# Is Life Insurance Worth It? Consider This **URL:** \ **Category:** In My Humble Opinion\ **Created:** [December 1, 2023, 1:38pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958 "2023-12-01T13:38:24Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [December 1, 2023, 6:31pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/21 "2023-12-01T18:31:03Z")
> [@RitterSport](#): > > Definitely should fill up the 401k before looking to invest anywhere else. Not necessarily. A Roth IRA is an amazing thing when you consider the ability to later pull the principal out of it with no tax consequences. If I were starting out, maxing out a Roth IRA (_not_ Roth 401k), and then focusing on the 401k. > [@Icarus](#): > > If they are not designated as such, then they are putting their own interests first (selling you something that they get a commission on.) Fiduciaries are also going to sell you things they get a commission on. The real benefit of using a fee-based financial planner is if your assets are high enough to justify it and you want to run everything once the plan is in place. A typical plan may run you $1000. At a 0.50% (an extremely low number for advisor comp these days), does she have $40,000 invested outside of her 401k to justify the expense of a fee-based planner every 5 years? Does she have the restraint and discipline to follow that plan when the market tanks, or she thinks she’s heard an amazing stock tip she wants to capitalize on? If so, great - a fee-based financial plan sounds perfect for her. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [December 1, 2023, 6:39pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/22 "2023-12-01T18:39:58Z")
> [@Munch](#): > > If I were starting out, maxing out a Roth IRA (_not_ Roth 401k), and then focusing on the 401k. The OP said nothing about a 401k, so we don’t know if that’s an option. But if the first x dollars of 401k contributions also include matching funds from the employer, that’s what I’d do first. That’s free money. ---
**Author:** ![RitterSport](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rittersport/32/6326_2.png) [@RitterSport](https://boards.straightdope.com/u/RitterSport)\ **Post date:** [December 1, 2023, 6:40pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/23 "2023-12-01T18:40:40Z")
> [@Munch](#): > > If I were starting out, maxing out a Roth IRA (_not_ Roth 401k), and then focusing on the 401k. I guess you’re saying this because you can withdraw the basis of a Roth IRA but not a Roth 401k? For what it’s worth, I have a Roth 401k with company match and that age-related catch-up amount, so I’m definitely doing that first. Not sure if I quality for a Roth IRA anyway. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [December 1, 2023, 6:47pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/24 "2023-12-01T18:47:16Z")
> [@Railer13](#): > > The OP said nothing about a 401k [Yes, they did.](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/4) But very fair point about getting an employer match first - that’s essential. > [@RitterSport](#): > > I guess you’re saying this because you can withdraw the basis of a Roth IRA but not a Roth 401k? Yes. Also, you can have a Roth IRA at Fidelity or Vanguard or wherever for a fraction of the cost inside a standard 401k, which are usually packed with hidden fees (if there’s not a line item for admin or advisory fees on your statement, just compare the expense ratios of the investment options versus how the expenses are reported on Morningstar. The ones at my company come in at about 0.40% higher.). ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [December 1, 2023, 6:59pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/25 "2023-12-01T18:59:33Z")
> [@Munch](#): > > > [@RitterSport](#): > > > > Definitely should fill up the 401k before looking to invest anywhere else. > > Not necessarily. A Roth IRA is an amazing thing when you consider the ability to later pull the principal out of it with no tax consequences. If I were starting out, maxing out a Roth IRA (_not_ Roth 401k), and then focusing on the 401k. One argument I heard was to contribute enough to the 401(k) to max out employer matching, then to contribute to the Roth account up to the maximum for that and if there is still money available, make additional contributions to the 401(k). ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [December 1, 2023, 7:31pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/26 "2023-12-01T19:31:43Z")
> [@Munch](#): > > Yes, they did. Whoops, my bad. I was only looking at the first post. > [@Dewey\_Finn](#): > > One argument I heard was to contribute enough to the 401(k) to max out employer matching, then to contribute to the Roth account up to the maximum for that and if there is still money available, make additional contributions to the 401(k) Interesting strategy. I don’t know if I, for instance, could have done that, since all of my 401k contributions were payroll deductions. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [December 1, 2023, 8:02pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/27 "2023-12-01T20:02:32Z")
