Posts filed under 'Burial insurance'
If it wasn’t just plain sick the way AARP treats it’s members, it might be laughable. AARP holds itself out as an advocate for just about everything for us seniors. In fact they are so excited about being able to be an advocate for you that they start working on you to join well before you reach your golden years (over 50).
Just when you think they are getting serious about offering valuable advice like their “No-guff guide to rude relatives” in their latest magazine issue, you open the magazine and run smack into a full page ad for their group life insurance. I’ve attached a copy so we can all be on the same page. Read the disclaimer right below their quotes and tell me about the warm fuzzy feeling it gives you.
aarp-rip-off
Let’s cut right to the chase. Unless you have some reason to want too little life insurance for too much money, some comparison shopping is in line. First, let’s come to grips with the fact that $10,000 or $20,000 worth of life insurance between ages 45 and 60 is simply unnecessary when we’re talking about term insurance. That is burial insurance amounts and people shouldn’t buy burial insurance with term unless they are planning to die fairly soon. So, while still not likely to be enough, we’ll do our comparison at $50,000.
AARP’s term insurance, underwritten by New York Life (they should be ashamed too) is a 5 year renewable term. That means that every 5 years the price is going to go up and while the first few times might not be too bad, when you get to 65 or 70, the prices will likely lead to you dropping the coverage. Even if you hang in there with the rapidly rising prices, the insurance ends at age 80. Of course we all know hardly anyone lives past 80, so that’s hardly even worth fussing about.
I will compare their products with the best standard rate (most will qualify for better than standard) guaranteed level 30 year term available. The prices I quote will also contain a conversion option that will allow coverage to go on to age 100 if you want. The conversion will be at a higher price, but remember that you don’t have that option with AARP and your premium will be level for 20 years, unlike AARP.
So, here are the $50,000 quotes (monthly rates) from their attached ad.
Age 45-49 female $28.67, male $41.08
Age 50-54 female $36.29, male $51.04
Age 55-59 female $55.92, male $74.58
Compared to the best standard rates on the market.
Age 49 female $17.94, male $23.76
Age 54 female $22.71, male $31.89
Age 59 female $34.91, male $52.02
So, what’s the difference? Well, to get the better rates you have to take an exam. That’s at no cost to you and can be done at your home or workplace. And remember, I quoted standard rates. Those quotes will generally be high for the age groups that AARP advertised. A person in good, not perfect but good, health could easily be looking at rates half of what I quoted.
Bottom line. If AARP really cared about their members they would be writing articles about how to get the best life insurance rates possible instead of telling you about rude relatives.
June 9th, 2008
Pre-paid funeral plans. Pre-paid burial plots. Burial Insurance. All are products that are designed to tug at the emotions, tug just hard enough to get you to ignore the realities, ignore the math, and ultimately make a decision that is free from logic.
If memory serves me right, my parents bought pre paid burial plots way back when they were much younger. The idea (the pitch) was probably something about wanting to be buried near loved ones or perhaps being able to ensure being buried next to each other. My dad reads these blogs so I’m sure he’ll correct me if I’m wrong, but the sum of $600 sticks in my head as what they paid. This had to have been 30 or more years ago and they held onto that idea until recently when they decided to be cremated rather than buried.
So, the math to see if the deal was good for them is simple. They gave someone $600 and let’s say they left it with the funeral home for 30 years and let’s be modest and say the funeral home made a 12% return on that money. Am I using too aggressive an interest rate? I’m thinking not because if you know, just based on mortality statistics that you have a long time to use money, high yield mutual funds will provide that kind of return. And, after all, they would need to earn interest to cover the current cost of a plot. So a plot today would go for about $2500 and the money earned by the funeral home would be about $10,200. At the time my parents bought those plots it would have been no hardship for them to have put that money aside. Ultimately they plots were sold and a handsome profit realized by the plotters.
On the other end of the spectrum are burial policies or final expense policies. Globe Life is famous for offering these with no exam and only $1 premium for the first month. The dirty truth is that they are guaranteed issue whole life policies that are exorbitantly priced. In their advertising you will see “rates as low as $3.27 per month”. What they don’t tell you is that is for the youngest age group and that is the per thousand cost, so $10,000 is $32.70 per month and so on.
