Life Insurance

Lately I’ve been thinking about getting some life insurance for my parents, in case anything ever happens to them.

I’ve been looking into life insurance policies and I’ve become confused - how do they work? The life insurance policy that I have from my work is based on my salary. So lets say I make 50k and I choose the 1.5 option. I’d pay something like 5-7 dollars a payroll and if I expired my wife/kid would get 75k.

I’m looking for a roughly comparable policy for my parents (I realize that it would probably cost more then 5-7 dollars a payroll), but when I go on to the websites (metlife and liberty mutual) I see stuff about term life, variable life, permanent life, and annuities. In fact, after reading some of them, they almost seem like mutual funds.

Can someone give me a brief (and simplistic) rundown of the different types of life insurance and, if possible, the closest thing to what I’m looking for (ie, I pay X amount a month for a policy that pays X).

Thanks,

I can tell you about Term. Term life insurance is very simple. You pay a premium each month and the death benefit is paid out when the insured passes away.

You can generally get monthly rates fixed for 10, 20 or 30 years. Obviously, the premium is based on the current age of the insured and their medical history.

It is the cheapest type of life insurance. There are oodles of web sites that will give you quotes. I would put in false contact info though if you are just curious about rates. Don’t put your real phone number in there. You will be called by dozens of brokers lol.

The policy coverage should be for about 10 times what your parents earn now (or at least what they live on).

if you have a lot of sales resistance the best thing to do is go to an insurance agent. The thing is to not grab the first deal that comes your way. Ask them about their various insurance plans and how they work. They will be glad to talk your ear off about it.

“There’s no one with endurance like the man who sells insurance.”

Disclaimer: I’m not an insurance agent. The following is based on my own study and life experience only.

Don’t know how old you or your parents are, but what makes you think they don’t already have life insurance? Most responsible parents get some sort of insurance when their children are young so that they will be provided for in case the breadwinner(s) are not around. Once children are able to support themselves, parents often reduce the amount to what’s necessary to provide for their funeral, and for their spouse’s needs if said spouse is unable to provide for him/herself.

IMHO once youngsters are self-supporting, insurance money is better spent on long-term care insurance so that you do not become a burden should disability or disease make you unable to care for yourself. Also so that you’ll have the means to select your own LTC facility should the need arise and not be stuck with whatever medicaid/medicare options are available.

The type of employer-provided insurance you provide is great if you have dependants who would be left in dire straits if you kick the bucket early, and it’s an excellent idea to carry a goodly amount if you have such dependants.

As to how they work, based on your age, general health and other factors, the insurance actuaries figure how long you are likely to live. The insurance company charges a premium based on that. Remember they are a business and not a charity. They are “betting” that you’ll live a long time. You take out insurance to protect your dependants in case you go before your time.

Insurance agents will generally try to talk you into a policy that makes more profit for the insurance company. Resist. Do not consider a life insurance policy as an investment.

There are also rules about who can “take out” a policy on another person, and an insurance agent can advise you about those rules.

I recommend talking to an insurance agent, but not for the express purpose of finding out the intricacies of life insurance products. A good agent will work with you to figure out why you need cover (if, indeed, you do), and if so, how much. If you’re employed and not reliant on your parents, though, I would be surprised if you’d have a good reason to take out a policy on them. Assuming you’re to be the beneficiary, and not, say, your mother (if your father still works).

As others have mentioned, a policy for which you pay X dollars a month and on death of the insured pays out Y dollars is term insurance. Ignore whole life, variable life, universal life, and whatever other savings products are out there: that’s not what you’re looking for.

Excuse my ignorance, but is term life only good for X amount of years? I like the idea of a fixed rate - something that I can just pay monthly without thinking about it.

They do have life insurance - I have a few concerns about that though (I’m not going into details) and would just feel more comfortable if I had some control in the matter.

I didn’t even think about this aspect. My family has a history of Alzheimers and long term care is definitely a concern.

Do you know what such insurance is called?

Which is, kind of, the case.

Yes I realize this.

That’s good advice.

Do you know (or anyone) where I can find out about these rules? I’m leery about going to an agent/salesman without knowing precisely what I want - which is why I haven’t contacted one yet.

Thank you for your advice.

You appear to need to learn a lot about insurance, insurability and possibly financial basics in general. I’d suggest you visit your local library and check out books on basic family finances and/or investing.
What insurability do you have w/ your parents? Is the death of either, or both, going to be a financial burden on you? Do you think 75K is enough to sustain your spouse if you die? (I seriously doubt it) Does your spouse work? Does your spouse earn enough to meet the monthly debt if you should die? These are just a few of the questions you must consider before deciding on how much insurance you should have.
Here are a couple of sites to get you started. They don’t have all the answers, but they should get you a start:
http://www.bankrate.com/brm/news/insur/20020201a.asp
http://www.360financialliteracy.org/Life+Stages/Parenthood/Articles/Life+Insurance/Life+insurance+basics.htm

Long-term care insurance

The term for these rules is called insurable interest. They are put in place to prevent gambling on people lives.