In a recent thread on Morningstar.com, I asked readers to share how they had approached insuring against the latter risk. Had they purchased a low-cost, no-frills term life insurance policy, or had they opted for a more permanent life insurance policy as part of their financial plans?
Readers' responses ran the gamut: Although some were openly disdainful of permanent policies, characterizing them as high-cost and less-than-transparent, others said they have used a combination of term and whole or universal policies and have been satisfied with their decisions. To read the complete thread or share your own approach to life insurance, click
here.
BTID All the Way A healthy contingent of posters was unequivocal about using a utilitarian term policy and steering clear of permanent products.
Jnelson6455 advised, "Buy term and invest the difference--BTID--all the way. My agent replaced my whole life policy and for the same money I had been paying I was able to triple my coverage and still have money to save on my own. Cash-value policies are one of the worst products sold to the middle class. Too expensive to get the coverage needed and too many hidden fees to qualify as a good savings vehicle."
Molokoeo is of a similar mind. He used a term policy for income replacement while he was working but has since canceled now that he's not. "I think that life insurance is one of the most misunderstood and overhyped products on the investment landscape. And I say that with two sisters in the insurance business. When I was working, I carried straight term insurance. Its sole purpose was income replacement at the lowest cost possible. When I retired, and after my daughters were married, I canceled all of my life insurance. I no longer had any earned income to protect (replace), and I reasoned that my widowed wife could easily live on the investments that today support two of us. My daughters were aghast until I assured them that their mother wouldn't live like a bag lady after I died."
FidlStix has done the same. "I've always had a hard time pouring money into something I (more correctly, my family) would very likely never need. Nonetheless, I did carry term life until the term was up. Now it's just my wife and I, the kids are on their own, and I'm on the eve of retiring. My 'life insurance' now is to maintain my good health as long as I can with plenty of daily exercise and healthy eating, and to leave my wife with enough retirement to sustain her nicely in case of my premature departure."
ColonelDan, like the aforementioned posters, sees little need for life insurance in his post-retirement years. "During my working years I had enough term life insurance to pay off all debts and provide a nest egg were I to die. Now that I'm retired, I have no debt and more than sufficient resources to 'self-insure' ergo no life insurance and no premiums!"
GoneFishin rightly points out that testing the viability of one's nest egg is a crucial step to take before dropping a term policy. "I'm 65-plus now, empty nest, and will retire in May. My wife will get 100% of pension and Social Security if I pass before her. Per all the retirement calculators I've used, we have enough money for retirement to last until we're 90 years young. My term life policy is due now. We will let it expire."
EMFR12 articulated a point made by many of the "buy term" set: If one saves diligently, investment assets will obviate the need for life insurance. "I've always been a diligent saver. I looked at different types of life insurance plans and considered the returns and benefits if used as an investment vehicle. In the end, I decided it was best to separate insurance from savings. To me, insurance is meant to protect against loss of current earnings and to protect my family in the event I die early. Savings, specifically retirement savings, is to provide a comfortable living for my wife and me in our golden years. I have a 20-year level term policy that expires when I turn 69. By then I should be set and in no need to 'protect' my earnings--dividends, annuities etc. You know exactly what you get with term insurance. It is inexpensive if you buy it in your 40s or earlier, easy to understand, and serves its purpose. For those who like the idea of leaving something for the kids or to provide for funeral expenses, I say, 'If you saved and planned early you can do both."
Turtle took a similar tack. "I bought the simple term life policy through work with for the purpose of protecting my family, and I invested the rest. Now, 40 years later I can sit back and laugh at all those insurance agents that said my plan would not work. I was able to drop the term policy 10-plus years ago and have built a lifetime of security for my family."
Several posters, like
Turtle, noted that they'd obtained inexpensive coverage via their employers.
Madbrain wrote, "For now, I use my generous employer term life benefits. When I switch jobs I port/convert them. That's been enough to get $2 million coverage on myself and $650,000 on my partner."
But poster
Blindguy advised those purchasing term policies through their employers to keep an eye on their paystubs. What was affordable coverage in the past might not remain so as they age. "When I received my first pay stub of the year after I turned 55, I was surprised at the drop in take-home pay. So I took a look to find out the reason. Taxes, et cetera were relatively unchanged, but the deduction for my term insurance had risen significantly. Looking into the matter further, the change was not due to a general rate increase from the insurer, but a significant increase--81%--due to the fact I was now in the 55- to 59-year-old bracket. In addition I noted, based on current rates, I would see another 51% increase in premiums once I turned 60. Long story short, I no longer purchase additional insurance through my company plan. I purchased a 10-year term policy equal to two times my salary through our personal insurance agent. The cost savings for the first five years is rather insignificant--just $50 a year. But the savings for the remaining five years will amount to $500 annually, and that assumes the general rates for our company plan will not change in that time."
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου