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GWENEPOOH | Purchasing life insurance? |
I have adult family members that I want to purchase life insurance for. A $10,000 policy each to cover funeral expenses. I know that if anything happens to them I will be responsible. I'm trying active solve the problem before it occurs. |
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Doing the Right Thing
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I believe that everybody needs life insurance, except for kids. For example, if someone is single and really don't contribute money to anyone (other than himself or herself), then no one is dependant on his/her income. So they may or may not need life insurance, depending on their financial needs and whether their death will have a significant impact on the family's income.
If someone is married, then they definetly need life insurance, especially if they have kids. God forbids something happens to either parent, the kids will be able to maintain the same life style.
Now a $10,000 policy is a very small policy and does not provide adequate coverage. $10,000 may cover funeral expenses, but then it will leave the family or whoever is dependant on his/her income struggling to find a way to cope with the income loss. The person may have lots of debt such as credit cards and mortgages, so they going to need more than $10,000 coverage.
How much coverage really needs depends on their financial needs. Financial experts people should get coverage of 8-10 times their gross income. For example, if you make $40,000/year, then you need coverage of around $400,000. To find the exact amount of coverage, you would need to do a financial analysis.
Now the cost for that $400,000 depends on what kind of life insurance product you get, how old you are, height and weight, sex, medical history, and the results from the medical exam. I have always sold term insurance because it is inexpensive and provides the right amount of coverage. Another reason I sell term insurance is because it is better to keep savings/investments separate from life insurance, especially when it is in a tax-deferred account like IRAs. Plus people mistaken that term insurance expires. They don't expire. Term insurance provides level premiums for a fix amount of years such as 20 years and after that, it goes up every year or 5 years. The day they expire is when you stop paying premiums or when you reach age 100.
Anyway, for a 30 year term policy with $400,000 coverage for a 30 year old, the annual premium can be around $460. If this was whole life, lets say its going to be more than a $1000/year.
If this was a family with a huband and wife, I put them together in a single policy with a spouse rider. If I were to sell the policies separately, it would cost more because of the policy fees. It doesn't make sense to me for a family to have bunch of life policies. |
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Financial JUSTICE
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buy term and open a retirement account if you haven't already and invest |
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larsgirl
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Go talk to a couple of local funeral homes.. they have plans that you are describing...specifically for this purpose.
Good Luck |
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529s.com
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If you are looking to purchase policies that are designed to cover funeral expenses, you'll want something that lasts as long as the insured lives. A term policy will only provide coverage for 10, 20 or 30 years. What happens if this person lives to be 95 years old? Purchase either a small whole life policy or a funeral policy. This is a perfect example where whole life insurance is much better than term and is needed to fit the situation. |
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J. B
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Planning to purchase your funeral with Term Life Insurance" is similar to planning to purchase your next car with your auto collision insurance. It might happen...but it's a terrible plan.
Term insurance is not meant to be permanent coverage. If you keep renewing it your whole life you will not be able to afford the premium when you get older. Plus you will waste a lot of money.
Term insurance is great for what it is designed for...temporary coverage. It's usually used as replacement of income if someone dies at a young age (during their working years)
You will need whole-life insurance if you want to use insurance for your funeral expenses. But remember whole-life refers to the coverage NOT the payment. A lot of people confuse that part (even some agents I know.)
Keep inflation in mind. You should figure around 4.5% annual inflation of your funeral price (based on past history.) So make sure your policy will cover $10,000 today ...$15,529 in 10-more years...$24,117 in 20 more years etc. In other words you want an increasing benefit policy.
Also keep your payments as short as possible (never buy a pay-for-life policy.)
If you buy your policy through your funeral home, you will get a guarantee that you will never have to buy more coverage. Or you can buy it anywhere and take the risk yourself.
And finally, Do not buy a policy with less than an A- rating through AM Best.
You are doing a good thing for your family. Everyone should make these arrangements but many just never get around to it. Good luck. |
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Reenie
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This site has some helpful information about purchasing life insurance. You might find some help here. Good luck! http://insurance.divinfo.com/ |
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emaaaazing!
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I would have to agree with the penguin above.....Northwestern Mutual is a fine company with GREAT agents.
They do not advertise much and are dubbed "the quiet company" because of this.
Google them to find an agent in your area. Trustworthy and respectable. |
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Hadley
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There are several types of life insurance to consider when purchasing to provide funds for final expenses for adult relatives.
You want to make sure the policy will remain in force for the life of your relatives - that it will not expire within a reasinable number of years.
If your adult family members are over 50, you may want to consider Globe Life Insurance.
Globe Life offers you up to $30,000 of life insurance with no medical exam required. Globe Life is rated "A+" (Superior) for financial strength by A.M. Best.
You just answer a few simple questions and get a quote online. You can apply online and get approved in about 5 minutes. There's a 30 day money-back guarantee. Globe Life has more than 2.5 million satisfied policyholders.
I hope that helps you find affordable life insurance to cover funeral expenses for your adult family members.
To learn more about Globe Life, visit http://www.term-life-online.com/globe-life-insurance.html
Best of luck to you! |
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hightechchic
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One thing I'll point out, as I've seen several well-intentioned family members try to accomplish the same... under Federal law, the INSURED is required to be present at the time of writing (and must show proof of identity.) This may not be an issue; however, if your family members have never purchased life insurance for themselves, there may be some resistance from them. (I know it sounds crazy, but you'd be surprised.)
At any rate, assuming you can overcome that hurdle, a $10,000 whole life policy is probably your best option. Yes, lots of people buy term insurance, but in this case, you're not looking to replace income, you're trying to make sure that you're covered for the final expenses. (And by the way, having recently buried my own grandfather to the tune of $17,000 I have to say you might be aiming a bit low on the amount.) Some else mentioned Universal policies and I generally think of them as an excellent option (in simplistic terms, they work like term life insurance on steriods -- they typically extend past age 100, though they do not build cash value.) However, in this case, I don't think Universal will be a good option, because most companies have a $50-100k minimum face amount.
There are lots of companies that offer small whole life policies. I'm not going to recommend any one in particular, because I don't want to try to "sell" you on anything (and also because the options vary by state.) Here are a few tips, though:
Research the company. Any company that can't pay the claim when the time comes isn't worth fooling with. (You can find info on insurance companies' financial status on the AM Best web site; see link below.) Beware of any company with a "B" (or lower) rating on the AM Best web site, or any with a "negative" outlook. This could potentially mean that they would have a difficult time paying your claim.
Know your options. You don't say if the family members in question have any pre-existing conditions and/or list their ages. If they're in stellar health and under the age of 55 or so, you'll have plenty of options. If they're over 60 and/or have health issues, those options will start to dwindle pretty quickly.
Beware of graded/modified benefit (for someone in good health.) It may be the only option for someone who would otherwise be unable to qualify for any type of coverage, but you do want to be aware of the risks. Graded/modified benefit whole life typically paid out a reduced amount of the face value during the first 2 years if someone passes away from natural causes.
Beware of "guaranteed issue" policies. They may sound terrific for someone in not such stellar physical condition; however, they can really cost you a lot over the long haul. These policies don't turn anyone down and they do stress that you can't be singled out for a rate increase. However, you will likely see a rate increase every year (particularly as the insureds age) as long as they increase the rates for everyone in the same rating class. Most whole life insurance has a FIXED premium (and that's one of the big benefits of buying it sooner rather than later.) If any family member in question has serious health issues and can't get other coverage, this may be the only option; however, it should NEVER be the first option you consider.
Be certain that you are listed as both the policy owner and the beneficiary. Obviously, we all hope that family squabbles wouldn't turn ugly. However, as we age, it's not unusual for family members who are being placed into a nursing home, or who are no longer thinking clearly to attempt to change beneficiaries in order to "punish" the person they think is treating them poorly. If you're listed as the policy owner, they couldn't make that change without your authorization. |
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Bright Future Penguin
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Hi, your friendly insurance guy here, again!
Lots of responses so far. I'll summarize my views along with the best of what I've seen here so far.
First, Suzanne means well. Her intentions are good, she is trying to save you money, but she's giving advice without knowing your situation. She recommends Term insurance. Normally that is your best starting point. In this case it's not because, as another poster mentioned, you don't know for sure how long your parents will live. Because of that you need permanent insurance. Term is not permanent. Universal, Variable, and Whole Life are permanent.
Second, start with a Universal Life policy set up in such a way that it has a guaranteed No-Lapse provision. This will cost more than term, but a lot LESS than whole life.
Third, do not use Variable Life because, as its name implies, its value can vary. If the value has dipped at the same time your parents die it will fail to serve its purpose.
Fourth, avoid Whole Life because it tends to cost 8-12 times as much as Term and 3-5 times as much as Universal.
Side note: MassMutual, New York Life and Northwestern Mutual are basically the three most financially stable insurance companies in America. Each offers a very solid, guaranteed no-lapse Universal policy. Find a good, independent local broker to help you find out which will work best for you.
Fifth, Look at $20,000 to $25,000 each. Funerals are costly and will only become more so. If your parents live another 10-15 years, $10,000 each probably won't cover much.
Sixth and Finally, consider shopping around the local funeral homes to find one that will do a pre-purchase. In some cases, you can get them to contractually agree to provide the casket, embalming, services, cemetery plot and headstone as part of a package that you pay for today, or purchase by assigning the life insurance premium as payment (making them the irrevocable beneficiaires).
Best wishes and good luck. You're doing a great thing by accepting the responsibility for your parents and taking control of the situation. |
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Suzanne: YPA
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I think it's great that you would do this. Here are a few pointers:
1) Purchase term policies, which are much, much cheaper than whole life. Avoid "Universal Life" and "Variable Life" policies like the plague. Don't be suckered in by a greedy agent who trys to sell you a policy based on a predicted huge cash value.
2) Consider purchasing policies with face amounts of at least $20k. Nowadays, the average funeral costs at least $15k. The cost of a headstone or marker and a burial plot are separate.
3) While you plan to be the premium payer, you should also be the policy owner. Make sure you are listed as such on the application. If you aren't, then the insured is the owner, regardless of who pays the premiums. If any of these relatives must go into a nursing home, they will be required to "spend down" all their assets, including life insurance cash values, if any. (Of course, if you purchase a term policy, this isn't an issue.) In that case, the policy will have to be cash-surrendered and your efforts will have been wasted.
EDIT: "529s," I guess you're unaware that term policies are RENEWABLE. They're also much less expensive than a whole life policy. Why would anyone put so much money into an agent's pocket if they didn't have to?? |
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