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Old 10-20-2010, 11:58 AM   #41
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You're right, I'm wrong, never had any experience with any of these things. Everyone gets cheaper term insurance as they get older, nobody needs more than a 10-year term policy at a time, etc.

Thanks for correcting me and letting me see the light though.
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Old 10-20-2010, 12:05 PM   #42
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dgoldenz, I'd like to thank you for posting your blog comments which do have merit as explanations for reasons why a small subset of people do need to consider these types of policies, especially for estate tax planning purposes.

While I hold term insurance in modest amounts because I lack dependents, I do see folks that have do have need for permanent life insurance. As in most things, there is no one-size-fits-all.

I can appreciate the feelings of those who were taken in by cheeseball salespeople, but it is still up to the buyer to beware. Having reliable people on your team (CPA, estate tax attorney, and possibly a financial advisor not in the insurance business) can help those who do have need for permanent coverage be sure they are buying the right coverage for those needs and not excess. And for the vast majority of us, there is no need for this coverage.

As Khan pointed out--if no one is depending on your income, why carry life insurance? I've been unwinding some old policies of my FIL and am thoroughly disgusted that he's been paying on these for so long (like 73ss454) and dismayed that in his ignorance, he was ripped off on lousy products.

Edit to add: my term policy costs went down, actually--we quit smoking and got a better rating!
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Old 10-20-2010, 12:09 PM   #43
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As Khan pointed out--if no one is depending on your income, why carry life insurance?
If there are potential estate tax issues it can still make sense, as you may need the cash to pay the taxes without liquidating the estate. If there are no estate tax issues I would tend to agree.
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Old 10-20-2010, 12:28 PM   #44
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You're right, I'm wrong, never had any experience with any of these things. Everyone gets cheaper term insurance as they get older, nobody needs more than a 10-year term policy at a time, etc.

Thanks for correcting me and letting me see the light though.
Nah - you still don't see the light (and you know my comments were on the money). FYI - you shouldn't assume people on this forum have never walked a mile in your shoes
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Old 10-20-2010, 01:03 PM   #45
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dgoldenz, I'd like to thank you for posting your blog comments which do have merit as explanations for reasons why a small subset of people do need to consider these types of policies, especially for estate tax planning purposes.

While I hold term insurance in modest amounts because I lack dependents, I do see folks that have do have need for permanent life insurance. As in most things, there is no one-size-fits-all.

I can appreciate the feelings of those who were taken in by cheeseball salespeople, but it is still up to the buyer to beware. Having reliable people on your team (CPA, estate tax attorney, and possibly a financial advisor not in the insurance business) can help those who do have need for permanent coverage be sure they are buying the right coverage for those needs and not excess. And for the vast majority of us, there is no need for this coverage.

As Khan pointed out--if no one is depending on your income, why carry life insurance? I've been unwinding some old policies of my FIL and am thoroughly disgusted that he's been paying on these for so long (like 73ss454) and dismayed that in his ignorance, he was ripped off on lousy products.

Edit to add: my term policy costs went down, actually--we quit smoking and got a better rating!

