Question:
What percent of term life insurance policies pay out?
Cindy
2009-03-14 10:54:43 UTC
I want to leave some money for my children once I am gone. Is it better to buy a Term Life Insurance policy or to invest that money where it will earn interest? What are the odds of a Term Life Insurance Policy paying out? What percent pay out? I'm thinking it is probably very low. So I am leaning more toward investing the money instead of using it to pay premiums. It seems insurance is more of a gamble than an investment. I don't want to give my money to an insurance company for 20 years and have my children get nothing in the end. Can someone with knowledge of the insurance industry please give me a straight answer to this?
Ten answers:
james m
2009-03-14 11:46:56 UTC
Statistics say that only 2-3% of death claims are settled by term policies.



My suggestion is to call a LOCAL agent and have him/her do a free Financial Need Analysis (FNA), or other Total Need Program, to help you understand the differences in term and permanent, and to make an educated decision as to how much insurance you need, and what type.



I'm not going to argue which is better, term or permanent, at this point. That would be up to you after receiving knowledge with your FNA.



You might want to consider a combination of permanent and term, to make sure it's there when you need it.



The FNA will also help you determine if you need disability income insurance, or an Individual Retirement Account.



Statistics prove that risk is greater that one will be disabled prior to 65, rather than death.
Chris C
2009-03-14 15:04:51 UTC
As mentioned, stats show that only 2-3% of term policies pay out. In most cases they are cancelled or expire before a claim is ever made.



If you are looking to make sure you have something to leave the kids 20-30 years from now, Whole Life insurance is the only way to go. Based on the information you provided this is what you need. That being said, it is important to meet with an liscensed insurance broker to fully assess your needs to make sure that you are not buying too much whole life if you don't need it, when term insurance can cover some of your needs. Only deal with a broker who has access to multiple companies and both term and whole life. One trick ponies will only give you the reasons to buy thier policy and not give you well rounded advice that suits your situation. They will just try to squeeze a square peg into a round hole...



Term has a specific purpose. A temporary need, like covering debts that will go away eventually, making sure young children will get taken care of until they can care for themselves, etc. The catch is you have to die within a specified time period to get anythign out of the policy.



Whole Life also has a specific purpose. It's for long term needs, such as leaving a legacy fund or money for your family, covering final expenses, etc, no matter when you die.



The Buy Term and Invest the Rest theory is severely flawed. It's not horrible, you just need to be careful with it and make sure you have a very well rounded plan with safety nets incase something bad happens. Just ask any 60 year old today that started with this strategey 30 years ago. Right now, their insurance premiums on their term insurance would be a horrendously high premium if they still have it, and all the rest that they invested is worth as little as 30% of what it was planned for and they are going into retirement withdrawing their money for a loss with no safety net if something severe happens to their family. For those that used this strategey and thought they were self insured enough and cancelled thier insurance, will be leaving no where near the amount of money they thought they would. The returns on this strategey are completely shot. When it's a Bull Market this strategey looks like gold, just like any other investment strategy, but when the bear markets and recessions hit, you find out whether your strategey is really good or just a flash in the pan when everything is doing well.
2009-03-14 11:11:42 UTC
Here's a different question.



Suppose you own a house - free and clear. It's your house. Let's say, the house is worth $500,000.



Now, let's assume that the odds of a total loss on the house is 1 chance in 500, and that insurance costs $750 per year. Would you buy the insurance?



Returning to your original question, you should purchase term life insurance in the amount you feel is necessary to provide money in the rare case that you should die during the life of the term, especially early in the term. If you think you will accumulate sufficient money in 10 years, then don't buy a 20-year term policy.
GREG
2015-03-25 16:45:36 UTC
If you have a Permanent Need get Permanent Insurance. If you have a Temporary Need get Temporary Insurance.



Licensed Insurance Professional, MO
2016-03-01 05:32:12 UTC
What can I expect to pay for a life insurance term policy for 50k to a business partner in the event of an untimely death.
2009-03-14 11:07:32 UTC
The primary purpose of life insurance is to replace your lost income for people who depend on it - not to pass on assets to heirs. If no one depends on you for financial support, then you probably don't need life insurance.
2016-08-31 12:16:00 UTC
I always spend my half an hour to read this blog's posts daily along with a mug of coffee.
Austen
2009-03-14 11:23:30 UTC
I wouldn't take a term plan at all. If you are unlucky enough not to die within the term you won't get any Money at all !!
2014-12-28 16:39:17 UTC
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2016-07-22 12:01:35 UTC
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