It is guaranteed issue so if you’re really sick it may be the only deal in town, but if you’re healthy keep in mind that they are offering you the same deal that they’re offering to someone who is really sick. I’m not opposed to permanent life insurance for final expense purposes. If you are reasonably healthy there isn’t any reason that you can’t have substantially more life insurance using a universal life policy with a no lapse guarantee, for less money.
Bottom line. Burial insurance is a rip off as offered by most of the companies selling life insurance under that heading. Again, unless you are too sick to qualify for traditional insurance, burial insurance is a poor choice.
May 29th, 2008
When I sold my first final expense (burial) life insurance policy nearly 30 years ago, it had a face amount or death benefit of $7000. It was certainly, at that time, adequate to properly bury someone and even have a little left over to host a wake.
I still get 10-20 requests every week from people that “don’t want much, just a final expense policy”. When I ask how much they are considering it is always somewhere between $3000 and $10,000. I understand that the reason for asking for a small amount of insurance is always cost. The hope is that the smaller the policy, the smaller the cost. Unfortunately the logic doesn’t hold true.
For a little help with illustrating this I went to Colonial Penn. I believe, after a lot of study, that Colonial Penn is the best company in the business of writing small policies between $5000 and $25,000. This is a truly unbiased opinion. They don’t use agents. Everything is written directly through the company. I can’t sell it and can’t make anything from recommending it. Their products and pricing as so much better than the AARP policies written through New York Life, that AARP should really take a month off and just write letters of apology to all of us members.
OK. Now that I have put AARP in their place again, let’s look at a few examples of what Colonial Penn offers and what the alternatives are. For this example let’s assume a 65 year old man in pretty good health looking for $10,000 in life insurance. A little high blood pressure, a few new knees, but nothing serious. Colonial Penn offers a whole life policy, so we go to their website and get the quotes. All you have to do is type in the state, age and sex and hit submit. These are not guaranteed issue prices, so if our guy is hiding a few health problems they will likely show up on his medical information bureau report which could lead to a decline. But for now let’s assume good health.
Ok, let’s assume a 62 year wife, in comparable health, wants coverage as well. After all, properly burying you and not her is, well, just not proper. Use the same procedure to run quotes for her.
So, for $10,000 of coverage this couple would pay a total of $166 per month. If they wanted $25,000 it would run them $245 per month…..if they stuck with Colonial Penn. If they found an independent agent and asked them to find the best value for them, the results would be substantially different.
First I would have to explain that we are going to ask health questions and they will have an exam, at not cost to them, done in their home at their convenience. I would also have to explain that we don’t offer policies under $25,000, but if price is the issue, there’s good news. To write $25,000 on each of them, approved at preferred rates (not superman rates), their total monthly cost would be $93.39.
Keep in mind that whether through Colonial Penn or Genworth Life and Annuity (the company I quoted), these rates are guaranteed level and payable for life. So, if the reason for only wanting $10,000 is cost, wouldn’t it make more sense for you and your spouse, to have $25,000 in coverage for $70 less per month. More coverage? Less money? There’s no trick to this. Two things drive this out of balance scenario. Colonial Penn offers simplified issue which means no exam. So they are accepting the risk of not having lab results. That coupled with the fact that they are pushing cash value policies where they are simply not needed increases the cost. You’re buying life insurance, right? Take that extra $70 a month and throw it into an annuity if you need the cash, or gift it to your grandchildren if you don’t need it.
Bottom line. What appears to be the easy route, and yes, even appears to be the logical route can lead to higher prices for less insurance. Use your good health to your advantage. Take the physical and get the most bang for your buck. Don’t need that extra $15,000 in life insurance? Leave it to your grandchildren, or your church.
December 29th, 2007
Term insurance or whole life? Term insurance or universal life? How should you decide just what product best fits your need for protection for your family?
I’ve discussed in numerous posts how to determine the proper term length and the proper use of term insurance. There are plenty of good reasons for permanent insurance. I have beat to death the subject of whole life versus universal life so for the purposes of exploring the uses we will stick today with the generic permanent.
The key element in determining term versus permanent is the length of the need. In the case of permanent insurance, it’s a matter of a need that just doesn’t go away.
That need can take several forms, but let’s start small and work our way through life insurance policies that, by the nature of the need, you simply do not want to outlive. Probably the purest example would be a burial policy, also often called a final expenses policy.