> [@Jinx](#): > > Well, she is doing the 401(K) bit, but she wants to do more. I guess she feels stagnated by her situation and wants to feel she is getting somewhere on one front even if the housing / rental market keeps her stuck at home. Technically, she could just open any normal bank account and put the beneficiary down as whoever. And, likewise, she could set up for money to go to that account every month or deposit into it as she can. But if she wants something more official then she could probably look into revocable trust. Or if she wants to go very arcane, she could look at [infinite banking](https://www.quotacy.com/infinite-banking/), but I believe that would require being able to find whole life insurance. [This company](https://fidelitylife.com/life-insurance-basics/life-insurance-101/life-insurance-for-those-with-chronic-illness/) is saying that they offer permanent life insurance policies (including whole life) to the chronically ill. She might want to do her own checking and not trust the financial advisor. It’s real easy to not find things if you don’t actually look for them. Assuming that she continues on to live a long and functional life, being able to turn the insurance policy into collateral for self-directed loans is not a terrible power to have. And if that never happens then the fallback is that she has whole life insurance that will pay out to her chosen beneficiary. Personally, I’d go with the revocable trust option if she feels like she needs to level it up somehow. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [December 1, 2023, 8:51pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/28 "2023-12-01T20:51:42Z")
> [@Railer13](#): > > I don’t know if I, for instance, could have done that, since all of my 401k contributions were payroll deductions. I think all 401k contributions are payroll deductions. But the strategy is simply doing some math. You figure out how much you can afford to contribute each year. The first portion of that amount is to maximize your match. Then you factor what you’d put to a Roth IRA, up to the contribution limits. Whatever is left over you put in the 401k. So let’s say you’re making $100,000, and can contribute $20,000 (20%) to retirement. Employer matches up to…we’ll say your first 8%. A Roth IRA maxes out at $6500 if you’re under 50, so that’s another 6.5% off the board, leaving 5.5% left to invest. So you end up with 8%+5.5%=13.5% into the 401k, and $6500 into the Roth. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [December 1, 2023, 9:19pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/29 "2023-12-01T21:19:51Z")
> [@Munch](#): > > But the strategy is simply doing some math. Well, it was a LOT easier to max out my 401k contributions each pay period! Fortunately, those days are well behind me. ---
**Author:** ![Dag\_Otto](https://avatars.discourse-cdn.com/v4/letter/d/439d5e/32.png) [@Dag\_Otto](https://boards.straightdope.com/u/Dag_Otto)\ **Post date:** [December 2, 2023, 6:04am UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/30 "2023-12-02T06:04:28Z")
> [@Dinsdale](#): > > Not only should your daughter NOT be buying this life insurance, but she should be looking for a different advisor as well. Well - clarification. If having this term insurance gives her peace of mind worth $50 a month, good for her. But as far as an investment, she’d have to work somewhat to find a worse one. Agree that she should find a different advisor. The push for life insurance for someone with no dependents makes me wonder if this guy is an actual investment advisor, rather than just an insurance salesman. And actually, since it sounds like she has the desire to invest more, she probably has the willingness to learn more about investing on her own, and that will serve her well in the future. It’s fairly easy to invest in low cost index mutual funds or ETFs. Since she is young, not paying an advisor 1% every year will make a huge difference in her returns over a 30 year investment horizon. 1% doesn’t sound like much, but over the course of 20, 30, or 40 years the cost is staggering. Perhaps she may want an advisor early on, but she should learn about investing and work towards doing it on her own once she has some knowledge and confidence. Forums such as Bogleheads are a good source of information. That being said, investing in a 401k with a match from the employer is a solid move, as is investing in either a traditional or Roth IRA. But saving and investing in non retirement accounts is also going to be needed, because funds in retirement accounts are not easily accessible prior to retirement. But her biggest advantage is time. Investing isn’t a get rich quick scheme. In fact, even with decent returns the first decade isn’t that impressive. The second decade looks better, but the big payoff really happens in the third decade of investing and beyond. But you can’t get to year thirty without starting at year one. By starting young, she’ll be fine. ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [December 2, 2023, 6:51pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/31 "2023-12-02T18:51:54Z")
This is a sincere question: doesnt pretty mich any job that offers any benefis at all offer some sort of term life insurance? We all get $10k of term life with the district paying the premium, and we can buy up to 4x salary on top of that for not much. Certainly less than $50/month at 24. I always saw that 10k as “burying money” and thought it was pretty common. ---
**Author:** ![Odesio](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/odesio/32/20003_2.png) [@Odesio](https://boards.straightdope.com/u/Odesio)\ **Post date:** [December 2, 2023, 7:02pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/32 "2023-12-02T19:02:25Z")
> [@MandaJo](#): > > This is a sincere question: doesnt pretty mich any job that offers any benefis at all offer some sort of term life insurance? We all get $10k of term life with the district paying the premium, and we can buy up to 4x salary on top of that for not much. Certainly less than $50/month at 24. Until I started with my current employer, I had never had one that provided me with life insurance at no cost to me. My current employer enrolls all employees in both life and AD&D insurance at no cost to them, and we’re free to enroll in additional voluntary group term life and AD&D if we’d like. I think for most of our younger employees, we pay something like $10 a month for life insurance in the $120,000 range. AD&D is dirt cheap of course and probably a better idea than life insurance for younger people. $50 a month for life insurance for a 24 year old seems excessive unless the policy has some huge payout. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [December 2, 2023, 7:02pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/33 "2023-12-02T19:02:27Z")
