Life Insurance- Is it for everyone?

August 10, 2006 at 5:36 pm 7 comments

How does the topic of death seem to keep coming up with the joy of becoming parents? My husband and I are in the process of adopting a child from the People’s Republic of China. Now that we will have the care of a child in our future, I’ve been bombarded with the question: “Do you have life insurance?” When I reply, “No,” the response is quickly, “Well, you better get some soon.”So, with all of this concern about insuring my life, I ask: Is it really necessary? Is it for everyone?

Below are some reasons for life insurance given by the website FreeAdvice at http://insurance.freeadvice.com. I’m not sure of this site’s reputation, but these rationales seem to coincide with others I have seen:

1. Income Replacement
2. Funeral Expenses
3. Pay Off Debts
4. Pay Off Medical Bills
5. Mortgage life insurance

Let me address each of these in regards to my personal situation:
1. Income replacement– My husband and I met “later in life” (as some would describe it) so we were fairly well established when we married. We both owned our own home, made pretty good incomes, and were able to save a bit for the future. We’re used to supporting ourselves, with mortgages and bills, alone. If necessary, we could also support a child on our own if something should happen to either one of us.

2. Funeral expenses– Let’s plan this ahead of time rather than making monthly payments on something that is going to happen to everyone eventually. Set aside some savings for this and other emergencies. And if I go first, please no funerals or expensive burial sites (don’t waste the earth). Have a cookout in my honor and spread my ashes in the place I want them to be.

3. Pay off debts– Other than vehicles and a mortgage, we’re pretty debt free. Cars can be sold and the mortgage is covered (see #1).

4. Pay off Medical Bills– Now this is one area that could be uncertain. However, other investments could cover this rather than paying an insurance company more money every month so that they can make a profit from investing my money.

5. Mortgage Life Insurance– see #1

SO….. If something should happen to the both of us, we will have planned (are continually working on it) and invested so that our child is taken care of without having to pay an extra monthly payment for Life Insurance.

I understand why a lot of people get Life Insurance: they live from paycheck to paycheck and struggle to get ahead. Life Insurance may be the only way that they could afford some benefits if they or a spouse passed. If I was still living on the edge and struggling as I did a few years ago, I would probably consider it.

It took a long time and a lot of hard work to get a little bit “ahead” and I hope to stay in this position by being smart with my money and always planning for the “just in case” scenarios. I can’t see making an extra payments for when I die, but maybe I’m wrong.

Just checking out some quick quotes at http://www.1stquote.com/,a $530 yearly premium with a 20 year guarantee would secure a $500,000 life insurance policy. It sounds good, but what if I cancel my policy? Would I get my money, plus interest back? And, could I take that $530 a year and invest it myself, let it sit over time, and see it increase with yearly accumulations and interest? If I paid about $1500 a year that would guarantee that I would get back all of my premiums paid if I canceled the policy. But what about all of the profits and interest made off that money over the years. Would I get that back, too?

I am suspicious of Life Insurance. They have to make more money than they pay out in order to stay in business. How do they do it unless they are using your money and making what you should be making with it. Hmmmm….

I’m curious as to what others think and know about this matter. Please share….

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Entry filed under: Everyday Life. Tags: , , .

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7 Comments Add your own

  • 1. Mytoocents  |  August 10, 2006 at 6:40 pm

    I am definitely suspicious! I think you would be wiser to save that money otherwise spent on something else or invest it….to me insurance is money that is not working. And money that is not working, is not giving you any wealth…your investments would more than likely pay off any costs you would incur should anything happen. Or better yet, take that money and start a college fund…

    Reply
  • 2. bychance  |  August 12, 2006 at 12:40 am

    Yup….I think I have to agree with you: “insurance is money that is not working”. Obviously, as you read, I’m leaning that way to begin with. College fund- great idea!

    Reply
  • 3. Joel  |  August 17, 2006 at 12:44 am

    NIce of you to poop on something your brother does for a living. Life insurance is not an investment, you’re right…and if anyone ever tells you it is, stay away. Investments will always make more money…but not if you die tomorrow.

    Life insurance isn’t for people who live paycheck to paycheck, it’s part of a solid financial plan. And to answer your question, yes there is life insurance where you get your money and interest back. I wouldn’t get your information from a website. Talk to a trusted financial advisor; sure, they’ll tell you to buy term and invest the rest (cause they want to invest your money for you). Death benefits don’t have to be hundreds of thousands of dollars…a lot of people buy a 10-15,000 plan for final expenses (how many of your investments can you access instaneously and tax free?).

    Anyhow, my two cents. Lots more to say, but I know you wouldn’t want to hear it.

    Love Joel 🙂

    Reply
  • 4. bychance  |  August 18, 2006 at 12:24 am

    Hmmm….didn’t think I was “pooping” on it so much as wondering if it is worth while. I’m open to suggestions and well reasoned insight.

    Reply
  • 5. John Q Public  |  October 8, 2006 at 10:05 pm

    Such peculiar thoughts.

    Life insurance is a bad deal because there are profitable companies who sell it?????? Hah? Then every financial product is a bad deal.

    The only reason you buy life insurance rather than financial products is that you want to ensure your children (or spouse in some cases) get at least a minimum inheritance.

    It used to be said to beware of red China because they don’t love their children; it now looks as though the orpanages in PRC suspect the same about us.

    Reply
  • 6. bychance  |  October 27, 2006 at 12:10 am

    I appreciate the insight, however, I hope the last comment isn’t a slam in my direction. Looking for insight and advice for the future is definitely the best thing to do for yourself, your family, and a future child.

    There are a lot of things in life that are just accepted. I’m not opposed to life insurance, I just want to REALLY understand why I should have it as compared to being able to rely on investments in case of a mishap.

    Reply
  • 7. peter  |  January 5, 2007 at 11:30 pm

    I have always liked cotton my self.

    Reply

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