Sort of. They make reasonable assumptions about the average health of the cohort of annuitants he’s in, which does vary by product. But everyone in that cohort gets the same price, regardless of health.
Sort of like how a 22 year-old actuary pays the same for employer-sponsored medical insurance as a 64 year-old despite their risk profiles being radically different.
Typically “no” for group and “yes” for individual, but I think unisex pricing is becoming more common for individual too.
If you have a kid every other year you can help get your money’s worth
As a person that had a 3 kid in 4 calendar year stretch, I agree with Dan.
Why buy anything other than term? Term will pay for your mortgage and for your kids to go to college if you drop dead tomorrow. Other forms of life insurance just seem like incredibly complicated investments with a tax loophole.
This was our strategy. We bought term. We no longer have life insurance being what wtith requires.
Exactly this. Term life insurance does what insurance is fundamentally designed to do. Whole life is a bad investment vehicle.
If you are maxing your 401ks/IRAs/FSA or HSAs/529s, I could see buying whole life on a child in order to set them up for later life.
Whole life is a bad investment vehicle if you haven’t maxed out other tax shelters. If you have, it can become a great investment vehicle. the clarification is important given the tendency of the internet to say ‘always’ when in fact it’s only ‘most of the time’.
It’s also a great vehicle if you have high utility for estate creation. People ‘want’ to look after their dependents but don’t actually have to - which is why term is a want not a need. Other people want to create an estate, and they don’t have to either, but whole life fills that void. Too many consumers hardline that term is a need and whole life is a want, and that’s not the case, and people here should see that difference.
I have a strong desire to guarantee an estate for my kids. I’ll have an estate anyway, but I want the guarantee. Thus, we have a joint last to die permanent policy. I also have a strong desire to guarantee that my SO is well looked after in retirement if I die before I create a large enough estate, so I have a second decent sized permanent policy to guarantee that. Neither of those permanent policies are investments (I actually buy permanent without cash values), they’re entirely a risk transfer tool for me.
Plus the term/whole life distinction is inflated in the public. Anyone who’s studied LTAM likely appreciates that term and wl are the same insurance just with different premium structures - the insurance is the same it’s only the way the premiums are built over time. Do you want your premiums level for years of 5,10,20,30 or your expiration date? There’s no conversation around different death benefits - a check (cheque) is a check (cheque) is a check (cheque).
I suppose, I don’t know why I said to purchase the whole for your kids when as you said you can just purchase it yourself. It’s kind of “babying” them to make sure they have their own insurance, instead of relying on your lump sum payout. You can of course buy your own, but like you said you should be maxing out a lot of other accounts first, and if you can consistently max out over $30k in taxable shelters each year, you should have quite the estate left.
True, and that’s a relevant “if” for sure.
Eh, for people who don’t have a lot of savings but a decent amount of income / lifestyle to match I think it’s more than a little heartless to consciously think “f*** my kids… if I die they are just screwed. NO COLLEGE FOR YOU!!!”
I mean, by that logic ALL insurance is a want and not a need.
I would not classify term insurance as a “want” for middle & upper middle class families with minor children whose assets are insufficient to cover their kids until the kids are financially independent. (ie most middle & upper middle class families with minor children)
I agree, but I’ve spoken to people who don’t think that. THey think that gov’t benefits are sufficient, and the associated drop in lifestyle is acceptable. Maintaining your family’s lifestyle is a want not a need. Most of the world doesn’t do it.
I’ve also spoken to people who think it’s heartless not to leave an estate. In fact there’s entire cultures that think this - the term vs whole life thing is very much a western culture thing. You want to sell whole life? Set up a mandarin sales center (and some companies have this, and sell a ton of whole life).
Well, perhaps. So is buying them an xbox. But there’s also guaranteeing insurability - and at the price of kids life insurance, guaranteeing their future insurabilty is cheap.That’s hugely important to me, and I will pay for that risk transfer.
I suspect that the difference in evaluation here is that many people here are proponents of the actuarial world. I’m a proponent of insurance in general. I like smoothing out my risk - a lot.
What are people going to do if their kid becomes uninsurable? Probably shoulda/woulda/coulda, because they’re actuaries and now their kids don’t have life insurance and can never get it. I further suspect that most people don’t disagree with a policy to cover that risk so much as just never thought it through.
I did, I’ve got permanent life and critical illness on my kids. And thank goodness, because the risk got realized. My eldest is uninsurable for life and CI so what I bought is what they’ve got. I bought enough to cover a mortgage, but not enough to replace income in the event of a family. It’s working right now because they’re married and have a mortgage. But regretfully, they are talking about kids in a few years and I didn’t buy enough for that. Which means if that secondary risk of them dying (and remember, they’re uninsurable), then I’m on the hook financially to some extent for the grandkids. Surely few people are going to suggest that eff the grandkids financially, not my problem.
And my point may being lost here.
That’s a fair point - in all likelihood they’ll eventually be eligible for group life insurance via employers, but it’s not guaranteed.
If you have kids life insurance, make sure you keep the policy until the perceived value(death benefit)>perceived value(cash value). It’s common to transfer ownership of these policies to kids when they’re in their 20’s. They have a look at the policy, convert the CSV into cases of beer, then at 40 regret that they don’t have that $50K $5/month policy anymore.
My eldest is married, so we’ve changed the beneficiary on their policy, but I still pay the premiums and expect that to continue. At this point it’s just a dad thing. Dad pays for insurance just like dad pays the restaurant bill when we go out. (or as I say when they offer to pay, “are you the dad? i didn’t think so”).
I think exactly that happened with my brother and his then-girlfriend. All I was told was “she got an insurance benefit when she turned 18”, and they got some low payout around the $100k-200k range and moved across the country and were broke in a couple years.
In the metric system, we measure that in years.
I don’t know what the government benefits look like in Canada, but in the US those benefits run out when the kid turns 18.
If Canada has better benefits than the US then maybe term insurance IS more of a want than a need there for middle class & below.
I had already omitted lower class from my earlier statement because government benefits probably DO come fairly close to what those folks are spending on their kids.
If there’s something going on with your kids to the point that they are unable to buy an individual life policy AND unable to hold down any sort of job with benefits… I’m not sure why they’d need life insurance. At least not beyond burial insurance and most actuaries can probably swing the cost of final expenses for their kid.
They would have no one dependent on their income because they have no income. Why does such a person need insurance in the first place?
I mean, it stinks that they’ve got whatever medical issue is preventing them from getting an insurance policy. But that doesn’t translate to needing life insurance.
I was thinking the same @twig93, although there’s always going to be a fringe case. Say, a person moderately disabled (physically or mentally) who can work part-time at a low-level job but can’t be fully independent, yet it’s possible they could have a SO and/or a child. A small enough concern that I still would just set myself up to support them with term on me, but I could see it.
That’s a stretch. If the person is in the US then Social Security would pay a benefit to the kid, and for low income it would probably replace more than what the person was spending on the kid.
Is the SO financially dependent on this not-fully-independent person? If not then SO just needs to be able to cover final expenses. If yes, then this person probably either has a real job making real money and can access life insurance or there’s something else going on.
This is not true.
I am not saying that whole life is right for everyone, in every situation. But whole life is an asset class that could fit into some peoples’ financial lives quite well.
I would be more likely to accept the concept that universal life is a bad investment vehicle.