term or whole life insurance

[Brute 23]

Dave R., and many others, recommend 10X your annual income in term insurance. The reason being if you make $50K a year and die, your wife will receive $500,000. She can invest that money and average a 10% arr. Your $50K income has been replaced.

 

[Bez__]

Well. This is a long one and I have to point out that this is also done from a Canadian perspective.

If any of you have a farm and more than one kid, you need some sort of life insurance that will help at least one of your kids keep the farm and keep the rest of them from suing your "on farm kid"

So – term first.

An excellent vehicle for money to keep things going if you are 35 years old (or whatever age) and you get written off while driving down the road. It does happen. And do not forget the wife and kids as well – unfortunately it happens to them as well. When it runs out it is gone – and that means you might not be insurable if you want to renew – never – never forget that! If you become uninsurable during the term insurance life span – you might never be able to renew it.

Next is whole life.

At least in this country when you invest in whole life – there comes a time when you can stop paying the premium and let it ride. It usually is far more expensive. However one thing that does happen and I have not seen it mentioned so perhaps it is different in the US of A – the death benefit continues to grow. So for the sake of argument if you have a $100K death benefit today, your death benefit can grow to double by the time you have paid in for 20 years. If you stop paying and let it ride the death benefit can even double again if you do not draw any money out if or you live long enough.

All life insurance death benefits are paid out within 48 hours and the money is tax free.

There is also another whole life insurance called universal life. It is a policy that you can also throw additional money into and that money is invested and grows with a tax deferred status. This means that while you or your estate will pay taxes on the "non-insurance" portion when you die – the money grows at a faster rate. The investment portion of this policy is literally no different than investing with an investment broker – we can buy and sell investments within the policy – and it will never affect the actually pay out of the death benefit – however you will also see the investment funds when you are put in the ground.

We deal with London Life. There are several other excellent companies in Canada but this is the one we picked.

Now I personally do not care how much insurance you have and I do not care what you use it for.

But on this site and on Ranchers – every year we read about how someone was screwed out of their land because when Mom and Dad finally kicked off, the bank account did not have enough cash to pay all the bills, keep the lawyers, and especially the kids and government tax man happy – so the land was sold.

We also read about how Junior wanted to farm but the four other kids took him to court and forced the sale of the land so all could get what they considered to be their fair share of the estate. And no matter how exacting you are with a Will – it can be challenged and changed after your death should the kids get to fighting. And if you believe for a moment yours will not then I have some really cheap land to sell you.

If one kid gets the farm the rest get the death money - and the farm stays in the family.

Grief and greed are terrible companions and they often tear a family apart.

So – what we did. We have a lot of term insurance. That is the cheap stuff. And it is an excellent vehicle.

We also have a large Universal Life policy based on "First to die" – so wife and I know that one of us will get a large lump sum – and if we both kick then the kids get it. We also invest through the life insurance policy – just like any investment plan – except it is tax sheltered through the life insurance. The cost of the policy never changes – so get it when you are as young as possible – term can tend to be expensive as you age or have health problems – especially if you experience a health issue. And yes – we can put money in and take it out as required.

Over the past few years we have averaged a return on our investments of about 14% - and paid no tax on it yet - the time will come when the policy is cashed in that tax will be required opn the investment portion - put that is just the way it goes.

And never forget that you can become uninsurable overnight if something happens to you.

If you want to be mercenary and have some funds left that you can spend, you can also pay for the family farm in another way.

My parents approached us kids some years ago and had us insure them.

When they die – and all things being equal they will die first – the kids will get the cash. It will pay for some of the company things and all their final expenses and leave a large amount of tax free cash to help the kids "ease the burden of grief!"

Us kids pay for that – divided equally between us all. If you are buying the family ranch from your parents or the family business - buy a big insurance policy on your parents to pay for it and all the bills and pay off the siblings and any possible partners when they die. It will definitely make all the lives easier.

Some will say that this is not a good thing because it is your parents – and that is your choice – and it is another way to maximize a tax free return investment.

So – when you think and talk about life insurance remember – there are many reason other than simply getting buried – it might be the only vehicle that can financially ensure your land stays in the family. It might be the only way to guarantee a disabled kid some sort of life after you are dead – and yes, you will die. LOL

If you were to die today - how much money would it take at todays rates and factoring in a 3% annual inflation rate for your family to survive for the next 5, 10, 15, 20 years. Or do you care? These are the things that we needed to consider.

It might also be the only way to prevent a huge schitte storm when the kids and the government and the tax man and the county and every feed and hardware store and the funeral costs get factored in.

So – while people tend to think that is it only to provide some money for their clean up and burial and for the wife – it is a very, very important part of your succession planning and should never be ignored.

On the other hand you can say screw it and let the chips fall where they may – in the end no matter what you do, your decisions will have far reaching consequences once you are gone – if that is not important then do not worry.

If you are one of the fortunate few that has large amounts of cash and investments and all the land is paid for then you do not need to worry about this - the average person cannot do a decent succession plan without insurance.

