Term Life Insurance for Parents

[LeBlanc]

Is buying a life insurance policy on your parents ever a "good investment"? I don't know much about term life insurance policies but my father called Select Quote to inquire and they told him that I could take out a $350K policy on him for the following rates:
10 yr - $75/mo
15 yr - $95/mo
20 yr - $120/mo

So what does that exactly mean? To collect on an insurance policy such as this, my father would have to pass during that term...correct? If I paid $17,100 over the course of the 15 year policy and my father did not pass during that time, would I just be out $17,100?

My father is only 53 yrs old and I have no reason to suspect that he won't live for many years to come.

 

[mickeyd]

Is buying a life insurance policy on your parents ever a "good investment"?

In my view life insurance is only a "good investment" for the agent selling the policy. The commission that he is paid will be financially rewarding to him/her.

If you would suffer a financial loss (not an emotional loss) upon the death of your father, a life policy may be in order. Most adults do not have a financial loss on the death of a family member unless they are in business together.

 

[ProspectiveBum]

I agree with MickeyD; there's zero reason to buy term life unless your Dad is somehow supporting you financially. My wife and I each have 20yr - 500k term life policies, purchased when our daughter was born. The purpose of the insurance is just to ensure that either of us could continue to meet our financial obligations (mortgage, college for kids, etc.) if the other passed (since we both work). The term ends in 20 years, when both of our kids will be college age. I definitely don't consider it an investment, just a safe-guard.

 

[brewer12345]

There is a burgeoning industry of [-]sleazebags[/-] investors who buy life insurance on senior citizens. Some of them even go so far as to pay seniors to take out new life policies with the investor as beneficiary (Larry King did this). Generally speaking, unless the insured has serious health issues, these "investors" won't be interested unless the policyholder is at least 70. So even if this unbelievably morbid proposition appealed to you, it doesn't look like a candidate for a great investment.

 

[putty]

This is something that I had been wondering about to. My parents are in terrible financial shape and are barely making it right now on my father's disability and my mother working 50 or 60 hours a week (father 52, mother 44). If one of them were to pass away, the other would literally be up a creek without a paddle. I think my mother may have a small life insurance policy, but with me being the only child of theirs with any kind of money I would be responsible for helping the remaining one and paying funeral costs. How would you feel about a situation like this?

Oh, and OP I apologize if you feel like I am hijacking your thread. Mine seemed close enough to yours to put it here.

 

[ats5g]

Putty,

If your one of your parents would need extra money coming in if the other died, then they probably have a need for life insurance. Term life insurance is pretty cheap. IMO, the first question is how much income does each need to replace if the other dies. For example, if father passes, does his disability go away?

- Alec

 

[putty]

Thanks for the reply ats5g. It's hard to even imagine one of your parents passing away so I can see why all too many people neglect to even think about this. I am going to sit down with my mom and discuss this with them. They live in a very low cost of living area and don't have any extravagant tastes beyond the basic necessities so 25k inflation adjusted would be enough for either of them. But then I wold need subtract out the disability and/or SS to find out how much more they would need.

I am really glad the OP posted this. I think this is something I, unfortunately, need to address.

 

[ats5g]

Thanks for the reply ats5g. It's hard to even imagine one of your parents passing away so I can see why all too many people neglect to even think about this. I am going to sit down with my mom and discuss this with them. They live in a very low cost of living area and don't have any extravagant tastes beyond the basic necessities so 25k inflation adjusted would be enough for either of them. But then I wold need subtract out the disability and/or SS to find out how much more they would need.

I am really glad the OP posted this. I think this is something I, unfortunately, need to address.

FYI - they should have [or can get from ssa.gov] their SS statement showing what their spouse/dependents would get in SS if they died or become disabled.

My in-laws are probably going to get custody of our niece and nephew soon, so I'm going to have a talk with MIL about more life insurance.

- Alec

 

[samclem]

There are definitely a lot of misconceptions and myths surrounding life insurance policies. As an advocate of Allstate Insurance, I suggest taking a look at their Web site regarding the facts about life insurance policies: Life Insurance Facts

Some good info, some info clearly designed to sell insurance. Buying expensive insurance as a means to provide an inheritance to family members (as suggested at the web site) is a poor use of insurance (IMO), but I'm sure it is very profitable for Allstate.

There are lots of good impartial sources of info on insurance.

 

[73ss454]

Tell us Jill, why do you like Allstate Life Ins.

 

[FinanceDude]

There are lots of good impartial sources of info on insurance.

Maybe Jill is an Allstate rep?

 

[FinanceDude]

In order to buy insurance on someone, you have to have an "insurable interest" in that person.

I doubt you need insurance on your father, if you are on your own supporting yourself. Also, only 4% of all term insurance policies pay out..........

