Thoughts on Life Insurance, Funeral Expenses

I've heard a lot of different philosophies on life insurance over the years. The "wise investors" tell us that "whole life" policies are a bad investment vehicle, that we should instead "buy term and invest the difference." I understand the principles of that.

But I have a brother-in-law in his early 60's who followed that advice. A few of years ago, during a routine colonoscopy, doctors discovered a couple of cancerous polyps. The polyps were removed, and he went through some cancer treatments, and fo the past couple of years he's been declared cancer-free. BUT since he was diagnosed with cancer, to the life insurance companies he's now considered "uninsurable"...and his term insurance has expired, so he can no longer buy more life insurance of ANY kind.

Since my house is not yet paid off, I have a term policy separate from the loan, and no credit life, per se. The term policy I have runs the length of the home loan, and is in the face amount of what the loan was when I took it out [level term, not decreasing term]. I figured that way, if anything ever happened to me while the house was still mortgaged, the wife could pay off the house and have a little money to live on until she could start collecting SS.

I also have a whole life policy [purchased when I was 18, so the premiums are quite low], but today I filled out the paperwork to cash it out. My PLANS are to sit down with the funeral director of my choice and prepay a simple funeral, casket, etc., and then use the remaining cash to pay off some bills that have accumulated. My grandmother, who passed away on New Year's Day at the age of 100, had prepaid and pre-planned her funeral, and that made things easier on the family when that difficult day came. Since hers was prepaid years ago, a few prices had increased, but overall the family will only be out around $1,000 for the things that have gone up [no, she didn't lock in the total price, only the major stuff].

The thing is, if I outlive my mortgage, while the house WILL be paid for, there won't be any life insurance proceeds left after cashing in the whole life policy. Sure, I could possibly buy another small term policy, but since I'm now 57 years old, the premiums are something I'm not looking forward to, just at a time when I'm trying to get rid of a lot of monthly payments.

I know some of you will probably say I'm doing the smart thing, and should've done it years ago. Others will probably think I'm making a stupid move, and just another in a long line of stupid moves. But I'd like to hear your thoughts on life insurance, and dealing with funeral expenses. [And I'm philosophically opposed to cremation, even though that's probably the cheapest route, short of having the county bury me as an indigent.]

Thoughts?

I know several people who have signed up to have their carcasses hauled around the country for research or whatever with the agreement of a fully paid cremation or burial after 3 years plus bringing their remains home, this doesn"t appeal to everyone -- point being that there are cheap options for the final ride. As far as whole life goes I have 3 policies, the most recent was 35 years ago, the interest may not be much to brag about but the premiums never got me in a bind and they will provide a little monthly income or lump sum or death benefit, I doubt seriously that the few hundred dollars per year I pay would have been put to better use. You see those adds for Colonial Penn and a few others quoting guarunteed term life, no physical etc. but there has got to be a catch. You have the term policy to cover the mortgage in the worst case scenario, that has to give peace of mind, as far as the rest of it goes, the best investment anyone ever made was becoming debt free and then its surprising what accumulates.

One major caution with term insurance- check what the premium is when you turn 65! Mine went up five fold! I have a small paid up policy from years ago, and cashed in a larger one 3 years ago. Had I known what term was going to do I would have gotten some whole life. Now, with med issues, mrs and I are not currently insurable. We wanted a smaller policy than our term currently is. One caution on pre-paid funeral plans- what protection is there for you if the home goes out of business?

Buzzman---it sounds like you are trying to determine what to do in a lot of different areas.

Cash in your whole life, buy some term, take the proceeds from the WL and prepay a funeral, use the extra money (yes, some of the WL policies do have enough cash to do that)and reduce some monthly expenses all at the same time.

Not knowing what your particular financial picture looks like, I will give you my $0.02 worth on a few ideas....

IF you prepay a funeral, you can do it in a way that gaurantees the funeral cost will be covered in the future regardless of the current cost when you die..today or 25 years from now..ask the Funeral Director for Details. This route can be a good idea.

IF you feel you need/want some additional life coverage, you can do a "tax free" exchange of your current policy to one with a higher death benefite, and possibly reduce the out of pocket costs...NOTE: Make sure you do this with a reputable company that will gaurantee the death benefit even after your Cash Value is used up!

Warning: Did you find out what the taxable amount of the current policy will be when you cash out of it? Even "small" policies can accumulate large Cash Values..