But - do not forget the kids - someone will want a piece of that pie - and it you need to divide it six ways to Sunday there better be enough cash in the bank or the farm is sold.

If it is important to you then start thinking about it today. You might get written off tonight in the back field. (Hope not!)

In closing - get a will, think about what plans you would like to see carried out after you die - and for Heavens Sake - be sure the kids are ALL IN THE KNOW! Because things change on a regular basis be sure to keep things updated - we have a family meeting every December because that is the time when we all get together - those updates do make a difference.

That way you can help them sort out their concerns while you have some input - because when you are dead you will have no say! LOL

Best to all

(Sorry for all the edits - I tried writing this directly into the thread rather than working it first and then pasting it in)

 

[John SD]

GM, do you really need life insurance? Don't mean to ask what might sound like a stupid question but life insurance is really meant for your survivors - to take care of final expenses. If you have provided for them and your finals then your wasting your money buying life insurance.

Taking care of final expenses is only a very small part of the need for life insurance. It's main purpose is to replace your income. That's why Dave Ramsey recommends having a policy of 10 - 12 times your yearly income. So your survivors can invest it in mutual funds (or something else) and get the income from this investment to replace your income.

If you don't have anyone depending on your income, then you don't need life insurance (assuming you have enough assets to cover your funeral expenses). Someone mentioned you don't need it if your children are grown and gone and your wife has a good job. I disagree. Even if my wife has a good job, I wouldn't want her to cut back on her lifestyle if I died and she didn't have anything to replace my income.

I agree, but some here totally missed my point. You don't need life insurance to pay for your funeral. Pick out whatever products and services you wish, and pay for it now at today's prices. That's as close to a done deal as you can get.

My step-grandfather did this in 1976 and passed in 1998. Funeral home changed hands twice in that time, but they honored the original deal. Only thing left needed to do was to pick a few pallbearers because Grandpa had outlived most of his choices and those left weren't able to do it.

I deal with the other funeral home in town, owned by same family since 1967. I call :bs: on the funeral home getting 10-12% return on a CD because they deposit the money in the same local bank I use. If they are getting 10-12%, I want in on it for my own CDs

 

[John SD]

Well. This is a long one and I have to point out that this is also done from a Canadian perspective.

If any of you have a farm and more than one kid, you need some sort of life insurance that will help at least one of your kids keep the farm and keep the rest of them from suing your "on farm kid"

So – term first.

An excellent vehicle for money to keep things going if you are 35 years old (or whatever age) and you get written off while driving down the road. It does happen. And do not forget the wife and kids as well – unfortunately it happens to them as well. When it runs out it is gone – and that means you might not be insurable if you want to renew – never – never forget that! If you become uninsurable during the term insurance life span – you might never be able to renew it.

Next is whole life.

At least in this country when you invest in whole life – there comes a time when you can stop paying the premium and let it ride. It usually is far more expensive. However one thing that does happen and I have not seen it mentioned so perhaps it is different in the US of A – the death benefit continues to grow. So for the sake of argument if you have a $100K death benefit today, your death benefit can grow to double by the time you have paid in for 20 years. If you stop paying and let it ride the death benefit can even double again if you do not draw any money out if or you live long enough.

All life insurance death benefits are paid out within 48 hours and the money is tax free.

There is also another whole life insurance called universal life. It is a policy that you can also throw additional money into and that money is invested and grows with a tax deferred status. This means that while you or your estate will pay taxes on the "non-insurance" portion when you die – the money grows at a faster rate. The investment portion of this policy is literally no different than investing with an investment broker – we can buy and sell investments within the policy – and it will never affect the actually pay out of the death benefit – however you will also see the investment funds when you are put in the ground.

We deal with London Life. There are several other excellent companies in Canada but this is the one we picked.

Now I personally do not care how much insurance you have and I do not care what you use it for.

But on this site and on Ranchers – every year we read about how someone was screwed out of their land because when Mom and Dad finally kicked off, the bank account did not have enough cash to pay all the bills, keep the lawyers, and especially the kids and government tax man happy – so the land was sold.

We also read about how Junior wanted to farm but the four other kids took him to court and forced the sale of the land so all could get what they considered to be their fair share of the estate. And no matter how exacting you are with a Will – it can be challenged and changed after your death should the kids get to fighting. And if you believe for a moment yours will not then I have some really cheap land to sell you.

If one kid gets the farm the rest get the death money - and the farm stays in the family.

Grief and greed are terrible companions and they often tear a family apart.

So – what we did. We have a lot of term insurance. That is the cheap stuff. And it is an excellent vehicle.

We also have a large Universal Life policy based on "First to die" – so wife and I know that one of us will get a large lump sum – and if we both kick then the kids get it. We also invest through the life insurance policy – just like any investment plan – except it is tax sheltered through the life insurance. The cost of the policy never changes – so get it when you are as young as possible – term can tend to be expensive as you age or have health problems – especially if you experience a health issue. And yes – we can put money in and take it out as required.

Over the past few years we have averaged a return on our investments of about 14% - and paid no tax on it yet - the time will come when the policy is cashed in that tax will be required opn the investment portion - put that is just the way it goes.

