mcaulfield
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About 19 years ago when I was 4 years old, my father purchased variable appreciable life insurance for me. When I turned 21, the value of the policy became $75,000. The current premium is $25.10 monthly and is slated to stay at that rate forever (as I understand it). I learned about this insurance plan when my father called me a few days ago and told me about it. He has a bill that he needs to pay (it's a long story, I don't even know what it's for because I asked him not to tell me) and wants to cash in the plan to pay for the bill. The current cash-in value of the plan is $3,861.55. He has been paying the premium since 1992. I will be taking over the responsibility of the account from now on. If possible, I'd like to keep the considerations of obligations to self or to family out of the discussion. To keep things simple, imagine I am asking "Should I buy a health insurance plan that costs $25.10 a month for $75,000 coverage?"
I'm 22 years old, in good health, in college and working part time with no dependents. Is it in my financial interest to "buy" this life insurance plan and get more life insurance when I have dependents in the future? Or is it overkill at this point in my life and I should wait until I have dependents?
Thanks in advance
- Miller
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Sun Apr 17, 2011 7:14 pm |
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oldguy
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quote:
Should I buy a health insurance plan that costs $25.10 a month for $75,000 coverage?"
Three things -
1. $301/yr is very expensive for only $75k of coverage.
2. $75k of coverage is almost worthless in terms of the amount of coverage you will actually need to care for your dependants some day. To allow your dependants to live 'normally' from ages 0 to 22, and pay for their college, you'll need $750,000 to a million. The $750k, invested in 5% bonds, would spin off $37,000/yr for your family - so the surviving spouse would need to work full-time, and spend much of the $37,000/yr on childcare. (A standard 30-yr million dollar term policy costs about $250/yr.)
3. You currently have no dependants - so no need for life insurance.
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Sun Apr 17, 2011 10:40 pm |
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mcaulfield
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Excellent, this answered my question completely. Thank you!
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Mon Apr 18, 2011 1:17 am |
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richard96
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In my experience it is cheaper getting quotes online. Some of the top insurance companies offer discounts when ordering online, because it is less work for them. But to be safe you could compare rates online, pick the best offer and try a local agency to see if they can match it or do better: http://www.quotes-center.com/life-insurance-premium-calculator
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Mon Apr 18, 2011 11:42 am |
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littleroc02us
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Unless you have a family to take care of you don't need life insurance. So all you get is 75k for paying 25 dollars. Not a very good value. Go to Zander Insurance and you can fill our their questionairre for Term life insurance. I am 40 and I filled it out and I can get $500,000 for $30 a month for 20 years. Much better deal. Term IMO is better because in 20 years I should be financially set with a paid for house and no needs for life insurance because the kids will be out of the house and I will have no debt and a million or so to play with by age 60.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Mon Apr 18, 2011 1:24 pm |
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clintdavis
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Cash-Value life insurance (whole, universal, etc...) is quite a horrible waste of money.
He's paid in $25/month for 19 years now and the policy is worth only $3,861. If you die, your beneficiary will only receive the $75,000.
Let's assume he had instead invested that $25/month for the last 19 years. The 70 year stock market average rate of return is about 11.5%. So, let's assume he averaged even 10% annually. That account would now be worth over $16,000, instead of $3,861.
Life insurance makes a horrible investment (as you can see). I would cash out this bogus rip-off insurance and use the money to pay off debt, establish an emergency fund, or put toward a major purchase.
But, you do need to have some life insurance once you have a wife and/or kids to provide for. You will want to look for 15-20 year level term life insurance. For a 30 year old male in good health, 1 Million dollars of life insurance will only cost you about $25/month.
Do you see the difference?
$25/month can buy you $75,000 in life insurance and give you basically NO interest as an investment.
Or, the same $25/month could buy you $1,000,000 in life insurance.
In Freedom,
Clint
http://www.daviscoachingsolutions.com
clint@daviscoachingsolutions.com
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Fri Apr 22, 2011 5:47 pm |
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jimmyjhonson
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Mon Apr 25, 2011 1:06 pm |
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