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sweetysamantha
Guest
Please help me about insurance…i don’t know any thing about that please anyone tell about term insurance at younger ages.
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Saburo
Guest
Term insurance is pure insurance rather than insurance combined with an investment vehicle yielding a rather poor rate of return, as are all other types of life insurance. Term insurance insures you for a term – that is you pay your money and receive nothing at the end of the term if you are still alive unless you happen to receive certain qualifying injuries (lose a finger, an eye, etc.) under certain conditions such as would typically impair your ability to earn a living. Term (really most life insurance policies) usually disqualify suicide, dying in a car accident in which you were driving while impaired, hang gliding, piloting a small plane, acts of war, etc. Because you are only insured for a term (like auto insurance) it is very easy for the insurance actuary to calculate the probability of you making a claim based on a very large (though somewhat outdated) statistical sample of other people with your characteristics of drinking, smoking, health condition and whatnot. Their risk is well understood, so your cost is as low as possible. With other life insurance vehicles, there are a variety of investments made in addition to the insurance aspect, and the companies risk is more difficult to calculate, so they pad their charge to you. Essentially, the insurance company is taking the premium you pay, investing it in something, such as a bond, and returning part of the profit to you after many years when you convert or cash out. This gets people all excited that they are “investing” in life insurance and are guaranteed a payout at the end without having to die first. Well, the reality is that they are getting the same thing they could have gotten with term insurance, but paying a lot more for it by loaning money to the insurance company at a very low rate of return. Insurance companies would least like to sell you term, because that is where they make the least money, and that should tell you something about non-term insurance: it is a scam, and some types are more of a scam than others. Also, it tends to force you to commit while term is easier to abandon without a large sunk cost.
My advice is to buy lower cost term and only from a large, highly rated company. Save the difference in premium between that and universal or whatever nonsense tempts you. Invest the difference yourself in a broad market ETF such you can find through any broker (Schwab, ETrade, whatever). If you do that regularly (hopefully inside a Roth IRA), you will easily accumulate far more than you will ever receive through any insurance company. For example, 50 bucks a month at 7% per year for 40 years will get you about $131,000. Here, time is more important than what you invest, but your ability to invest will eventually outgrow 50 bucks a month, or you just aren’t trying. Also, experience will eventually teach you how to do better than 7% a year (unless Obama continues in office indefinitely :banghead
. $75 a month at 8% gets you about $262,000. See how a little change makes a difference over time? The more you invest early, the less difference it makes what you invest later, so cut corners and invest your pennies while you are young and can tolerate suffering.
One caveat: stay away from the CUNA term offered through many credit unions. It is inexpensive, but it is infamous for not paying claims and for giving the runaround. Google it and see for yourself. Also, be aware that the cost for term increases as you age and your ability to purchase will end somewhere around 65-70 when you really don’t need it anymore. This is because your risk of a claim increases. However, your ability to pay should keep up with the increases unless you happen to be making some bad career choices right now
. This same thing is happening with all other types of life insurance, but you are paying for it ahead of time such as when you make the same payment your whole life (gee, what a deal! Not.). If you decide to drop the insurance, that money is gone, but with term you haven’t paid for it at the increased rate yet, so you lose nothing. Term is “pay as you go.” Others are “pay now and be reluctant to leave, because we are going to hang this promise of a paltry future payout over your head and hope you never get good at math or figure out how to use Excel.”
That’s about the size of it, but it is only my opinion. I don’t sell insurance and have nothing against anyone who does. Some people are poor investors and will never have anything except what some life insurance policy pays them when they cash out, so for them it may be better than nothing. You might also want to spend a few bucks on books such as those by people like Dave Ramsey. I have never read his books, but I understand he boils things down pretty simply. I’m sure he covers insurance. Used books from Amazon read just as well as new books from the bookstore, and you can invest the difference. amazon.com/s/ref=nb_sb_noss/185-1164723-6129307?url=search-alias%3Daps&field-keywords=dave+ramsey&x=0&y=0
…:coffeeread: Pretty gripping stuff. You were warned.
