Life Insurance, Do i need it? What type of policies are good? Should i wait to get other things in life done?

[21chicken]

I'm doing my due diligence and and starting my research for life insurance! I took a break from reading to type this in hopes someone will grace my with some knowledge.

Age - 28 Male Smoker No medical issues No kids or dependents

What I THINK I know . . .

When I purchase a policy I will start to pay a monthly premium. I will acknowledge a beneficiary on the policy to receive the death benefit if I pass away. Depending on the type of policy I will be could be covered a certain number of years (10,20, or even 30 years a.k.a. Term L.I.) or for the rest of my life. (Permanent L.I.) If i do not pass away during the period of coverage of a term policy I forfeit all the premiums, To counter that the premiums are cheap compared to a permanent L.I. policy. The reason a permanent L.I.P. is more expensive is cause it pays outs the death penalty no matter when i pass away as long as i pay the premiums.

I was lead to believe that a Permanent Insurance is flexible in some ways also being a one way to leave your family a little money also only requires one medical exam and has a higher cash surrender value? Not sure what that means yet. I know there are different types of permanent policies.

What i want to know . . .

Do i need to get insurance? What companies are reputable? How can i use insurance to work around taxes or is that for certain people like a businessman? Should i save up and buy a house before i get a policy? Is there somewhere else i can seek advice about life insurance?

Anything helps. Thank you in advance.

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[shadowgun1104]

@21chicken Insurance is to cover a loss. Think of it the same way you do about auto, homeowner’s ins, if something happens, the ins can cov the loss.

If no one is depending on you or your salary, you probably don’t need insurance.

If something were to happen to you today, how will your loved ones pay for a funeral? You might need insurance.

If you have life ins thru your job, this maybe enough to get you buried or how ever you want your body disposed.

Most will say invest instead of buying life ins, but what if one is not comfortable or don’t want to invest? You can always save the money as well.

You can’t go wrong either way, but if you do plan on having a spouse/mate, child/ren, the earlier in life you get insurance the better. Term maybe ok or a whole maybe ok.

Who’s the best company? You’ll need to do your own research on that one.

 

[futuredreamer]

@shadowgun1104 This is a very 1950-1970’s myopic view of insurance. Insurance products are not those types of products anymore. It’s like you read a blog or /r/personalfinance and you have no real experience in the space.

The reasons to buy insurance, the riders available, the cash value, the tax preferential treatment all eclipse the “pay for a loss”. Insurance is for the living, not just the decedents.

 

[zaverax]

@21chicken No kids or dependents

You don't need life insurance because no one will be financially burdened by your death. Perhaps the cost of your debts or a funeral, but building a emergency fund and paying off debts should be a higher priority.

If you are worried about future health issues, you can get a 20-30 year convertible policy that lets you have term insurance for a fixed period, and the ability to convert it to permanent policy later if your health changes.

 

[futuredreamer]

@zaverax This sounds like a playbook from Dave Ramsey (never once has he been financial licensed or life licensed btw)…. Or /r/personalfinance bullshit (which is literally the blind leading the blind, I would lose my licenses and face thousands in fines if I said to my clients what gets said in that sub)

 

[zaverax]

@futuredreamer I’m an FA. I have my life and health, and series 6, 63, and 7. I manage assets and sell insurance products. Life insurance is not for people without dependents. Only life insurance salesman believe otherwise.

 

[futuredreamer]

@zaverax I'm an RIA, with a 7, 24, and 66, CLU and CFP. Noone says they have a 6 & 7 at the same time, so you must be a new FA if anything.

I'm certainly not a life insurance salesman, while I am also life licensed as any professional in my field would be. I've been an RIA for 20+ years, and in the financial business for 30. I only take high net worth clients, so most of the people in here would be clients I would never take.

The fact you proudly talk about your Series 6, tells me you aren't really an FA, you work for a life insurance company that calls you an advisor, yet you probably don't have the first clue about advising.

Good thing for you, is that Continuing Education is a thing, and you will develop as a professional as you gain more experience.

 

[zaverax]

@futuredreamer I’m not getting into a podding match on my credentials with someone on Reddit. If you think people without dependents need life insurance it’s because you sell it. Life insurance can be an important planning tool, but selling it to young people is a predatory practice from insurance companies.

