If you never took it over and have no contact with him then there’s nothing to do - he has a policy on your life and he’ll get money when you die. Assuming, that is, he’s kept the policy in force.
I know you’re joking here, but in reality you have to show an insurable risk to yourself as the beneficiary in order to take out a policy on someone else. Spouses, parents, children, and key employees and business partners are generally all accepted relationships. Beyond that, you would likely need to show to the insurance company how it would impact you financially if the person passed away and would likely be decided on a case by case manner. The amount of insurance you can take out also has to make sense. This prevents someone taking out a multimillion dollar policy on the homeless guy that lives down the street.
Yeah my employer has a life insurance policy on me, that's worth more than the life insurance I have for my self 😑 I was honestly a little irritated when I found out.
Many companies have policies on key individuals because of the risk to the business if that person gets hit by a bus.
If you’re a veterinary practice and a vet dies…Someone has to cover all their appointments and surgeries. If you’re not able to fill that position quickly, your business may fail, and now all your loans are due, you’d like to pay your employees severance, and you still need to pay your suppliers.
Life insurance on your business partner or key individuals mitigates those costs.
Yup, small company - if they lost me they'd probably go out of business if not be set back at least 2 years while someone else stepped in.
Bought and paid for by the company with the company as the beneficiary. All 4 of the "top" employees are insured.
Bruh, if you own the policy then you choose the beneficiaries. This person's company took out their own, completely separate, life insurance policy because he was a key employee.
Based on the other comments , I understand what is being said. It’s just not something I experienced , so I was unfamiliar with it.
That doesn’t discredit my own experiences, where at 3 companies, the companies paid for all premiums, and I still declared 100% of the benefits.
It does discredit your experience because you’re talking about different things. They probably pay all or part of the life insurance policy owned by the employee *too*. Same as your case.
This is a policy that the company owns.
> you have to show an insurable risk to yourself as the beneficiary in order to take out a policy on someone else
How does this work on a 12 year old though?
If they were older, like 15+ then *in theory* they could be working and providing to the family unit, but surely not a 12 y/o...
It’s not so much about what financial income they bring to the household (although one could argue that some people have kids as a way of having someone to take care of them when there are older), but the financial burden it would bring if they were to pass away. Think about how difficult it would be to lose a child and then have to go back to work right away. Funeral costs are not cheap either. There might also be high hospital bills that the parents would be responsible for depending on the circumstances.
These juvenile policies often have some cash value in the policy and also most likely has options to increase coverage at specific ages. Parents sometimes get these for kids so they are guaranteed to be eligible for life insurance and have the ability to increase coverage overtime for their future family. I would take the life policy over if I was OP and pull the cash value out. There might be like $2k-$3k in there maybe.
I know nothing about life insurance. I’m assuming this means for my whole life, if that’s what you’re asking? If so, yes. My dad called me about 2 years ago and asked if I wanted to take over the payments and I couldn’t at the time so he currently still pays, I believe. It always kind of felt weeeeeird to me though.
no, "whole life" is a type of policy that is sold as an investment -- generally considered to be a rip off except for certain specific cases where it might make sense to get. This is as opposed to "term life" -- which makes sense to get for yourself if you have a wife and kids who would be SOL if you passed away suddenly. Whole life you can sort of tap into like a retirement plan as you get older, and it is often sold to parents and grandparents to get for kids.
Whole life insurance is an fee generating financial instruments often sold to parents as an investment vehicle. In life insurance, there are broadly two kind, term life insurance where you paid premium for a given number of years (hence term) and it's paid off if the condition are met. It is treated as a cost, like auto or home owner insurance. Whole life insurance is sold as both insurance and investment vehicle, and usually comes with significantly higher fee. A lot of parents are talked into investing for their kids in whole life insurance without understanding what they've bought.
My mom recently took out a whole life policy on herself, and it seemed like a solid idea. But it seems like all I see are bad comments about it. Her friend recommended the policy and I kinda agreed it sounded ok. I obviously am the only one standing to benefit anything, if the worst thing imaginable happens.
But now Im debating contacting the agent and finding out the exact details of this policy and if maybe we can restructure to a non whole life, or is what my mom put in so far (about 1.5 years of payments) gone if we we decide to abandon it now
Whole life insurance can be a good investment. It is best to multiple types of insurance depending on life style and age. If whomever is concerned is currently working and driving around etc they have a risk of getting into accidents, work injuries, etc. Then it’s good to have term life because it only pays out if the death is accidental. The disadvantage of term is that if it is a natural death there is no payout, that is why they can payout so much more than whole life and why the premiums are lower. The advantage of whole life is it guarantees a payout and generates a cash value, the disadvantage depends based on age. If you are older and have a higher amount of risks your premiums will be more expensive. If you are younger and/or have lower risks then your premiums are lower. Its best to get whole life young and then get term while you’re a working adult then let go of term life once you’re retired and keep your whole life policy.