In either of these instances, outliving the policy you’ve been paying for simply doesn’t make sense. It is a permanent need. You need it to be there when you die.
I will use an example from my own portfolio as another need that is clearly permanent. I carry enough term insurance of varying lengths to ensure, at any given point through age 80 or so, there will be enough insurance to take care of my wife’s needs it my absence. I also have a $50,000 permanent policy.
The reason I carry this policy and the reason I believe it should be considered in most situations with husbands and wives, is that I believe it is a smart move to provide your spouse with enough money to bridge the gap between your death and their activation of the plan for the rest of their lives. In my case I believe there will be plenty of assets. What I don’t want my bride to have to do is make any kind of rash decision on how to use them.
Many people carry life insurance policies purely for the purpose of leaving money behind to their adult children. If that is a desire of yours, you should absolutely consider permanent over term. What you don’t want to do is put substantial money into a term life insurance policy for your children, and then outlive the term. At that point you would have to make a choice of dropping the plan, applying for more term insurance at higher prices (with the chance of outliving it again), or converting it to a permanent policy at a higher rate than you would have had to pay 10 or 20 years earlier.
There are plenty more, but the last example I will throw out is that of estate protection. Whether it is federal estate taxes or state death taxes, someone is going to want a bite out of any substantial estates. Carrying life insurance for the purpose of paying these taxes is a prudent move, but definitely a another example of a policy that you simply don’t want to outlive. Anything short of permanent could potentially cost your estate rather than saving it.
Bottom line. Term insurance fits by far the majority of needs, but there are plenty of good, solid reasons for permanent insurance.
September 16th, 2007
It’s time I quit beating around the bush about this subject. I get numerous requests for people who are looking for $20,000 of life insurance or less. Generally I am talking about retired folks who only need final expense or burial insurance. Some times health is an issue. I have tried to find a better product in that size policy, but the truth is that nothing I have found beats Colonial Penn . It is not a company that uses agents. that is to say it is a direct company on line, so I can’t offer their products, but I can recommend them.
From $25,000 on up, which I consider legitmate amounts for final expense policies, there are a number of better options available. A good independent agent can guide you to the best product and the best rate in that area.
Bottom line. Whatever the size of your life insurance need happens to be, you should know where to go for the best possible price.
August 21st, 2007
Here’s where you can get a whole helping of my opinion that has grown and matured and reformed and settled since I sold my first whole life life policies in 1978.
Both whole life and universal life are meant to be permanent insurance. They are meant to be there until you die because they are covering a need that never goes away. A very simple example of a need that never goes away is burial insurance. It is almost always a whole life policy and should absolutely be guaranteed to be there when it is needed.
A larger example of the need for permanent insurance is an estate preservation policy, a policy designed to provide the money to pay estate taxes. That need is there until the death of the owner of the estate. In the case of a married couple the ownership passes to the surviving spouse when the first one dies. When the surviving spouse dies, taxes come due. This is generally covered by either a whole life or universal life second to die policy. In the absence of insurance, most of what a couple earned and worked for could go to the government and not their heirs.
Generally speaking I think universal life is the better product. It is more affordable and can be guaranteed to stay in force longer than anyone has ever lived. The thing I really like about it and the reason it is more affordable, is that it can be structured to accomplish it’s mission without massive amounts of cash value buildup.
Life insurance building cash value really catches a lot of attention. The instant image for most people is having your cake and eating it too. With very few exceptions, the cost of building that cash value is much too high. In a later blog I will provide some actual scenarios to back up my opinion.
I beleive everyone should have some amount of permanent insurance. Call it final expense money. Call it burial insurance. I carry $50,000 of permanent insurance so that, when all the term insurance is gone and we are living on our retirement, if I don’t wake up some morning my wife won’t need to borrow money or liquidate assets until she has had time to put together a plan. I call it bridge money. It builds a safe bridge from my passing to her plan.
I will cover this more later, but when you are looking at permanent insurance, always, always make the agent show you the guarantees in the policy. If it isn’t guaranteed past age 100, send the agent back to the drawing board or find another agent. The last thing you want is a permanent policy that wasn’t guaranteed and believe me, there are plenty of them out there. Millions of policies currently in force are not guaranteed to do what the agent said they would. Make them show you the guarantees.
