All Life Insurance Tips - term life and term life with return of premium?

term life and term life with return of premium?

Hello, my husband and I are in the market for life insurance now. If you could enlighten me about the following I would appreciate it very much. Are most term policies the same (I can just compare premium quotes, or are there differences that I should look into? If so what?). With an online quote system, some of the best quotes (=cheapest) for term life came from Beliastar life insurance co/ING, Genworth life and annuity insurance co, West coast life/protective life corp, American General Life, Transamerica Life/AEGON. I’ve never heard of any of them. Do they seem like credible companies? They are all rated as A or above by “A.M. Best” (according to the website). Also, what do you all think about return of premium term life policies? Do we typically actually receive ALL of the premium, or are there any fees etc. subtracted from the refunded amount? We still have almost 30 years of mortgage, and 20 years of raising our son. In this case, would you try to get a 20 year term policy and then if no death occurs, buy another coverage for 10 years (remaining mortgage years) for smaller amount covered? Or would you buy 30 year term although you wouldn’t need that much towards the end of 30 years? (We’re 40-45 years old right now.) Or buy 25 year return of premium term policy and pay 5 more years of mortgage using the money we receive from return of premium? In reading various websites, I saw posts in Kiplinger about having term to cover mortgage or education cost, and then have a permanent policy for a smaller amount you may need for retirement years. I’m still not clear why you need life insurance for retirement, after kids are independent and mortgage are paid off. Is this "perm life for retirement years" idea for the money for my spouse to receive after I die, or for me to pull out to live on after retirement? Thank you for your help! Thank you so much for your responses! If someone could suggest finding a list of A+ rated companies that work in my state, that would be greatly appreciated. What do people think of State Farm for term/term ROP life insurance? Also, does ROP term insurance give you investment returns in addition to the amount of premium you paid? Thank you! I found the following list that's supposed to be the best life insurance companies at this website. http://www.lifeinsurancestar.com/lifeinsurance/company-ratings.php * New York Life: A++, stable outlook * Mass Mutual: A++, stable outlook * State Farm: A++, stable outlook * Geico: A++, stable outlook Does this mean I should probably check out these companies? And that's State Farm is a good company for life insurance? I also thought Geico didn't offer life insurance. I was led to LifeQuotes page from Geico, that's actually where I received my online quotes (and list of companies that I listed above). Does this mean that this list is not reliable? Sorry to have so many questions. I'll organize remaining questions and re-start a fresh question later, but this additional question for now. I was using some calculator online (Kiplinger, Life Foundation?) to calculate how much coverage I need, and they both returned figures like 1+ million. How can this be? Is 1 million life insurance common these days? We only have 170,000 in remaining mortgage balance (actually I only included half of that in calculation), and I calculated monthly living expense to be 2000-3000 (depending on if our child is still with us)/month with my spouse's income to be 2000/month, and also included college cost. Does this seem reasonable that this will add up to be million dollars in 30 years, with inflation? Thank you, you knowledgeable folks!

Public Comments

In rare cases, a very tiny amount of permanent (whole life) coverage to cover funeral and burial expenses may be a good idea, but usually not. Life insurance for retirement really makes no sense. After you die, your spouse can live off the same money as if your spouse was still alive. If anything, you need the opposite of life insurance: you need something to cover the risk that, if neither of you dies, then you will both need to live off of the retirement savings that are enough for just one person. Life insurance, preferably term life insurance, should be used to cover the possible unexpected loss of income if either (a) a working person dies before retirement, or (b) a working person has to stop working (or work less) to stay home and take care of the children after the other parent dies before normal retirement age. All other needs should be funded in other ways, not with life insurance.
For the most part, term policies are the same. What's different, is any "rider" you might add to the policy. For example, MY term life insurance, has a "guaranteed renewable" rider, and a "guaranteed convertable" rider. Online quote systems are basically designed to give you a "bait rate", best case scenario. They make money, by harvesting your personal information and selling it as leads, to insurance agents. HUNDREDS of insurance agents. Your phone will not stop ringing for months. Or, they give false 'best rates' to steer you to ONE company, and get paid for every hit that company gets from their website. You can ALWAYS check with your state insurance department website, to see that they're licensed to do business in your state. Most of those life insurance companies, I've heard of - but here are the AM Best financial strength ratings for each, for your consideration: Beliastar - no such name listed Ing Life & Annuity - A Genworth Life & Annuity - A West Coast Life - A+ American General Life & Accident - A Transamerica - A+ And those are just the tip of the iceburg. MY life insurance is with Jackson National, for example (A+) and you've probably never heard of them, either. I think return of premium life insurance companies are a ripoff. You're giving the insurance company a 30 year, interest free loan, at a premium price. IF you keep the policy and pay for it the entire 30 years, you get your money back. If your premium is $1,000 a year, after 30 years, you get $30,000 back. You've LOST over $28,000 in earned interest, at only 4%. If you use an 8% rate of return (below stock market average for any 10 year period), you've lost almost $96,000 in interest. Compare the cost of straight term, to ROP term, using this calculator: http://www.msfinancialsavvy.com/calculators/monthly_deposit_savings_calculator.php and make your own decision. Particularly look at investing the DIFFERENCE between the two premiums, to see how far ahead you come out, buying straight term, and investing the difference. There are two different kinds of people who need life insurance after retirement: Either really broke people, who can't come up with the cost of a funeral for a spouse, or really wealthy people, who want to pass money or parts of their estate to heirs, tax free. And if you're one of the latter, you're better off working with an estate planner, to move your assets into a trust before you die . . . so your kids can be the beneficiary of the trust, after you pass.
Totally disagree with MBRCATZ. She's comparing a guaranteed, tax free return on your money to a potential return on the stock market. A return of premium policy can return the equivalent of a 4-5% guaranteed, tax-free rate of return. Sure, you can earn more than that, but it's not guaranteed. Plus the difference between a term policy and a ROP term policy is minimal. AND, it doesn't make sense for everyone, but blanket statements like hers (i.e. "ripoff") are not constructive nor accurate. Secondly, she's also overlooking the fact that if you have a 30 year return of premium policy and decide in year 29 that you do indeed want to continue coverage into your retirement that you can convert the policy to a paid up policy. So, if you were going to receive $30,000 back in cash, you could essentially take a $60,000-$75,000 (ballpark) policy into retirement without paying additional premiums. Or, you could take additional coverage into retirement and use the $30,000 (in the example) to fund a new policy to cut down the premiums. If you buy term insurance you need to make sure that the policy is convertible. AND, under no circumstance should you buy 20 year term if you want coverage for 30 years. That is a BIG mistake that people make. Buy coverage for the length of time you need it. People do often need/want coverage into retirement for various reasons. One, is that most people are rarely 100% prepared for retirement. Find a good broker/financial adviser to help you. DO NOT go through a large online firm that will a) not save you any money over the broker/adviser and b) not be able to deliver on the service that the smaller broker/adviser can.