Life Insurance over 90?

[dixonge]

Our parents are 91 and 87. Their budget is thin but they have spent several years together in assisted living (Brookdale). Dad has managed to negotiate his way out of/around prior monthly fee increases but I don't think that's going to work this year. They are facing a $675 jump in the monthly rent and something has to give. My brother has called to some other facilities and they are all around $2,000/mo. *more* expensive than their current facility.

Unfortunately the only budget item I can find with any serious wiggle room is insurance. They are paying $523/mo. on Medicare, Medicare Advantage and Medicare Part G. They are paying $637/mo. on life insurance. One question I have is for the Part G and whether or not it can be eliminated. Other than that, it's all about the life insurance.

Dad is a Korean War vet and can be interred at no cost, including Mom. But the funeral/memorial service and related expenses are primarily what they are maintaining insurance for. It is true that we don't want their deaths to create financial turmoil for us (my brother and I) but I don't see how they can continue paying these premiums.

Is their any way to cash out these policies and set that money aside? Dad is covered for $20,000, Mom for $50,000. Mom's policy is a Universal Life (TransAce) through TransAmerica and is currently $372/mo.

Mom's policy has a *negative* cash value, in spite of having paid in over $34,000 in premiums. But is their any way to surrender this policy and get at least the premium back out of it? Setting that amount aside would more than cover burial/funeral expenses.

Dad's policy is with United of Omaha and is $265/mo. I don't have the policy at hand but would also like to surrender it.

Looking for any advice from people who are familiar with life insurance or who have gone through similar decisions in the past. Thanks!

 

[aja8888]

As a veteran, he will qualify for medical benefits at a VA hospital, probably at no cost.

The Plan G policy is Supplemental insurance and Medicare is primary. You could switch whoever has that to a Medicare Advantage policy, but understand the terms of it before you bite off on it. You could save a lot there.

As far as life insurance, I doubt they could get premiums back as that's the cost of the insurance.

Any cash value in a whole Life policy is obtainable. Term policies, or whole Life with negative values have no cash available.

VA death benefits are there for him, but it's not much. He could get free burial at a National cemetery but you have to apply for that. I believe the spouse can join him there when the time comes.

 

[Sunset]

Sad that they fell for the sales pitch of buy life insurance to cover burial costs. As long as people don't get too fancy for a burial, its easy to have one for less than $10K.
They have been paying $637/mo x 12 = $7,644 per year for life insurance, so just 2 years of not paying this would have banked the burial costs.

Considering their age, nobody but OP and very immediate family are going to be attending any funeral/memorial service.
We skipped the entire memorial service thing and just had a grave site burial service, which is short and low cost, as all the friends of Dad were dead.

Many whole life insurance policies do have a cash value, depends on the policy.

I'd drop the life insurance before changing the fully covered medicare G plan, as it seems to me , they must really use their medicare coverage at their age.

If OP is concerned about financial turmoil from burial costs, then investigating the costs and options now while there is lots of time would be smart. Also OP and brother can start setting aside $X so they have the cash available.

 

[dixonge]

Sad that they fell for the sales pitch of buy life insurance to cover burial costs. As long as people don't get too fancy for a burial, its easy to have one for less than $10K.
They have been paying $637/mo x 12 = $7,644 per year for life insurance, so just 2 years of not paying this would have banked the burial costs.

Considering their age, nobody but OP and very immediate family are going to be attending any funeral/memorial service.
We skipped the entire memorial service thing and just had a grave site burial service, which is short and low cost, as all the friends of Dad were dead.

Many whole life insurance policies do have a cash value, depends on the policy.

I'd drop the life insurance before changing the fully covered medicare G plan, as it seems to me , they must really use their medicare coverage at their age.

If OP is concerned about financial turmoil from burial costs, then investigating the costs and options now while there is lots of time would be smart. Also OP and brother can start setting aside $X so they have the cash available.

I'm sure when they bought these policies they were thinking of me and my brother, as well as the surviving spouse, not becoming burdened by death-related expenses. They were also very active in church and any funeral would have been well-attended. My father pastored many churches over 50+ years and also the senior ministry at his current church. More recently they no longer drive and so merely watch the services on TV. He has conducted hundreds of funerals over the years so has 'expectations' about the whole thing. Unfortunately financial considerations may determine how things go.