July 18th, 2007
Life insurance these days has so many options available as far as products go that it has become easier and easier to hone in to just exactly the right product for your life and your needs. Along with the huge increase in options is the need to have a professional independent insurance agent help you understand how best to choose or combine different options.
The good old days were simple. There was whole life insurance and you had a choice of what company you wanted to purchase it from. Today, while whole life is still an option, there is now universal life, universal life with no lapse guarantees, variable whole life and universal life. Along with all of those permanent options there are guaranteed level term insurance options from 5 to 30 years and return of premium term insurance. And for those small needs there are final expense policies or burial policies and finally, for the technically uninsurable, there is guaranteed issue graded whole life.
I’m not saying you can’t figure out the appopriate route on your own. All I’m saying is that professional advice can save you huge amounts of time and money. With the number of people who die each year “looking into” life insurance, time is an important consideration.
March 21st, 2007
Want to throw a wet towel on an adult conversation? Ask your friends how much life insurance they carry on their children. The normal answer would run the gammet from, “why would I do a thing like that” to “that’s not something I want to talk about”.
Just suppose for a moment that juvenile or children’s life insurance isn’t some morbid thought, but a potentially valuable gift to your child. OK, who said “life insurance can’t be a gift to my child because for the life insurance policy to do anything my child has to die and I don’t want to talk about it”?
Let’s just talk about adults for a minute. Hopefully we can all agree that life insurance has value in our adult lives. OK, I think I got about an 80% positive response to that. Now, if you could pay a very small amount of money to ensure, no matter what your young adult child’s health was, that they could get life insurance at affordable rates, would you agree that there might be some value in that? If your child developed some illness during their growing years it could probably be construed as a gift, couldn’t it? A prudent thing to do to make sure they can do the right adult thing at affordable prices?
All right then! Let me tell you how to accomplish that and then I’ll tell you how to answer that awkward question and sound like you are just, well, savvy.
The best policy out there that will guarantee that your child can buy $100,000 or more of insurance when they reach age 23 has a one time cost of just $250. You are purchasing something that gives them a guarantee as much as 23 years down the road that there is no other way for them to have guaranteed. The kicker is that it also includes a small amount of term insurance as they grow up. $5000 through age 13. $10,000 when they reach 13 through age 18 and $15,000 from age 18 to 23. This is no more than final expense or burial insurance. At age 23 they can do a conversion of that policy to a universal life policy of up to $100,000 in coverage WITH NO EVIDENCE OF INSURABILITY. All of that for a one time payment of $250? Yes!!
Now, when your friend asks you how much life insurance you carry on your children, tell them you bought a guaranteed insurability policy so that when your child grows up, they are going to be able to buy insurance no matter what there health is. If they really push on the children’s life insurance question, tell them that the guaranteed insurability policy has a small death benefit rider on it if, God forbid, anything should happen while they are growing up. Tell them you weren’t really interested in children’s insurance, but it just came with the package at no additional cost.
March 4th, 2007
Burial insurance, sometimes also called a final expense policy, can be an affordable way to spread the expense of a loved one’s death over a number of years. Morbid idea? Not when you think it through. All of us reach the point of final expenses sometime.
Final expenses can be anything from a simple burial to hospital bills, attorney’s costs to administer a will, or gifts left to children or grandchildren. Depending on your personal desires, a burial or final expense policy might be as small as $5000-$10,000 or as large as $50,000-$100,000.
Most folks don’t really put a lot of thought into this kind of life insurance until they start to see “final” kind of off in the distance. Generally at that point most of us don’t want to be bothered with exams and people poking around our medical history so we opt for a guaranteed issue life insurance. We just want to sign up without any hassle. There are some good and some not so good products out there for those who want to take the easy route.
If you are in good health and just don’t want to take an exam, ask your independent life insurance agent about simplified issue life insurance. There will be a few health questions, but it is generally very easy to qualify for, comes in both term insurance and whole life, and is usually less expensive than guaranteed issue.
If you have some fairly serious health problems, guaranteed issue life insurance is a good option. Again, employ an independent life insurance agent to do the shopping for you. They will be able to get through the fine print and find a good match for you.
Are these types of policies a good idea? You know, they really are unless you have $10,000 in a box marked final expenses.
February 28th, 2007