Personal Opinions:
-Most term policies expire before you do, so if you want to make sure there is some insurance inforce when you die, don't buy term insurance.

-The "wise investors" tell us that "whole life" policies are a bad investment vehicle, that we should instead "buy term and invest the difference." I understand the principles of that.

I understand that principleas well---Life insurance was NEVER meant to be an investment....but when they start to build up value, they are picked on as a bad investment. Comparing apples and oranges.

At age 18, the "difference" between the premiums for same amounts of term and WL, IF THEY WERE Invested religiously......would give you a sum of money that wouldn't really provide you with much of a retirement fund at 65....especially with the way the Stock Market has performed.

If you want to leave TAX FREE insurance dollars to someone after you are gone, and the premiums for it do NOT take anything away from your life style, I say go for it.....Millions of Dollars of Life Insurance are sold each day for that specific reason..

Everybody has their own reasons to do or not to do anything with insurance...there is no cookie cutter right answer.....I hope my opinions were more advice oriented on where to get some info to help you make a more informed decision.
Tim

Buyer beware on insurance, some of the "investors" don't consider every aspect of the equation when making recommendations. They are focused on maximum returns and unfortunately sometimes I think they forget things. I'm not an insurance agent but I understand their are term products out there that can provide the coverage you need at a reasonable cost it's just you have to get into them EARLY and before you have any diagnosis of cancer, diabetes or heart trouble. This may mean getting into a longer term product that costs more in the beginning or a diminishing term where your death benefit tapers off a you get older, or getting into a term with renewal options or steps, yes your cost is a little higher up front and goes up as you age or if you got into one young enough a whole life or universal life for core coverage and low cost term to cover life events laddered to expire as the obligations you are insuring no longer exist (child/spousal support, college, mortgage ...). I am no fan of insurance companies but most people fail to understand pricing is (should) be based on risk and the more risk they assume the more you'll pay. If you manage your life so as you age you are financially able to assume more of that risk yourself you'll pay them less money over all. Someone mentions what protection you have on a prepaid plan if the funeral home goes under, what protection do you have if your insurance company goes under or becomes insolvent because they're holding corporate paper, the company issuing the bonds goes bankrupt then the government butts in and weakens the bondholder's position to pay off the union pension funds?

(quoted from post at 09:39:03 03/26/12) I know several people who have signed up to have their carcasses hauled around the country for research or whatever with the agreement of a fully paid cremation or burial after 3 years plus bringing their remains home, this doesn"t appeal to everyone -- point being that there are cheap options for the final ride. As far as whole life goes I have 3 policies, the most recent was 35 years ago, the interest may not be much to brag about but the premiums never got me in a bind and they will provide a little monthly income or lump sum or death benefit, I doubt seriously that the few hundred dollars per year I pay would have been put to better use. You see those adds for Colonial Penn and a few others quoting guarunteed term life, no physical etc. but there has got to be a catch. You have the term policy to cover the mortgage in the worst case scenario, that has to give peace of mind, as far as the rest of it goes, the best investment anyone ever made was becoming debt free and then its surprising what accumulates.

Click to expand...

There was an exhibit in a town near here a few years ago titled something like "the human body".... Wife talked me into going to it because it was supposed to be really interesting and informative about how things work.... Went in expecting to see plenty of 3d models and pics....

I'm a pretty tuff guy, but sure wasn't prepared for what was in that hall......

That ain't gonna happen to me or any of my family if I have any say.....

Buzzman---another thought.

You wrote--"The term policy I have runs the length of the home loan, and is in the face amount of what the loan was when I took it out [level term, not decreasing term]."

Most Level Premium, Level Term policies allow you to "convert" the term to a permanent policy, up to the original amount of the term without having to prove any insurability...usually up to a certain age....and at the same "rating classification" as the original policy....even if you are NOW uninsurable.

Tim

I just finished looking after my Dad's funeral. His prepaid funeral money was forwarded to an investment company until it was needed. The Funeral Director did all the legwork for me ( he was directing the funeral afterall) and as it turned out, there was about six hundred bucks (the interest on the money) more available for the funeral than what he had paid.

I was told that is required here in central Canada for exactly the reason we all fear the prepaid route. The funeral company could go broke, but the cash is still fully available (for the funeral only). Dad also had a policy certificate.