The rent increase is forcing us to do a deeper analysis of everything. Unfortunately I'm outside the States and my brother is swamped at work. This makes everything harder.

 

[pb4uski]

....They are paying $523/mo. on Medicare, Medicare Advantage and Medicare Part G ....

Part G that you refer to is probably really Plan G, a Medicare supplement policy, also known as Medigap. There is no Medicare Part G that I'm aware of. Also, you can't have Medicare Advantage and Plan G at the same time... its that you have either one or the other so you need to get some clarity on those.

Unfortunately, the deadline for switching from Medigap to a Medicare Advantage plan expired yesterday, December 7. Prior to that you could have switched to a Medicare Advantage plan and likely the $523/month premium would have gone away but they would be on the hook for some deductibles if they ever had a serious illness.

My guess is that they are paying for Medicare Part B and it is taken out of their social security checks, and the $523/month is Medigap Plan G. They probably also have a Medicare Part D plan for prescriptions.

 

[pb4uski]

....They are paying $637/mo. on life insurance. ... Other than that, it's all about the life insurance. ...

Is their any way to cash out these policies and set that money aside? Dad is covered for $20,000, Mom for $50,000. Mom's policy is a Universal Life (TransAce) through TransAmerica and is currently $372/mo.

Mom's policy has a *negative* cash value, in spite of having paid in over $34,000 in premiums. But is their any way to surrender this policy and get at least the premium back out of it? Setting that amount aside would more than cover burial/funeral expenses.

Dad's policy is with United of Omaha and is $265/mo. I don't have the policy at hand but would also like to surrender it.

Looking for any advice from people who are familiar with life insurance or who have gone through similar decisions in the past. Thanks!

In theory, universal life aka UL is like a bank account and a term life insurance policy combined. You pay in premiums and it goes into the bank account and then there are monthly withdrawals for expense charges, cost of insurance, etc and also monthly credits for interest on your account value balance. Usually the premium deposits exced the cost of insurance and expense charges by alot in the early years so the account balance can build and will be sufficient to fund the higher cost of insurance charges in the later years since the cost of insurance increases with age. The surrender value is the account value less a surrender charge which is usually a percentage that starts high and then grades to zero over 10-12 years typically. It is not at all uncommon for UL policies to be underfunded and fail at advanced ages, usually because the policyholder has not paid the recommended premium (I'm not saying that is your case though).

You probably need to communicate with the agent who sold them these policies or an agent representing the insurer to see what your options are. There might be an option to convert the policy to "paid-up status" or "paid-up insurance" where you could stop the bleeding and not have to pay any more premiums but would get a reduced death benefit when they pass. There might also be an option to covert the policy to an annuity of some sort... or even perhaps take a policy loan and then just stop paying premiums and let the policy lapse.

Another option would be to just stop paying premiums... in that case they would not get any money but the coverage wouldn't lapse right away. Coverage would continue until the account value was gone at which point it would lapse. An agent can run projections on when it would lapse if you just stopped paying premiums.

Unfortunately, its very complicated.

 

[pb4uski]

Have you factored into your thinking that social security will increase 8.7% in 2023?

 

[JoeWras]

There's a lot to unpack here.

First of all, let's talk about insurance. You can request a simple "surrender value" and they have to give that to you. One thing I learned on bogleheads is you can also request an "In-force Illustration" to give you an idea of what happens if you keep it. For a 90+ year old, you may find the surrender value actually decreases, even though you are paying! This is the magic phrase: "In-force Illustration". https://www.forbes.com/advisor/life-insurance/in-force-policy-illustrations/

My gut feel is surrender it now and be done with it, put the money to something pre-paid for mom and dad.

Second. OK, so Dad is a pastor. Let's look at that. I'm a Christian, and I've seen all kinds of funerals. I've seen the drunken Catholic funeral*, and I've seen the puritan Baptist funeral.

Neither have to be expensive!!!

The point is that the people come, the people visit and commiserate, the people worship. That's the point. People connecting. This is not a wedding. Most churches have hospitality committees that are more than happy to provide heavy appetizers as a volunteer effort. This is especially true for former pastors!

