What about life insurance?

Question

What is so important about it? What are some problems about it? Any tips or experience you want to share?

Answer 1

Wow, some really dangerous opinions in here!



Life insurance proceeds are there to provide protection for your dependents in three basic areas:



1) Funds made available to pay final costs (burial, medical bills, etc.) and debts (mortgage, credit cards. etc)



2) Funds to make up the difference between the household income before your death and what it would be following your death.



3) Funds to invest to meet the savings goals you would have been saving for had you not died. (Think children's education)



Not everyone has needs in all three areas and like Lady Death alludes to in her answer, you can accumulate assets to offset these needs. This is referred to as Self-Insuring. In an ideal world, we would all quickly accumulate wealth sufficient to fully protect our families while not accumulating enough wealth to fall afoul of estate taxes. In reality this is not always the case, hence the continued need for life insurance.



When you first apply for a policy, you go through an intense process called underwriting. This is when the insurance companies underwriters tak a very indepth look at you health (through blood and urine tests, questioning you, questioning your doctors and requesting information on you from the Medical Information Bureau [Think of the MIB as a Credit Bureau that tracks your health]) and your financial situation to determine IF you are insurable and how much your premiums are going to be.



When people say you should only buy term insurance, be skeptical. It is a very unobjective thing to say when they know NOTHING of your situation. Term insurance is an easier sale and some salespeople follow the path of least resistance rather than providing the best objective advice to their clients. Buy Term and Invest the Difference- this assumes that you have the discipline to invest the difference rather than spend it, that you accumulate enough assets to self insure before the term period runs out, and that you don't accumulate too much with respect to estate taxes. Otherwose, you find yourself in the unenviable situation of having to go through underwriting again to put another term policy in force, with premiums based on your then current age, of course. This is particularly bad if your health has deteriorated in some way, jeapoardizing your ability to get coverage. Some may say you could convert the policy to permanent insurance at that point but that negates the tenents of the startegy and why put a permanent policy in place then, having given up all those years when you could have been funding it?!?



My best advice is to consult a financial planner (AVOID anyone who tells you what type of insurance to get without asking any questions of you and run away from anyone who uses a "multiple of salary" approach to determining your need) and have a survivorship analysis completed. Your planner will educate you on the different types of insurance and develop an insurance portfolio to meet your individual situation. It may be that term insurance is the right thing for you right now; maybe not. For anyone to say it is without the facts is not very intelligent nor prudent.

Good Luck.

Answer 2

Term insurance -where insurance is purchased for a specified period (typically a year, or for level periods such as 5, 10, 15, 20 even 25 and 30 years) where a death benefit is only paid to the beneficiary if the insured dies during the specified period. on survival nothing is payable Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value.

Answer 3

Life insurance is not for the insured, but for their dependants. One would not want their family to lose their home and savings due to burial expenses and hospital bills in the event of an untimely death. Life insurance is one of the things a responsible and successful person has to protect his/her family.

Answer 4

Get it while your healthy and young. Only buy Term Life Ins (the kind that pays if you die). Whole Life Insurance is much more expensive and you can invest better. You really only need it if you have kids (or a very dependent spouse).

Answer 5

In my opinion it isn't worth it unless you can get it cheap from work. If you have people that depend on your income and you believe you may die then it may be worth looking into.

Answer 6

Get it to secure yourself financially only if you can't take care of yourself and don't have a plan "B"