Now this didn't literly pay for the funeral in that it was money earmarked for the funeral only and the amount of money was an estimate of what a funeral might cost. As it turned out, it was enough and I'm waiting for a refund.

The way I saw this deal was that it was a chunk of money put into an investment to be used only for the owner's funeral expences.

Make any sense?

What does your brother in law need life insurance for?

I have term policies but they will mature a few years after my mortgage is paid off - also when my kids will be out of the house. At that point I don't need life insurance anymore - if I die my wife retires on the money that was supposed to support both of us. I don't plan on my death turning into a Mega Millions lottery win for her - that's just asking for trouble.

already told my sis and friends to throw me on the compost heap and cover me with leaves...i got a 5k whole life policy thats been in force since mid 50's...still payin a lil over 60 a year to keep it in force...borrowed against it about 20 years ago or i'd be getting a dividend...no way will it pay for a funeral...theres a funeral home in texas city that'll cremate ya for $695 total...probably go that route.
that term life bs is nuthin but a scam...odds better in vegas

Funny, this topic should come up because I just purchased a 20 year term policy which would allow the remaining (small) balance on the farm to be paid-off with some extra.

I'm 61 and longevity is not on my side of the family so it's a good hedge..

Sure when the kids were growing up and we had the big house sort of speak, my insurance needs were greater. But not now..

I often muse about how much money I saved in insurance premiums by living.. But now at 61 (I am in good health) coverage for the farm and a some extra is needed.

Again my wife will get my pension / social security etc..

Prudent in my opinion and not over done.

I did the same thing you did. Bought a whole life policy when I was 18. I increased it by quite a little bit when I was carrying a lot of debt at the bank. It was way better than credit life on the loans since they only pay off the loan,even if you borrowed $200,000 had credit life for that amount,if the loan was down to $1000,that's all they paid.
I dropped it back to $75,000 when I was pretty well out of debt. The cash value that it has more than pays the premium every year without making much of a dent. I got whole life on the wife too right after we got married. Good investment or bad,it beats trying to get term life now.

This wont answer your question, nor help most of the old farts on here. Buy it when you are young and healthy.

And insist on a "guaranteed purchase option" I had a $15,000 policy in the early 80's when I was diagnosed with kidney failure. Since I couldn't buy more, I took the option everytime I could. On certain birthdays, and I could also buy more upon the birth of a child.

I was surprised a few years ago when I added up the cash value of all of the familys policies and it was a little over $50,000.

If I had taken the premiums and invested in a good mutual fund I could have maybe gotten a better rate of return, but wouldn't have had the protection for my family.

If you cash your in and pay up some bills and pre plan a funeral, you are getting the peace of mind that those tasks are done. The credit life will leave your wife with a house.

See if you can shop for some term.

My dad had about $40,000 when he died. It paid off what he owed on the farm and his house was paid for, but my mom sold the house and moved to an apartment. She basically used the proceeds of the house to live on.

It all depends on your personal situation.

Gene

Some mortgage companies offer life - disability insurance for the mortgage they are providing. I'd start with your mortgage holder and see what they offer.

The premiums on your whole life policy are going to be a whole lot less than a term policy at age 61. Also most companies are going to limit you to a 10 year term policy, which means that at renewal, the premium will be based on attained age. Over 70, the term policies become cost prohibitive. Term policy can be compared to renting a place, once you quit paying for the place, you don't have anything. I would keep my whole life policy, even though it may be more than you need. Another thing you need to be aware of is that life insurance transfers tax free. I would also advise you to have your spouse have a bank account, checking or savings, without your name on it. When you pass and medical examiner is notified, state freezes your accounts. No one can get a dime. Have a seperate account and instruct your spouse is to move some money before calling funeral home or anything.

Are you sure about that? What state? My mother sat right there and wrote the check for my Dads funeral from their joint account.

The cash value of my policy is sufficient to pay for a funeral--not elaborate, but I don't need elaborate--and leave enough to pay off a couple of other things, and help out on a couple more. I don't have any auto debt.

The idea of convertability of a term policy is something I was aware of, but I had simply not thought about it in my own case. When my term policy completes, I'll be 64-65 years old, so I won't be able to afford a huge premium...but then, at that age I shouldn't need a lot of insurance, with a prepaid funeral and burial package. Term convertablilty is something I'll explore. Thanks for bringing it up.