The expenses can be as low as a standard fee for the pastor and staff, maybe a rental fee or cleaning fee. If the flock provides the food, you are done. If you cater, keep it simple. This can literally be less than $1,000.

Caskets, embalming, cremating, interment are another issue and perhaps mom and dad should pre-pay for that. Dad prepaid his interment fees and it was the best gift ever. We had no choices to make as to where he would rest. It was all paid. The only decision we had was on the casket. Cremation is even simpler.

* - A bottle of generic whiskey was provided on every table at the banquet hall celebration after the funeral. It was cheap, but people got drunk. My cousin joined AA (20 years!) after that.

 

[RetMD21]

They are paying $523/mo. on Medicare, Medicare Advantage and Medicare Part G. They are paying $637/mo. on life insurance. One question I have is for the Part G and whether or not it can be eliminated. Other than that, it's all about the life insurance.

I don't understand this. Does one have Medicare advantage and one has a plan G supplement? An individual wouldn't have both.

 

[dixonge]

Have you factored into your thinking that social security will increase 8.7% in 2023?

Yes, plus an increase in his VA benefits. I also did a spreadsheet on their facility's average annual increases, which clocks in at over 7%. There is an odd anomaly where my Dad evidently pays the new rent in January, then negotiates them down to a lower rent for the rest of the year. Based on the historic pattern, they might end up owing less, I hope.

 

[dixonge]

I don't understand this. Does one have Medicare advantage and one has a plan G supplement? An individual wouldn't have both.

I am still unsure on what covers whom. I think traditional Medicare + Plan G is for my Dad. Mom has the Advantage plan through United Healthcare. I need to clear this up, but Dad isn't always sure of it himself...

 

[street]

That is a tough call what to do. For me if it came down to shove and push, I would say the LI would need to be sacrificed for one. If at all possible, it be best to continue the policy. The losses would be a bad thing for them and their intentions for when they took out the policies.

I'm sure they had both of you on their minds when taking them out and also to pay for their final days. One thing to look at if policies are in their name as the owner or are both of you are listed as owners. One thing is when a payout for LI is made, they are tax free money. Any way that was the way the tax structure was not that long ago.

I wish you well and hope you can come up with the best solution.

 

[Beststash]

* - A bottle of generic whiskey was provided on every table at the banquet hall celebration after the funeral. It was cheap, but people got drunk. My cousin joined AA (20 years!) after that.

That's funny

 

[athena53]

If you don't go for in-ground burial, even a proper church funeral can be inexpensive. I had an organist and 4 soloists (total a little over $1,000) for DH's funeral and since we were church members the cost to use the facility was zero. The priest didn't charge, but I made a contribution to his Discretionary Fund. No gathering afterwards- it was a snowy day in January and a small group so we all went home.

One thought against cancelling Dad's insurance: since he's likely to go first given the age difference, if they're receiving SS your mother will get only the Survivor benefit, which would be a 1/3 decrease from the Primary + Spousal benefit and the life insurance proceeds might come in handy.

 

[Koolau]

So far, I'm keeping my universal policy that funded a buy-sell for the family business. The cash value is dropping as I age. I'm looking at it as my DW's best gamble (crap shoot, really.) I bought it out for the cash value, so for a few grand (plus paying premiums) I can keep it in force for several years. With my health, it's a good gamble, I think.

I don't see that in your parents situation unless there is quite a bit of cash value. Of course, if there IS quite a bit of cash value, it might be better to take it for their expenses NOW instead of later. Later will find a way to take care of itself. In the mean time, do your research on final costs, etc.

Sorry you are going through this now. DW's mom and my mom both ran out of money for their nursing home care. As providence would have it, they both passed just as the (more or less) final dollars were spent. Otherwise, the Medicade route would have needed to be navigated. Not fun and fraught with pitfalls. Good luck and blessings to you.

 

[dixonge]

If you don't go for in-ground burial, even a proper church funeral can be inexpensive. I had an organist and 4 soloists (total a little over $1,000) for DH's funeral and since we were church members the cost to use the facility was zero. The priest didn't charge, but I made a contribution to his Discretionary Fund. No gathering afterwards- it was a snowy day in January and a small group so we all went home.

