Worst life insurance EVER!!!

[meierlde]

You do know how "paid up" works? =
Dividends (refund of overpayment of premiums per IRS) + amount necessary from CV. Not included in paid-up premiums are the transaction fee for taking a loan from CV plus the prepaid 1st year's interest of the loan (installment calculated) from CV.

Speaking of reduced paid up conversion:
As I understand it from reading the policies, converting to paid up does not involve a loan, it just takes the CV and buys a single premium insurance policy with a value that the cv will pay for. For example one old policy I have is paid up at 85, but if I convert at 65 the policy is reduced from 10k to 8.8k face value, for a savings of $ 3600. (ignoring npv issues) The policy usually provides a table that says that if you convert to a paid up policy you get x amount of insurance. Or of course if the policy has an option you could use the face value to buy term. So there is no loan involved or interest. It keeps some of the insurance, and eliminates any future payments. It appears that the cash value will continue to grow somewhat even if you do this.

 

[LongPrime]

^ correct.
Forgot about that method.

 

[FinanceDude]

Almost sounds like one of those old "vanishing premium" whole life policies sold by Jackson National. DW's dad bought one in the late 70's. He paid a bunch of money into it and then they told him he didn't have to pay anymore. Then 3 years later he got a premium notice. Apparently their "projections" were "off" and they reserved the right to start charging premiums again and so they did. We ended up cashing out the policy and putting it into a CD............

 

[Telly]

The worst life insurance that I have personally seen was the stuff my Mom paid for when I was in elementary school. It was a colored sheet of paper every kid was supposed to take home and show to parents shortly after the start of each school year. There was an ability to collect an amount due to severe and permanent injuries...

The highest amount was for "Skull fracture with resultant brain damage - $50"

When I started my professional life many years ago, I was surprised how many new graduates were buying whole life in their first year out of school. They had no dependents, nothing. When I asked them why, they all said their parents thought it was important that they do it, that "the rates would never be lower". And their parents had a friendly insurance man that would help them get it started.
I assume he was the one that suggested it to the parents and convinced them... Salesmanship!

Most professional jobs had some "free" life insurance as a benefit, with a higher amount available via payroll deduction. I took the free, and further along supplemented it with Term via a professional association. The cost was lower, and since it was not tied to a job, it was always in force. I cancelled it when I turned 55, the need was gone.

 

[athena53]

The worst life insurance that I have personally seen was the stuff my Mom paid for when I was in elementary school. It was a colored sheet of paper every kid was supposed to take home and show to parents shortly after the start of each school year. There was an ability to collect an amount due to severe and permanent injuries...

The highest amount was for "Skull fracture with resultant brain damage - $50"

Ah, good old AD&D (Accidental Death and Dismemberment). Loved the gory schedule (Loss of one eye, $X, Loss of finger, $Y....)

Most professional jobs had some "free" life insurance as a benefit, with a higher amount available via payroll deduction. I took the free, and further along supplemented it with Term via a professional association. The cost was lower, and since it was not tied to a job, it was always in force. I cancelled it when I turned 55, the need was gone.

I should have cancelled mine; I realized last time I did my taxes that I had imputed income of $2400 on employer-paid insurance over $50K that I didn't need, and when I asked about cancelling it they said I had to wait till the next enrollment period. I quit 2 weeks ago so it's no longer a concern.

 

[brewer12345]

Ah, good old AD&D (Accidental Death and Dismemberment). Loved the gory schedule (Loss of one eye, $X, Loss of finger, $Y....)

I once dealt professionally with a company that sold lots of AD&D by mail. I asked the exec in charge of that business how they did with underwriting, since they basically bought lists of people and mailed the junk mail ("you are automatically approved!"). He said they did great due to conservative assumptions about the risks they took as long as they avoided "nubvilles." Naturally I asked him with a Nubville was. Apparently in some less economically favored localities, Bubba would get a little to far behind on the trailer lot rent or the buy here-pay here truck loan, dig around for a solution, and realize that they had an AD&D policy that paid $500 for a toe, $1000 for a finger, etc. Said Bubba would then go into the woods and have a "hunting accident" or would have a mishap with a lawnmower.

 

[Texas Proud]

Update...

Well, not really... just wanted to add something else...

Was over at mom's looking for a copy of the policy... did not find one... BUT, I did see where she wrote down that she has a $500 policy... with no backup...


So, a trip to the safe deposit box is in my future....

 

[LongPrime]

Comment: TP, You may find this worthwhile, maybe not.

The neighbor whom I bought a second hospital bed (two months ago) said the among the boxes of her mother's (95) personal effects, they found a life insurance policy. They took policy to our state's Insurance Commission, who said that there is a data base of life insurance policies. I think neighbor said they so far found 4 additional policies.

Who knows? There may still be a chance that your Mom's current policy is only bad. There could be a policy that's even worse.

 

[FinanceDude]

I once dealt professionally with a company that sold lots of AD&D by mail. I asked the exec in charge of that business how they did with underwriting, since they basically bought lists of people and mailed the junk mail ("you are automatically approved!"). He said they did great due to conservative assumptions about the risks they took as long as they avoided "nubvilles." Naturally I asked him with a Nubville was. Apparently in some less economically favored localities, Bubba would get a little to far behind on the trailer lot rent or the buy here-pay here truck loan, dig around for a solution, and realize that they had an AD&D policy that paid $500 for a toe, $1000 for a finger, etc. Said Bubba would then go into the woods and have a "hunting accident" or would have a mishap with a lawnmower.

When I worked at AAA for a college night telemarketing job a million years ago, we sold an AD&D policy that was added to the membership..........for $5 a year you got $1000 coverage. Some nights we would sell 50 of those with 3 reps...........

 

[jIMOh]

Do you know where this rule is located so I can talk to them...

We are planning on cashing out... and I would like to get am much as I can...

I just heard back from an insurance agent, and she confirmed what I posted was in fact law- the insurance company has to pay out a percentage higher than the cash value for this to be considered insurance.

Check state statutes or ask your insurance agent to see how to determine more facts.

 

[travelover]

Ah, good old AD&D (Accidental Death and Dismemberment). Loved the gory schedule (Loss of one eye, $X, Loss of finger, $Y....)...........

DW teaches elementary school and I was amazed that they still peddle this stuff to kids. Must be a nice kickback to the school.

 

[Texas Proud]

I just heard back from an insurance agent, and she confirmed what I posted was in fact law- the insurance company has to pay out a percentage higher than the cash value for this to be considered insurance.

Check state statutes or ask your insurance agent to see how to determine more facts.

I think you might be confusing one thing with another....

Yes, a life insurance policy has to pay out higher than 'cash value' or it is not life insurance... this is not what was said earlier...

What was said earlier is that they have to pay out more than the premiums paid in... since premiums paid in does not equal cash value... well...

The policy IS higher than the cash value... it is just that the cash value is low... and much lower than premiums paid...