 

[73ss454]

FD, ya think? (heh)

 

[FinanceDude]

Glad to know we are "In Good Hands"..........

 

[megacorp-firee]

Insurance should be bought for ... well INSURANCE.
Insurance is NOT an investment, just as auto and home insurance is NOT an investment.
Your father should have term insurance if someone is dependent upon him for their security and well being, ... like a wife with young kids, a sibling or parent that relies upon him for care, or stuff like kids education, if that is THAT important to him.
If he gets free or inexpensive insurance from w*rk, then no problem. I had employer supplied life insurance and bought additional when my kids were younger. Once they got out of college and were working I dropped some of the supplemental insurance but kept the 'free' policies. When I FIREd, I declined to buy the follow on insurance that was offered by the company at cost. My dw has access to all our assets and has a 100% suvivor benefit on my pension. So she is covered.

It's worth repeating, INSURANCE is for security, not an investment. My apologies to the insurance salespeople out there.

 

[lhamo]

If you spend $75/month on lottery tickets, then you might as well switch over to a ten-year term life policy on your father -- the odds are probably better that the insurance policy will pay out than that you will win the jackpot.

I'm not actually joking when I suggest this. We don't currently have life insurance on me or my DH, except for some relatively smaller policies offered through our employers. We have looked at our SS benefits for the surviving spouse, and in both cases the money the survivor+kids would get is more than current take-home pay (we contribute a LOT to retirement accounts off the top). So between assets and death-related benefits, we would all be fine. But I am considering getting term policies for us now because they are relatively cheap, we can afford it, and it wouldn't hurt to have a little more extra padding that might allow a surviving spouse to FIRE if something horrible happened. Kind of like lottery tickets for the fiscally responsible.

lhamo

 

[Fantasm]

Get Whole Life insurance. After 10/11 years the interest breaks even and begins paying for the insurance premiums on its own.
It can be used as an investment vehicle for young people as well, especially when insurance is still cheap to get in your 20's.

You may also want to consider a larger policy, $1MM or $2MM as depending on when he passes, the payout will still be worth it -- as long as you can afford the monthly fee's for at least 10/11 years (at which point the interest earned breaks even on premiums)

 

[brewer12345]

Do we have a link to the forum up at some insurance agent website? Buying whole life as an investment? Why not just go with Venezuelan beaver-cheeze futures?

 

[MichaelB]

Do we have a link to the forum up at some insurance agent website? Buying whole life as an investment? Why not just go with Venezuelan beaver-cheeze futures?

Brewer, Hey! You demean Venezuelan Beaver Cheese when you compare it to investing in whole life insurance.

 

[73ss454]

I bought 3 Whole Life Policies in my life, all before I had any idea what I was doing. All 3 of them ended up in some sort of Class Action Suit. 2 of them I took the settlement and cashed them in. The last one for 500K I still hold but received a check 2 years ago for $31500 as the settlement from the CAS.

When I was sold the 500K policy I was told I'd only have to pay for 10 years (7K a year) and it would gain cash value and I wouldn't pay anything after the 10th year. Well, I guess we all know what happened on the 11th anniversary, I got the bill in the mail for 7K. Only to find out that I had to pay until the age of 99. I know, I know the dividends are supposed to pay the premium. But guess what I may never live long enough for the dividend to pay the premium. I'm in the 22nd year and still have to take money out of my pocket every year.

So don't believe any of the clowns coming on this thread stating that this is a good investment. The policies are out and out scams and nothing else, designed to line the pockets of the agents who sell them.

I had kept the original paper work from when the policy was sold to me and the agent stated I'd only pay for 10 years. This is the only reason that I received the settlement after 6 years of watching the CAS get settled.

 

[73ss454]

Oh yeah I forgot to mention this. A few years ago I called up Mass Mutual when I received my settlement. They said my agent had passed away and they were assigning another agent to my policy. One day I get a call from him and he said it's time to cash my policy in because I shouldn't need life ins any longer.

He then said it would be in my best interest to sell the policy and buy an Annuity. BRILLIANT!

 

[73ss454]

Yeah, maybe I'll go out and buy another whole life policy. I haven't been involved in a law suit in a few years so it'll give me something to do.

 

[73ss454]

Nope, I didn't sue anyone, just went along with the other 10million people who took me along.

You are correct, I had no idea what I was buying and most people don't. This is exactly what agents are counting on. Anyone thinking straight wouldn't get involved in one of these scams. That doesn't make me right, that's just the way it is.

So if I Google (Good Agent) some will pop up? Stop it, you're killing me~

 

[haha]

How can you guys bear to talk about Beaver cheese? No doubt Venezuelan is best of that category, but damn have mercy!

Ha

 

[brewer12345]

[Moderator edit]

Let me guess what you do/did for a living...