Why would you have any insurance if you have no dependents? I am divorced with a 15 year old daughter and I don't have any life insurance because I know all my assets will pass to my daughter's trust. I don't see the point in paying for insurance anymore?
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Old 10-20-2010, 01:12 PM   #46
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Why would you have any insurance if you have no dependents? I am divorced with a 15 year old daughter and I don't have any life insurance because I know all my assets will pass to my daughter's trust. I don't see the point in paying for insurance anymore?
What if you had a family business that was large enough that your daughter would pay estate taxes on it when she inherited it? Seems to me that if she didn't have the cash to pay the taxes, the other option is to sell or liquidate the business. I doubt that's what you would want, is it? So it is, going back to what I said earlier -- if you have a large enough estate that inheritance taxes are likely, and if paying the taxes required liquidating assets, then life insurance which could pay the taxes might make sense.
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Old 10-20-2010, 01:15 PM   #47
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Oh, easy. I have a husband who would like to receive a windfall if I die so he can drown his sorrows in a warm, Caribbean climate for a year or so. Likewise, I need to be able to find an attractive cabana boy.
Ours is 20 year, due to lapse in another 10 years. It was pretty cheap, and when we bought it, we still had a mortgage so it was (all kidding aside) intended to help the surviving spouse pay off the house.
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Old 10-20-2010, 01:41 PM   #48
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What if you had a family business that was large enough that your daughter would pay estate taxes on it when she inherited it? Seems to me that if she didn't have the cash to pay the taxes, the other option is to sell or liquidate the business. I doubt that's what you would want, is it? So it is, going back to what I said earlier -- if you have a large enough estate that inheritance taxes are likely, and if paying the taxes required liquidating assets, then life insurance which could pay the taxes might make sense.
If you had a family business that was large enough that your daughter would pay estate taxes on it when she inherited it - and she didn't have the cash to pay the taxes - you've failed your family by not getting with your business advisors and creating a bullet-proof succession plan to avoid that scenario. Your business advisors also failed you....
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Old 10-20-2010, 01:44 PM   #49
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If you had a family business that was large enough that your daughter would pay estate taxes on it when she inherited it - and she didn't have the cash to pay the taxes - you've failed your family by not getting with your business advisors and creating a bullet-proof succession plan to avoid that scenario. You business advisors also failed you....
There are multiple ways to handle this. Having enough insurance to pay the taxes upon inheritance is one way. Maybe not the optimal way, but it is a way, and you've really only "failed" if you have no way to pay the taxes upon your death. I know many people hate insurance and insurance companies, but really, having insurance to pay the tax bill is NOT a "failed" financial strategy.

Not having *any* way to pay the taxes and being forced to sell or liquidate the business, on the other hand, IS a fail.
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Old 10-20-2010, 01:57 PM   #50
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There are multiple ways to handle this. Having enough insurance to pay the taxes upon inheritance is one way. Maybe not the optimal way, but it is a way, and you've really only "failed" if you have no way to pay the taxes upon your death. I know many people hate insurance and insurance companies, but really, having insurance to pay the tax bill is NOT a "failed" financial strategy.

Not having *any* way to pay the taxes and being forced to sell or liquidate the business, on the other hand, IS a fail.
I for one don't hate insurance - all of its forms have earned their place in this world, and deserve to be correctly represented where their real marketable value lies, and not misrepresented as an savings investment vehicle (it is really a hedging tool for betting against your life - kind of like annuities).

If you own a family business that potentially faces inheritance taxes, you should have business advisors that advised you to place your business in an LLC, or FLP and to start transferring the assets ASAP (but not the control of them).
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Old 10-20-2010, 02:08 PM   #51
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The product many people really need is an option contract that would allow them to buy insurance in the future at a price determined today by the current risk. We actually had a faculty member who studied this issue.
It was essentially buying insurance against the risk of becoming uninsurable. The math was impeccable but the industry was uninterested.
Did he present an "impeccable case" as to how the insurance companies would reinsure that kind of longevity risk? They probably could, but the premiums would be so high noone would buy it, kinda like trying to sell LTC to a healthy 40 year old..........
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Old 10-20-2010, 02:10 PM   #52
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If there are potential estate tax issues it can still make sense, as you may need the cash to pay the taxes without liquidating the estate. If there are no estate tax issues I would tend to agree.
Trusts do not remove ALL estate planning issues.......
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Old 10-20-2010, 02:20 PM   #53
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You can almost believe that the people who sell this crap actually think people should buy it. But really it's all a scam to line their pockets and rip us all off.

fritz, you are correct, it's all double talk.
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Old 10-20-2010, 02:23 PM   #54
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I believe most term insurance policies are dropped in favor of a more competitive rate with another company - just like shopping for auto/home insurance.
Actually, does not happen much in the real world. If you are 7 years into a 20 year term, you can't merely "swap out" for a better deal. You are thinking of this like car insurance, you are forgetting about underwriting with regards to health changes, actuarial tables, etc. A car is just a car, so it is apples to apples, not so with life insurance. FWIW, 96% of all term insurance policies end without paying out. Insurers LOVE writing term, it's like free money, particularly for young healthy folks. It is true whole life policies are much more expensive, but the insurer is on the hook for your "whole life"......

Dave Ramsey is good at many things, but understanding insurance is not one of them...........