And never forget that you can become uninsurable overnight if something happens to you.

If you want to be mercenary and have some funds left that you can spend, you can also pay for the family farm in another way.

My parents approached us kids some years ago and had us insure them.

When they die – and all things being equal they will die first – the kids will get the cash. It will pay for some of the company things and all their final expenses and leave a large amount of tax free cash to help the kids "ease the burden of grief!"

Us kids pay for that – divided equally between us all. If you are buying the family ranch from your parents or the family business - buy a big insurance policy on your parents to pay for it and all the bills and pay off the siblings and any possible partners when they die. It will definitely make all the lives easier.

Some will say that this is not a good thing because it is your parents – and that is your choice – and it is another way to maximize a tax free return investment.

So – when you think and talk about life insurance remember – there are many reason other than simply getting buried – it might be the only vehicle that can financially ensure your land stays in the family. It might be the only way to guarantee a disabled kid some sort of life after you are dead – and yes, you will die. LOL

If you were to die today - how much money would it take at todays rates and factoring in a 3% annual inflation rate for your family to survive for the next 5, 10, 15, 20 years. Or do you care? These are the things that we needed to consider.

It might also be the only way to prevent a huge schitte storm when the kids and the government and the tax man and the county and every feed and hardware store and the funeral costs get factored in.

So – while people tend to think that is it only to provide some money for their clean up and burial and for the wife – it is a very, very important part of your succession planning and should never be ignored.

On the other hand you can say screw it and let the chips fall where they may – in the end no matter what you do, your decisions will have far reaching consequences once you are gone – if that is not important then do not worry.

If you are one of the fortunate few that has large amounts of cash and investments and all the land is paid for then you do not need to worry about this - the average person cannot do a decent succession plan without insurance.

But - do not forget the kids - someone will want a piece of that pie - and it you need to divide it six ways to Sunday there better be enough cash in the bank or the farm is sold.

If it is important to you then start thinking about it today. You might get written off tonight in the back field. (Hope not!)

In closing - get a will, think about what plans you would like to see carried out after you die - and for Heavens Sake - be sure the kids are ALL IN THE KNOW! Because things change on a regular basis be sure to keep things updated - we have a family meeting every December because that is the time when we all get together - those updates do make a difference.

That way you can help them sort out their concerns while you have some input - because when you are dead you will have no say! LOL

Best to all

(Sorry for all the edits - I tried writing this directly into the thread rather than working it first and then pasting it in)

Bez, thank you for the well written post. Can't say I disagree with any of it ;-) My I add it is not only important to have a will and make sure your beneficiaries understand it, you also should have a living will for health decisions along with a power of attorney both for your financial business and a POA for health care.

I have 2 whole life policies purchased in 1985. I'm 52 years old now with no dependents. I probably should cash in the policies. Then I could use the proceeds to buy booze, entertain wild women, and probably end up wasting the rest 8) :lol:

As it is, I'm still paying the annual premiums and the policies increase in value each year. The policy dividends buy more paid up insurance.

On the last annual statement, the death benefit of one policy was around $100K and the other was 120K. The combined cash value of the policies was about $80K which I could borrow against.

I did borrow from my life insurance to finance the water pipeline work on my place. IIIRC, it cost me 5.5% interest. All paid back now and the policies are in full force.

I've set it up now that my sister and my neighbor are primary and secondary beneficiaries on the polices. One gets one policy, and the other gets the other. If either dies, the other gets it all.

When I expire, the cash to my neighbor should be quite helpful to him if he wants to purchase my land that joins his place from my sister. If he doesn't want to take it on by the time I kick the bucket, he can keep the cash. That's for them to work out, because I will be out of the picture.

Then again, I could just cash it in and say "Booze and wild women, here I come"

 

[lavacarancher]

We're talking at odds with one another but that's OK. All I was trying to say is if you have your family provided for already (you've got money in the bank, made investments, done due diligence, they can live without you) then why do you need insurance? Sure, I know that some people want to make a profit from the death of a loved one and if that's what you want - go for it.

When my Dad got sick and we all knew the prognosis I went to the local funeral home and "pre-arranged" his funeral. Cost me around $5K. When he passed 4 years later I expected the funeral to be all taken care of but guess what, I owed another $2K. None of us are in our right mind at a time like that so I paid and put him in the ground. After a few weeks I went back to the funeral home and grabbed the owner by the neck and asked why the additional charge. He told me that prearranging a funeral DOES NOT LOCK DOWN A PRICE. If the cost goes up then you owe the difference between what you have already paid and the current cost. So this is why I said keep your money in your pocket rather than giving it to someone else.

 

[Brute 23]

You don't use life insurance to ease the pain, give money to your kids, or as an investment. Take the premium and invest it if you want to leave money for your kids. Same thing with funeral expenses. Put the money in an account and be done.

If you can pay a monthly premium you can put it in to a savings account. It's not that hard.

Those are the three talking points all the insurance gimmicks use to sucker people.

 

[GMN]

We have a plan already but will have to pay more in to make it last longer or go to a term policy-probably just extend the one we have