I'm looking at things, I believe, similarly to you. When my kids were small and still living at home, the whole life policy was protection for them. With the term policy to pay for the house should I die before it's paid off--and the difference in premiums for decreasing term vs. level term was so small it was ridiculous--my wife will be OK if I die before the house is paid off. After the house is paid off, once a funeral is paid for, my wife will be eligible for my SS once she is of age [she's 8 years younger than I am], so her needs shouldn't be excessive.

She won't make out like a bandit...but she shouldn't starve, either.

Yes---give the company a call...with a policy I had, it covered me until age 68, but was convertible up to age 65..

..your company should be able to tell you exactly what type of policy you are able to convert too (usually a policy that they currently offer), what the smallest face amount is that you can convert, and how much the premium will be.

Don't forget the RPU (reduced paid up option)of your policy...ask the company how much reduced paid up insurance you have on your policy. They take the value of the cash, apply your age, and tell you how much insurance will be provided. This doesn't prohibit you from cashing it in at a later date, but provides you with a policy that doesn't require any more premiums.



good luck.

Tim

Buzzman72. Please wait just a minute on cashing out your Whole Life policy. You bought it when you were 18! No matter how good a rate you may get on a Term policy, your Dollar will go further on that policy than in a new one acquired at age 57!
I am an Insurance Agent here in Texas, So I can not sell you anything! I specialize in Final Expense Insurance, I deal with this every Day
!!! There are things you are missing and may shoot your self in the foot here!
A Term Policy is a great policy when used in the right place Application! Final Expense IS NOT THE CORRECT APPLICATION!!! ( a young person with a wife, kids and house mortgage, bills, A Term Policy is a great way for them to cover their debts) At your age you are on the outside edge of getting a 20 yr Term. IF at your age you are in good enough health to get a new policy at a decent rate,,But for argument sake Lets say you can and Do,,,,,,BUT In 20 yrs that policy goes away by virtue of having a Birthday, if you can keep it when the premiums reach $300 to $600/ month you will loose it like a bad habit!... And at that age there isn't much you can still qualify for!
I have NEVER seen a Senior who didn't need more coverage, or wished they had more! but their health and useable income have put more, out of reach for them!
***************
DO Not Buy The LIE that You Will Not Need Insurance when you get OLD!!! I have sat in WAAY Too Many Homes and had Men tell me in Tears that they wished that they had done things differently.
****************
It typically takes 7 yrs of clean health for many company's to reconsider a clean bill of health cancer Survivor for coverage
Please look at coverage through Lincoln Heritage out of Phoenix Az, and their Funeral Advantage Program. If You like I can visit with You and tell you all I know and what I believe, Answer your question. To the best of my abilities. I have been an agent for 18+ yrs. My phone is always open to incoming calls call me if you like. My cell # is 512-577-3837, As all of my clients know Your info will never go outbound from Me!
Please visit with me about your situation! Before you make a bonehead decision of any-kind!!
Later,
John A.

I am in Oklahoma and same would apply to any probate state. Would not apply to living trusts. why there getting so popular

Unless you really need the cash, or can no longer afford the premiums, keep the whole life. You're paying premiums for an 18-year-old; your cash value is probably twice or three times what you've paid in. Like 8N'r said, insurance is insurance, not an investment. Life insurance proceeds are paid out promptly as long as the beneficiary statement is current and valid, so I don't much see the point of pre-paying your funeral. If your funeral director is made aware of an in-force policy I can't imagine he'd be reluctant to proceed with your final arrangements.

You are WRONG on that still being true. Almost 100% of join accounts today are "and or survivor" accounts. Most deeds are that way too. When one person dies the account goes to the other person on the account without any probate issues.

My personal accounts are that way with my wife and my business accounts are that way with my sons. Very little of my estate will have to go through probate.

Old Prudential policy from 40 years ago still current to cover some expenses. Made my own coffin couple years back, Sisters and brothers know oldest brother has it in shop for use if needed-- and a request to borrow it if needed for one of them got OK. Ash box can be stacked on top of shelf or on top of existing family grave. Not going to worry anymore. RN

I know a man who isn't going to have a Funeral Expense as long as he dies in Indiana. After he dies, he is going to college, the IU school of medicane. Donate your body and no Funeral Expense. When they are done with you, someone will get your ashes. Told him I want to be there to kick some of his ashes around