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I personally think the comment relating to selling whole life/gul(lible) insurance policies on the premise that people are generally too inept to save for their own future is insulting to this forum, and people in general.
I doubt most of any on here have a whole life policy. Permanent life insurance works very well for very wealthy individuals, because they can transfer wealth efficiently. Multi-millionaires are some of the biggest purchasers of permanent insurance in the world. They are not doing it because they are inept.........

Based on your premise, you should get rid of your homeowners insurance when your house is paid off, get rid of your car insurance when it is paid off, etc.
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Old 10-20-2010, 03:38 PM   #55
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Actually, does not happen much in the real world. If you are 7 years into a 20 year term, you can't merely "swap out" for a better deal. You are thinking of this like car insurance, you are forgetting about underwriting with regards to health changes, actuarial tables, etc. A car is just a car, so it is apples to apples, not so with life insurance. FWIW, 96% of all term insurance policies end without paying out. Insurers LOVE writing term, it's like free money, particularly for young healthy folks. It is true whole life policies are much more expensive, but the insurer is on the hook for your "whole life"......

Why would you think you have to keep a term life insurance policy for its full term and not pick up another that's cheaper? I swapped out of (guaranteed renewable/convertible level term) life insurance policies about every three years or so myself when another opportunity for a cheaper/better policy came along (you know they always come along). You should receive an annual pricing chart showing when you'll be going up in the new policy (the heavier hit is @ 45, 55), so you can determine if the cost now and in the future is worth the swap. You're only "stuck" with your old policy if you're in poor health.

You can also cut your insurance costs if you no longer need as "much" life insurance as you needed when you were younger.

These are the reasons your independent agent usually makes a trip out to see you when your current policy expires (he's not a company agent - he's independent).


Remember - term life insurance is a hedge against your life - you never want it to pay out! You hope to be somewhat financially well off later in life to not carry it (the reason why the majority of people let it lapse, and don't renew it).

Whole life on the other hand, is a contract "for life" - for you to have any chance at getting any of your hard earned money back from having paid "extra" in premiums your whole life - you need it to pay out! (Even then, you have to subtract the cash value from the face value, and you have to die.) They should really call it "Death Insurance"...

Dave Ramsey is good at many things, but understanding insurance is not one of them...........

Has a decent radio show, but don't really follow "debt free" Dave...

I doubt most of any on here have a whole life policy. Permanent life insurance works very well for very wealthy individuals, because they can transfer wealth efficiently. Multi-millionaires are some of the biggest purchasers of permanent insurance in the world. They are not doing it because they are inept.........

But "Death Insurance" is not a great idea for 99% of the rest of us (previously implied as inept)...
Now who's being inept

Based on your premise, you should get rid of your homeowners insurance when your house is paid off, get rid of your car insurance when it is paid off, etc.

No - never implied that - you have. Life insurance is entirely different than auto and home insurance. You may not always need life insurance (and congratulations goes with that scenario), but you'll always want auto and home insurance while you own either of them (defensible action protection, and wealth insurance).
For what it's worth...
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Old 10-20-2010, 10:34 PM   #56
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For what it's worth...
YMMV............
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Old 10-20-2010, 10:35 PM   #57
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You can almost believe that the people who sell this crap actually think people should buy it. But really it's all a scam to line their pockets and rip us all off.

fritz, you are correct, it's all double talk.
UH..ok.........
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Old 10-20-2010, 10:36 PM   #58
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Nah - you still don't see the light (and you know my comments were on the money). FYI - you shouldn't assume people on this forum have never walked a mile in your shoes
Based on your posts, that is exactly what I am thinking.......
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Old 10-20-2010, 10:39 PM   #59
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For what it's worth...
For what it's worth, I'm an independent agent, not a company agent.
For what it's worth, I never meet 90% of my clients.
For what it's worth, I've never had a single complaint.
For what it's worth, I think you are being naive in your assessment of life insurance and how it applies to the general public
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Old 10-20-2010, 10:42 PM   #60
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For what it's worth, I'm an independent agent, not a company agent.
For what it's worth, I never meet 90% of my clients.
For what it's worth, I've never had a single complaint.
For what it's worth, I think you are being naive in your assessment of life insurance and how it applies to the general public
Quit making sense, obviously nobody cares........
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