One thought against cancelling Dad's insurance: since he's likely to go first given the age difference, if they're receiving SS your mother will get only the Survivor benefit, which would be a 1/3 decrease from the Primary + Spousal benefit and the life insurance proceeds might come in handy.

Pretty sure my Dad mentioned free use of the church for a memorial, but probably doesn't include some fees depending on personnel involved.

The problem w/ keeping the insurance is that it might mean moving to a cheaper facility which we have been unable to find, so far. Mom has ZERO SS due to some horrible policy w/ her Teacher's pension. I don't know if that would help her get more of his SS if he passes first or not.

 

[pb4uski]

What happens with the insurance if you just stop paying premiums?

You can stop the bleeding. Usually what happens is that the UL policy chugs along until the account value exhausted since cost of insurance exceeds the interest credits to the account value. Your agent can run an illustration that will tell you about when that will happen and it might be a better option than surrendering if the policy is still subject to surrender charges.

 

[ncbill]

What happens with the insurance if you just stop paying premiums?

You can stop the bleeding. Usually what happens is that the UL policy chugs along until the account value exhausted since cost of insurance exceeds the interest credits to the account value. Your agent can run an illustration that will tell you about when that will happen and it might be a better option than surrendering if the policy is still subject to surrender charges.

True but there might be a rider to keep it in effect paying a fixed premium even after the above.

I've had a couple of UL policies (didn't pick them but got stuck paying) blow up on me...wish they had had such a rider.

Non-guaranteed UL should be banned by law.

 

[pb4uski]

Well, all UL policies have minimum guaranteed interest rates. IME the more common problem is that policyholders underfund them and then get pissed when they blow up later.

 

[Koolau]

Well, all UL policies have minimum guaranteed interest rates. IME the more common problem is that policyholders underfund them and then get pissed when they blow up later.

I think that's because sales people emphasize the low monthly cost and deemphasize the cliff that is waiting in later life. YMMV

 

[TheWizard]

This is a sore topic for me.
Those ads on TV offer burial insurance for $9.95 per month. Have them switch to that.

Actually, I feel that most of this kind of life insurance is borderline Elder Abuse. But I guess we're talking about poor people who lived paycheck to paycheck in working years and now have negligible assets in retirement?

The only kind of life insurance that I'm in favor of for older people is when there's a family farm, ranch, or business involved where there will be substantial taxes due upon the death of the m/patriarch. And then we're talking insurance of $1M or more...

 

[dixonge]

This is a sore topic for me.
Those ads on TV offer burial insurance for $9.95 per month. Have them switch to that.

Actually, I feel that most of this kind of life insurance is borderline Elder Abuse. But I guess we're talking about poor people who lived paycheck to paycheck in working years and now have negligible assets in retirement?

The only kind of life insurance that I'm in favor of for older people is when there's a family farm, ranch, or business involved where there will be substantial taxes due upon the death of the m/patriarch. And then we're talking insurance of $1M or more...

I don't find burial rates for my mom's age (87) for anything under $200. Nothing at all for Dad (91)

They lived in church-provided 'parsonage' houses for 25 years. Then they bought their first house, a double-wide mobile home. They eventually moved from there to assisted living. The proceeds of the mobile home went to savings, which was slowly drained by life events and poor budgeting.

 

[pb4uski]

I think that's because sales people emphasize the low monthly cost and deemphasize the cliff that is waiting in later life. YMMV

That may be but the recommended premium is usually prominently displayed on premium invoices, annual policy statements and the like but people tend to ignore them because they don't want to pay that much premium.

 

[ncbill]

That may be but the recommended premium is usually prominently displayed on premium invoices, annual policy statements and the like but people tend to ignore them because they don't want to pay that much premium.

Nope.

Again, IMHO non-guaranteed UL should be banned by law.

 

[pb4uski]

Nope.

Again, IMHO non-guaranteed UL should be banned by law.

Yup. Gotta love the first amendment, everyone is entitled to an opinion.

UL has all sorts of guarantees... guaranteed minimum interest rates, guaranteed maximum COI charges...so I'm not sure of what you are looking for. Hard to guarantee anything while giving policyholders the flexibility to make whatever premium deposits that they want to pay whenever they want.

If you want guarantees then buy whole life... but don't miss any premium payments..