Advice needed:

[columbia1990]

Good morning! Reaching out because I am looking for life insurance! I am a 29y.o. F, doesn’t smoke, but I do have a son and would like to have him insured as well.

I don’t believe that I am high risk, no drugs, smoking, never have I had a serious illness, nor have I been hospitalized.

I have a small policy through my employer for the two of us, but I am looking for something that I will be able to maintain even if moving to a new company.

While I somewhat understand the concepts behind term and whole life I’m not sure which will be best.

I have spoken to an agent in my area that is pushing term life, stating that I can pull money from it in the future, but that is not my intention and feel that once my term ends I will be paying higher rates or it will be harder to be insured. I’ve asked questions about other types of life insurance but she told me whole life is not good and will only discuss versions of term life.

My ultimate goal for myself is to carry coverage for final expenses, debt, and leave something behind for my husband/child so that they can be comfortable without my income.

Thank you in advance for any advice!

 

[grasshopper66]

@columbia1990 Find a new agent...

 

[tabinek]

@grasshopper66 This.

 

[structure]

@columbia1990 Sounds like Agent is selling you a Return of Premium term policy.

Not worth the added expense. Some Agents try to push unnecessary riders or policies on young clients because it’s the only way to increase premium.

If not overweight and in good health, at 29, a 30yr term for $1,000,000 hovers around $40.

 

[tabinek]

@columbia1990 I can’t tell if your agent is confused or you’re confused but term policies don’t normally have the ability to pull money from them. That more accurately describes whole life.

Think of term like renting an apartment. In a lease, you pay a rent for a set amount of time and at the end of the lease you get nothing back. With term insurance you pay a premium for a set number of years (10/15/20/30 years) and at the end of the period you get nothing back.

Whole life or other permanent insurance is like buying a home. In home ownership you pay a mortgage and at the end of the mortgage you own your home. With whole life insurance you’ll have access to a ‘cash value’ similar to the equity in your home. You might even get some modest growth of your cash value along the way.

Both options provide your beneficiaries with a death benefit should you die. But term is much cheaper than whole life. Because you’re not likely to die during the term period the price is considerably cheaper (like 70% plus cheaper). Whole life provides coverage for your entire life so the company is certain to pay a claim so the premium is higher.

If it helps, what I’ve personally done is to buy a bunch of term to protect my family so if I die during my prime earning years my family has resources to continue their lifestyle. I bought a 30 year term that fully covers my mortgage amount and a 20 year term covering 10-15 times my income. I also bought a smaller whole life policy to make sure there was coverage for final expenses.

Check out lifehappens.org for more details then find an agent you’re comfortable working with that can work with multiple companies.

This doesn’t have to be a one-time purchase. Buy a term policy now to protect your mortgage. A couple years down the road or after your next promotion add some more coverage. When you’ve got a little disposable income, add some permanent coverage.

Hope that helps.

 

[columbia1990]

@tabinek Thank you so much! This is exactly what I was looking for! Very much appreciated!

 

[learningasigo]

@columbia1990 It almost seems like you have a better grasp of how life insurance works than your agent does. .

 

[888_apologetics]

@columbia1990 Others here have done a great job of explaining term vs permanent… your agent says you can pull money from the term? That’s a bit odd… unless it’s a return of premium type of rider. What those riders may do is give you certain years where you can surrender the policy and receive a percentage of premiums you paid. Generally the longer you’ve paid premiums - the higher the percentage. Not really worth it to be honest. Those are more valuable for business planning.

At your age - there is nothing more valuable than insuring your insurability, right now. It will be cheap and WELL worth it in the future - get the absolute most you can qualify for thru a carriers income replacement guidelines. Typically 30x your current income at your age. It may seem like overkill but how you described your health, I have to assume it will be be well less than $100 per month for a very healthy amount of coverage.

When I say insuring your insurability (with term insurance) what I mean is the ability to to lock in your insurability and risk class today for future policies. This is called a conversion privilege.

Conversion allows you to convert all of or a portion of your term policy into a permanent product with no additional underwriting and at whichever risk class you were approved initially - a 29 year old female with no medical issues… I imagine you’re going to get a great risk class… and I think we can mostly all agree that we don’t get healthier the older we get!

Conversion privileges vary widely among carriers - I would go for one of the 5 major mutual carriers. (New York Life, Mass Mutual, Penn Mutual, Guardian, and Northwestern) Mutuals tend to have great conversion privileges. After all they are policy holder owned. Not traded on the stock exchange. Policy holders are their focus, not quarterly profits for stock holders.

From there it’s really about finding the right balance of your budget and what products they offer conversion to.

Now, the mutual carriers won’t have the cheapest price for term like a Banner Life… but it is absolutely invaluable having the ability to insure your insurability and options in the future. If you end up with a term product with no conversion benefits and 10 years from now, god forbid, something serious happens with your health… underwriting for a permanent product - when you absolutely need it the most - can become far more difficult or impossible even. I’ve seen it happen in my many years in this business. It’s a tough conversation.

Whole life is certainly a conversation to be had, the earlier you start, the better - with any of this stuff really - it’s a good tool when implemented correctly. Ultimately depends on your goals when retirement comes. Personally - I have both IUL and WL, both heavily overfunded to compliment my taxable, market based retirement assets. If that sounds interesting to you - talk to your agent about it. Though it sounds like he/she may not be as well versed in some of these things … but maybe it’s also a good opportunity for them to learn something new. After all we learn something new everyday!

For your child - starting a whole life policy today for them will serve them very well when they are in their 30’s and starting their own family. I would consider some kind of guaranteed insurability option if you decide to start a policy for your child. What those riders do is similar to a conversion privilege - they lock in insurability today… and give them options down the road to increase their coverage at certain ages, with no evidence of insurability needed. They are well worth the additional cost. You’d be serving your child well and their family well.

Happy to answer any questions!

 

[unman87]

@columbia1990 You can get a 20yr or 30yr term for pretty cheap at your age and good health.

 

[frenchyriff]

@columbia1990 You definitely should be looking to carry the bulk of your insurance needs in term. It’s the most cost effective insurance vehicle and it will allow your family to maintain the same standard of living if you die. Whole life is good for final expenses but it’s not cost effect to carry hundreds of thousands of insurance in whole life. It will be very expensive. You should find an agent that will explain this to you. You really should be looking at a large term policy and a small whole life for final expenses.