My advice is to buy lower cost term and only from a large, highly rated company. Save the difference in premium between that and universal or whatever nonsense tempts you. Invest the difference yourself in a broad market ETF such you can find through any broker (Schwab, ETrade, whatever). If you do that regularly (hopefully inside a Roth IRA), you will easily accumulate far more than you will ever receive through any insurance company. For example, 50 bucks a month at 7% per year for 40 years will get you about $131,000. Here, time is more important than what you invest, but your ability to invest will eventually outgrow 50 bucks a month, or you just aren’t trying. Also, experience will eventually teach you how to do better than 7% a year (unless Obama continues in office indefinitely :banghead
. $75 a month at 8% gets you about $262,000. See how a little change makes a difference over time? The more you invest early, the less difference it makes what you invest later, so cut corners and invest your pennies while you are young and can tolerate suffering.One caveat: stay away from the CUNA term offered through many credit unions. It is inexpensive, but it is infamous for not paying claims and for giving the runaround. Google it and see for yourself. Also, be aware that the cost for term increases as you age and your ability to purchase will end somewhere around 65-70 when you really don’t need it anymore. This is because your risk of a claim increases. However, your ability to pay should keep up with the increases unless you happen to be making some bad career choices right now
. This same thing is happening with all other types of life insurance, but you are paying for it ahead of time such as when you make the same payment your whole life (gee, what a deal! Not.). If you decide to drop the insurance, that money is gone, but with term you haven’t paid for it at the increased rate yet, so you lose nothing. Term is “pay as you go.” Others are “pay now and be reluctant to leave, because we are going to hang this promise of a paltry future payout over your head and hope you never get good at math or figure out how to use Excel.”That’s about the size of it, but it is only my opinion. I don’t sell insurance and have nothing against anyone who does. Some people are poor investors and will never have anything except what some life insurance policy pays them when they cash out, so for them it may be better than nothing. You might also want to spend a few bucks on books such as those by people like Dave Ramsey. I have never read his books, but I understand he boils things down pretty simply. I’m sure he covers insurance. Used books from Amazon read just as well as new books from the bookstore, and you can invest the difference. amazon.com/s/ref=nb_sb_noss/185-1164723-6129307?url=search-alias%3Daps&field-keywords=dave+ramsey&x=0&y=0
…:coffeeread: Pretty gripping stuff. You were warned.
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puzzleannie
Guest
forum rules prohibit giving such professional advice, see your insurance agent for guidance. you might search on the Faith and Finances forum especially the stickies, and the first few posts which are placed there by a money management expert, Phil Lenahan. Dave Ramsey is also good.
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kbachler
Guest
Term insurance is insurance only. It has the lowest per year cash cost. There are other forms of insurance in which you essentially pre-pay and invest for future costs to manage the long-term cost of insurance.
See a fee-based financial planner for more information. One poster provided a significant amount of information in this thread - but unfortunately not all of the information is correct because it doesn’t take all the factors (such as taxes) into account. A financial planner working for you can do the best job of this.
See a fee-based financial planner for more information. One poster provided a significant amount of information in this thread - but unfortunately not all of the information is correct because it doesn’t take all the factors (such as taxes) into account. A financial planner working for you can do the best job of this.
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1ke
Guest
There are hundreds of books at the bookstore/library on personal finance, investing, insurance and similar topics. Look at Dave Ramsey, Suze Orman, Terry Savage, and similar authors.
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ProtectorRoss
Guest
sweetysamantha,
I know of a website that is easy to read and understand that explains the basics of life insurance. The article is titled; “Fact or Fiction: Do I Really Need Life Insurance?” and it covers both Term and Whole Life Insurance. I hope you take a few minutes to learn about life insurance before you make your decision.
I know of a website that is easy to read and understand that explains the basics of life insurance. The article is titled; “Fact or Fiction: Do I Really Need Life Insurance?” and it covers both Term and Whole Life Insurance. I hope you take a few minutes to learn about life insurance before you make your decision.
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