 

[isabelpatel]

@21chicken If I were you I would absolutely get life insurance right now. Get it while you’re young and healthy. Premiums go up the older you get and the more unhealthy you become. I work with companies that offer LIVING BENEFITS. This pays you while you’re still living if you were to develop a chronic, critical or terminal illness. So there are absolutely advantages to getting life ins even if you don’t have any dependents. I personally know a 25 year old woman who recently had a stroke. Her family now has a gofundme to help with bills. Younger individuals don’t think about this type of thing, but we are not immune to life altering illnesses. I’m 21 and I have peace of mind knowing my family won’t have to pay for my funeral. I also have peace of mind knowing that if I get sick I won’t go under due to medical bills.

 

[famof6]

@21chicken 999/1000 times people are better off investing the money they would have spent on life insurance, especially permanent products, which have high profit margins (for the company) and low returns (for you). Permanent is more expensive in part due to that guaranteed payout but also because it’s priced a lot less competitively.

Outside some specific circumstance, I would only ever recommend purchasing term insurance. And the main reason to do so is you have kids and/or a dependent spouse.

There’s no reason for you to purchase a life insurance policy imo…

 

[futuredreamer]

@famof6 This is absolutely not true at all, and any financial advisor would lose their licenses and be significantly fined for suggesting such.

 

[21chicken]

@futuredreamer All of the advice i have gotten has been from google and people i know. I never mentioned a licensed advisor. Should i talk to licensed fanatical advisor to get better advise?

 

[futuredreamer]

@21chicken Yes, I would always advise someone to talk to a professional in the field. Someone with a CFP designation has to act in your best interest as a fiduciary. And while most brokers and advisors do, if they are insurance ONLY sales people, they can't because they won't look at the whole picture.... but most try their best and mean well.

Google is literally a horrible idea, its a bunch of people posting about book definitions of policies, instead of the real products in the marketplace, and god forbid stay away from /r/personalfinance, that sub is going to make an entire generation poor and destitute with bad advice. Blind leading the blind there.

Or everyone is multi-millionaire and independently wealthy... which is most likely

 

[ayogoal]

@futuredreamer /@futuredreamer, I have found an error in your comment:

“idea, its [it's] a bunch”

I suggest that you, FinancialFett, use “idea, its [it's] a bunch” instead. ‘Its’ is possessive; ‘it's’ means ‘it is’ or ‘it has’.

[sup]This is an automated bot. I do not intend to shame your mistakes. If you think the errors which I found are incorrect, please contact me through DMs![/sup]

 

[futuredreamer]

@ayogoal Fuck off Bot, I'm not writing a college paper

 

[maxyss]

@21chicken You should probably talk to an educated person at the very least.

 

[famof6]

@futuredreamer In what sense? Permanent products have objectively higher margins priced and realized and, more-or-less, are guaranteed profits for any insurance company…

Life insurance is just that- insurance. It isn’t a viable savings instrument for most people.

 

[futuredreamer]

@famof6 I don't think anyone here is advocating insurance as an investment/savings vehicle.

IULs certainly have their place because of tax advantaged treatment.

But the leverage you get with life insurance for a death benefit is far greater, and sooner than you do with investment products.

 

[maxyss]

@famof6 Not going to discuss the clients perspectives but term insurance has much higher profit margins than permanent policies and are much more of a guarantee if cash flow and profitability to insurance companies. Primarily due to the fact there is a term, hence less variability and the much lower impact of lapse assumptions. It is true the bulk of premiums sold is for permanent insurance but that is because of the obscenely high reserves needed to maintain it. The cumulative risk cost to a company on a permanent policy is approximately 70% from purchase to life expectancy. And the majority of dollars claimed are claimed after life expectancy. With due respect you don’t even have a fundamental understanding of how life insurance works.

 

[famof6]

@maxyss Term reserves are much higher due to XXX reserves but PBR should bring them back down to ‘reasonable’ numbers. Profit margins on term are LOWER because the product is significantly more competitive.

Term is MORE volatile due to the shorter time frame, particularly due to no CSV and higher faces (making payouts more volatile…) not less…