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Life Insurance

Old 06-07-2008, 03:15 PM
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I was wondering if anybody has a life insurance plan. I figure because Im young (22), its probably a good time to get something for just in case. Any info (prices, plans, companies, etc.) is helpful. thanks everyone!
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Old 06-07-2008, 03:53 PM
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Originally Posted by wmuflyboy View Post
I was wondering if anybody has a life insurance plan. I figure because Im young (22), its probably a good time to get something for just in case. Any info (prices, plans, companies, etc.) is helpful. thanks everyone!
"Selectquote" is a great place to start. They have all the rates and policies for different companies and can save you a dozen phonecalls. Very low-pressure salesmen.

Get term life insurance. Stay away from universal/whole life insurance... it's a huge waste of money, which is why the insurance salesmen push it so hard. More money out of your pocket and into theirs. They will make it look real good, but run away if they keep pushing it.

When to start? Depends. Do you have any kids to send to college if you were to die tomorrow?

How much? Also depends. How much to pay off the house so your widow won't get evicted while she's going back to school for that nursing degree? Don't get too much... you don't want your widow's new husband living in a mansion and buying toys (boats, RVs, flatscreens) with your insurance money. A good rule o'thumb is 5 years salary, but good luck figuring out how much that is for a regional pilot these days.

For the biggest savings, get a 30 or 40-year plan before you start flying. If you're already flying, Banner Life Ins. has some good rates and they're pilot-friendly.

Finally, shop around before you buy group insurance from your employer or ALPA. Could be a steal, could be a rip, so find out before you sign.

Good luck!
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Old 06-07-2008, 05:01 PM
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I don't know if I'd say that universal life is a waste of money. Really, it depends on your situation. However, I do agree that term life is probably right for most people. In addition, term life will be the least expensive product. If you're just looking for a simple term policy, here's what I would do/have done:

Shop around. Minnesota Life through AOPA gave me a great rate.

Lock in your rate for 20 years.

Buy a $1,000,000 policy if you can afford it. It sounds like a lot now, but as your financial obligations, income, and family grow, that million will seem to get smaller. Also consider the effect of inflation and that your rate will typically increase with your age. So lock in your rate now.

You want a good rate, but you also want to know that your insurance company will be solvent if/when the time comes to make a claim. AM Best is a good place to look up insurance company ratings.

If you have friends or family who work in the field of personal financial planning, see if you can consult with them to learn about the different products available and how best to shop around.
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Old 06-08-2008, 07:10 AM
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my father explained to me that whole life insurance was the way to go. he explained that as i get older my life insurance will gain some cash value and would essentially be a investment. my brother is 27 and started a life insurance plan when he was 21 for $250,000. he said by the time hes 60 or 80 (cant remember), it will have gained a cash value of $1.1 million. i guess, then, i dont understand how whole life insurance is a waste of money. if its gaining cash value then you could essentially take out a loan from yourself. sounds like a good deal....
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Old 06-08-2008, 07:30 AM
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You can do much better. $125,000 at 5 percent over 40 years gives you 1.75 mill.
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Old 06-08-2008, 10:41 AM
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This explains it pretty well...

http://www.youtube.com/watch?v=7zGRDIVKUh4
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Old 06-08-2008, 11:03 AM
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Originally Posted by LJ-ABX View Post
This explains it pretty well...

http://www.youtube.com/watch?v=7zGRDIVKUh4
Thanks for the link. I bought a 15 year term policy when I had my first kid at age 40. The idea was to provide for my family while I was in my strongest earning years in the event of my death. Looking back, I should have bought the 20 level term. But the plan worked out fairly well. I'm 52 and things are on track financially. My wife has a level term policy in a lesser amount as well.
Whole life is a forced savings plan with high fees. You can do much better by investing in mutual funds. But you have to have the willingness to weather the ups and downs of the market.
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Old 06-08-2008, 10:26 PM
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Originally Posted by wmuflyboy View Post
my father explained to me that whole life insurance was the way to go. he explained that as i get older my life insurance will gain some cash value and would essentially be a investment. my brother is 27 and started a life insurance plan when he was 21 for $250,000. he said by the time hes 60 or 80 (cant remember), it will have gained a cash value of $1.1 million. i guess, then, i dont understand how whole life insurance is a waste of money. if its gaining cash value then you could essentially take out a loan from yourself. sounds like a good deal....
This will sound like I'm slamming your dad, but you may want to do some math and verify the lesson he was trying to teach you.

Whole life is a waste of money because people don't understand it. And yes, it does sound like a good deal.

Never buy what you don't understand - Are you buying life insurance or investing for retirement? Whole/universal life policies confuse the two, and the scam works because they keep a big chunk as fees. If you split it into two chunks - life insurance and an investment vehicle, then compare the costs, I think you'll find that you're getting ripped off.

If you were shopping for a car and also wanted a gym membership and some guy in a suit offered you a combined car and gym membership for $400 a month, would it be a deal? You don't have enough info - how much is the car and how much is the membership? I guarantee the insurance guy will not tell you these numbers.

The $250,000 whole life policy may run you (a swag) $150 per month, and in addition to the life insurance you'll have 1.1 million at retirement (Not sure if he said 60 or 80? I'm guessing 60). In the prospectus they will give you a "rate of return" on which that 1.1 million is determined. A fair quote would be 10%. They may have told you 14% to make it sound even better. You'll have to check.

Now the comparison...
How much would a term policy cost for that same $250,000? Maybe $30 per month. So from the same $150, you have $120 left to invest.

Invest that $120 per month in your 401k or Roth IRA at the same 14% return. At retirement (60 again) you'll have maybe 2.3 million. Where did the other 1.2 million go? Fees. That's the scam. You paid them 1.2 million to confuse you. Why do you think they make it sound like such a great deal?

If you're silly wealthy you can probably use Whole/Universal insurance to shelter more money for retirement (I guess after you've maxed out your 401s, IRAs, etc) But for a 22 year old regional pilot it's burning money you can't spare.

Do the math (using their numbers, not mine), compare it to any term policy you can find on the internet, and let me know what you come up with.
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Old 06-09-2008, 10:24 AM
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Here's my situation, I'm 19 and joining the Army soon, and I was also looking at buying life insurance to supplement what the Army is going to give me. I'm looking for something cheap (around 30 bucks a month or less) without any restrictions (like limited benefits the first two years, etc). Any recommendations?
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Old 06-10-2008, 08:59 AM
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Do you have a family, or anyone who depends on your income for their support? If not, you don't need life insurance. If you do, then you need a total of about 8 to 10 times your annual income. That amount will "replace" your income for a good number of years giving your family the ability to continue with their lives with plenty of time to adjust their financial plans to life without you.

Here's an independent (i.e. sells insurance from multiple companies) broker from whom you can get quotes online. Even if you don't buy from them, their quotes are a good for comparing to other quotes that you might get.

http://zanderins.com/
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