.

Without getting into other investment alternatives, let me just say again ... this appears to be a modified whole life product.

As has been posted many times before, whole life can make sense for a lot of folks.

I am not making any judgements here about whether whole life is a good investment vehicle.

But let's not pretend this product is anything other than what it is.

Since the entire whole/term/UV life insurance topic is the 3rd rail of finance topics, I'm out of here.

SUCKISSTAPLES said:

<< dcwilbur said:

<< SIS - Why would a hypothetical twenty-something year old single male with no dependents need a million dollars of term life insurance? >>

#1 to put a policy in force in case I become uninsurable later
#2 to help elderly parents payoff mortgages if they inherit property unexpectedly early
>>



I guessed that your real estate holdings had something to do with it. Just didn't want the average twenty-something who might be lurking here to think they needed that much insurance.

On the topic of life insurance, can someone help me understand imputed income in relation to life insurance. I noticed the following this morning in the description of my life insurance coverage:

The total value of your company-paid, basic employee life insurance provided by <my employer> that exceeds $50,000 is considered imputed income to you and is therefore taxable. For example, if the total value of your company-paid, basic employee life insurance is $150,000, imputed income is calculated on $100,000 of your life insurance.


I hope this means that my employers contributions to premiums for life insurance in excess of $50K are considered taxable income. Am I understanding this correctly?

TheGrayMan said:

<< On the topic of life insurance, can someone help me understand imputed income in relation to life insurance. I noticed the following this morning in the description of my life insurance coverage:

The total value of your company-paid, basic employee life insurance provided by <my employer> that exceeds $50,000 is considered imputed income to you and is therefore taxable. For example, if the total value of your company-paid, basic employee life insurance is $150,000, imputed income is calculated on $100,000 of your life insurance.


I hope this means that my employers contributions to premiums for life insurance in excess of $50K are considered taxable income. Am I understanding this correctly?
>>



Yes, you are correct. The more you make and the more benefits you have, the more difficulty you will have tying your W-2 back to your actual income!

dcwilbur said:

<< Yes, you are correct. The more you make and the more benefits you have, the more difficulty you will have tying your W-2 back to your actual income! >>

Thanks for the reply and confirmation. I was a bit concerned that the value of the unused policy was somehow going to appear as taxable income. Glad that's not the case

Return of premium policies count on one thing that is not being discussed here: a major problem is that if you don't pay for your term policy after 60 days of bill expiration date it lapses. Then you can no longer get the premium back.
If you buy regular term then this is OK because you did not have additional sum tied into the policy and it can lapse with less losses.
Don't forget that you are tying yourself for up to 20 or 30 years in such term policy. Life needs, life style and income change over time and you may regret your decision later. Based on this you will be better off if you just get the basic term and invest the extra $$$ in the market. This way your money will always be yours even if you change your mind on insurance.

SIS WHAT DO YA THINK OF THIS?

all good points...once again, basic term wins out.

HukaShakaHukaHuka said:

<< Return of premium policies count on one thing that is not being discussed here: a major problem is that if you don't pay for your term policy after 60 days of bill expiration date it lapses. Then you can no longer get the premium back.
If you buy regular term then this is OK because you did not have additional sum tied into the policy and it can lapse with less losses.
Don't forget that you are tying yourself for up to 20 or 30 years in such term policy. Life needs, life style and income change over time and you may regret your decision later. Based on this you will be better off if you just get the basic term and invest the extra $$$ in the market. This way your money will always be yours even if you change your mind on insurance.

SIS WHAT DO YA THINK OF THIS?
>>



if you could do this as a single payment policy where you pay the full premium ( obviously reduced ) in one payment right at the beginning then the issue of missing a future payment would be moot....

I researched the whole versus term pretty extensively at one time. It all boiled down to if you are not good at saving and investing money whole life is not a bad idea. Otherwise, save your money and go term. At your age you could probably get a good policy that could be guaranteed not to change up to the age you decide you no longer need it. Thats what we did.

I hope you're not thinking about getting married.

While we are on this -- does any one know where to research ratings of life insurance companies?

My brother mentioned he got a solicitation from Seabery&Smith with a seemgingly good rate: 300K 15yr term for about $96/year premium, premium doubled if including accidental death benefit (i.e, double the payout if died in an accident). I don't know this industry and have never heard of Seabery&Smith.

IIRC S&S is an insurance brokerage, not an "insurance company" per se.

They were selling somebody else's paper. And the name of that company should have appeared somewhere in the paperwork.

BTW - The old "double indemnity" clause is a piece of insurance marketing puffery from 70-80 years ago. Yes, it does pay off double. BUT scare stories not withstanding, you are far, far, far more likely to die either from sickness or old age than an accident.

I wouldn't pick a life product solely on the basis of the accidental death benefit.

I've been in arguments with others about that clause, but nothing I've heard has changed my opinion.

Which company would you recommended to purchase short-term and long-term disabilities?

Also, my BIL was just laid-off. Is it too late for him to purchase disability coverage?

Have BIL contact HR about converting his group DI to individual DI.

Quotes for conversion are usually pretty competitive, but he can always take his conversion quote to an agent to see if the agent can do better.

Personally, I would skip the short-term DI and only purchase long-term, own-occ DI.

If he doesn't want go the conversion route (I think mentioned that the rate was pretty high), would he be able to obtain an individual policy, given that he doesn't have a job anymore? If he would, what would the policy based his coverage amount on? His old salary?

SIS,

where did you finally buy life insurance ? Where do you have LTD/STD ?

Skipping 22 Messages...
bump



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014