> [@MandaJo](#): > > Certainly less than $50/month at 24. The OP still hasn’t told us what $50/mo gets their daughter, so there’s no telling if that’s a deal or not. Group life insurance is a nice little perk - but it’s not portable, and it’s definitely not cheap when you leave that job. If you just want burying money, that’s fine. If you’re looking for a longer term income replacement for dependents, it’s a much better idea to get a stand alone policy. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [December 2, 2023, 7:05pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/34 "2023-12-02T19:05:11Z")
We haven’t had a company paid option for many years at any of my employers. But the $10k option is $3.xx a week. Actuarially terrible for most people. But it costs my employer nothing, a part of the payment goes to our benefits administrator (Mercer) and the rest to the insurer (Met Life), and about 25% of people sign up for it. ---
**Author:** ![xtenkfarpl](https://avatars.discourse-cdn.com/v4/letter/x/c2a13f/32.png) [@xtenkfarpl](https://boards.straightdope.com/u/xtenkfarpl)\ **Post date:** [December 2, 2023, 7:14pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/35 "2023-12-02T19:14:33Z")
If you have no dependents, what is the point of life insurance? Put the money into low cost index funds, if you want to invest. Fire that advisor. They are almost certainly getting a fee for promoting ‘insurance’ products. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [December 2, 2023, 7:22pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/36 "2023-12-02T19:22:51Z")
> [@Jinx](#): > > Icarus, yeah, he claims he’s a fiduciary, but it seems they all do (from our own asking around). Maybe it’s just BS formality. Perhaps they throw the term around loosely. It’s almost impossible to prove a claim that an advisor breached their fiduciary duties. I remember there was a big kerfuffle in the Financial Advisor community 15 (ish) years ago that push for Fiduciary commitments was going to kill the industry, but this has petered out because it’s proven really easy to keep screwing your customers while pinky swearing that you’re acting in their best interests. ---
**Author:** ![Fir\_na\_tine](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Fir\_na\_tine](https://boards.straightdope.com/u/Fir_na_tine)\ **Post date:** [December 2, 2023, 8:00pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/37 "2023-12-02T20:00:10Z")
Just one tiny note of caution. You mention health conditions. Are they likely to get worse over time? And does your daughter hope to find a mate and have children in the future? If the answer is yes, then a term policy that is guaranteed convertible could be justified (because she might not qualify for insurance down the road). It’s not an investment. It’s insurance. She lives forever - the insurance company wins. She dies prematurely - her survivors are protected. The particular advisor you’re citing sounds unprofessional if he hasn’t explained these options as insurance and not as an investment. ---
**Author:** ![Chefguy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chefguy/32/138_2.png) [@Chefguy](https://boards.straightdope.com/u/Chefguy)\ **Post date:** [December 2, 2023, 8:24pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/38 "2023-12-02T20:24:10Z")
> [@xtenkfarpl](#): > > If you have no dependents, what is the point of life insurance? Even if you do, it’s a waste of your money. The only time I took out life insurance was as a term of my divorce settlement. As soon as the last kid hit 18, I cancelled it. If it was a good investment for you, insurance companies wouldn’t exist. And remember, the unspoken motto of all insurance companies is “There is no such thing as a ‘valid claim’”. ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [December 2, 2023, 8:30pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/39 "2023-12-02T20:30:19Z")
When you have minor children, and especially if you are the sole income, I think cheap term life makes a lot of sense. And I have never heard of anyone having trouble getting life insurance to pay out. The consumer protections there are pretty good. But yes, its a very specific circumstance where it makes sense. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [December 2, 2023, 9:47pm UTC](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958/40 "2023-12-02T21:47:46Z")
> [@xtenkfarpl](#): > > If you have no dependents, what is the point of life insurance? In some situations, whole life can be an excellent alternative to the cash/stable portion of your portfolio. > [@xtenkfarpl](#): > > Fire that advisor. They are almost certainly getting a fee for promoting ‘insurance’ products. Nonsense - we know a fraction of the situation here. There are very valid reasons for life insurance to be a perfectly reasonable option to offer. OP mentioned that his daughter has health issues. Getting into a policy now may be extremely wise if she has plans of building a family or marrying, especially if underwriting is possible now but may drastically decrease in time. And of course they get a fee - they get a fee for anything they sell. > [@Chefguy](#): > > If it was a good investment for you, insurance companies wouldn’t exist. There are plenty of situations where insurance isn’t an investment. Either way, insurance is simply diversifying your risk portfolio, which is always a good idea when there is risk to mitigate. [Previous page](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958.md?page=1) [Next page](https://boards.straightdope.com/t/is-life-insurance-worth-it-consider-this/993958.md?page=3)