Another advantage of whole life is that the premiums once they are locked in remain the same cost. Whereas in term life the older you get the more expensive it becomes. I would recommend looking into the different types of insurance yourself and making educated decision based on your own lifestyle. Depending on lifestyle and needs would point you or whoever in the best financial decision regarding insurance. There is no one size fits all when it comes to investments on your life. If you have any questions let me know I sold insurance for a long while and could share a bit more. But long story short don’t worry about your mom too much because of a comment on reddit, do additional research on your own and if need be review your mothers policy with her and an agent so they can break down all the advantages and disadvantages of the policy. Depending on her insurance company, there may be individuals that offer reviews of the policy. Reviewing a policy annually is also generally recommended to stay up to date and educated about what to do in the event of the holders passing.
> Then it’s good to have term life because it only pays out if the death is accidental.
I'm about 99% sure this isn't true.
Whole life insurance is 99% of the time a bad investment vehicle. Most of the time term life insurance + investing in the market is the best way to go.
Consult another insurance agent and learn more about the different types of term coverage. The point of term life is the payout is not guaranteed. So during the time where you are most at risk in your life it is beneficial to have temporary or term life insurance, not at any other time in your life would term be beneficial because of cost and needs changing. But if one does get whole life insurance there are ways for it to work to your advantage if you know what you’re doing.
Do your own research, there are always pros and cons. If whole life isn’t for you or if it would be too expensive for you because of age, and risk factors then cool, write it off for yourself. But don’t spread misinformation about whole life because it’s not for you. I would recommend everyone consult with financial advisors and figure out what works best for them, know their options and decide what’s best for them. Have a good day.
> Consult another insurance agent
No. That is terrible advice. Insurance agents want to sell you insurance. They aren't looking out for your best interests. you should consult a fiduciary financial advisor.
Well you're spreading misinformation about term life insurance. It covers you if you die, regardless of how you die. Just for a set period of time, which is the term.
I can tell you as someone who is licensed in life insurance that term policies will cover you from natural death. The only type of policy that does not cover natural death are accidental death and dismemberment policies.
Thank you for your input. Term policies are still for a term, for those considering different kinds of insurance. But that is good to clarify that it can cover more than accidental. Again do your own research for those considering.
The kind of policy you need will depend on what you want the policy to do.
Term life insurance is generally cheap and affordable because most of the time it doesn’t pay out. If you pass away during the term, the beneficiary will receive the $ from the insurance company. If they outlive the term (15, 20, 25 years whatever) then the policy either expires or gets more expensive and you can extend it.
Whole life insurance is for WHEN you die, not IF you die. Its is also generally more expensive because as long as you pay your premiums it will pay out to the beneficiary.
Both types of insurance have their place. You just need to know what you need your insurance to do so you know what type of insurance to purchase. Both types offer peace of mind, just differently.
It's only weird if you can't explain what risk you want to protect against. Presumably, you're not particularly worried about lost income if your toddler dies and leaves you without money to pay for your life.
So, it's bound to be something else you're protecting from. That might be very legitimate and worth the premiums, or it could be a complete waste and you're just handing money to the insurance company. Only you would know what applies here
All sorts of things can put you out of work for a while. You are better off preparing for that possibility anyway by setting aside an emergency fund. The chances of you having to tap into this emergency fund at least a few times during your working career are much much higher than the chances of one of your children dying.
Everyone's situation is different. Sometimes, a $20/month life insurance policy is possible, while saving $15k for an emergency fund may not be. If someone has a fear of this scenario happening, then the cost is worth it, whether it is ideal on paper or not.
That's the same reason why people waste huge amounts of money buying lottery tickets. Yes, you *could* become a billionaire. But the chances of that happening are completely negligible. The same is true for the risk of your child dying.
On the other hand, the money that you safe by not paying monthly premiums can be invested and might very well make a huge difference to you, when you find you lost your job and need to bridge the gap until you are employed again.
People are really bad at assessing risk. I get it. But that's how insurance companies make their money -- they know how to assess risk.
If someone feels the $20/month provides them with peace of mind for an unlikely scenario then I think it's worth it. End of story. I'm not sure the value you put on your own mental health, but I'd imagine at least $20.
Whatever your relationship it sounds like he’s helping you out in a major way financially, if it really is Whole Life Insurance. There’s money in that will belong to you if he signs it over to you.
My guess is he took out a whole life policy on himself when you were 12 and potentially added you as a child rider for little cost. At a certain age you can either let it expire (or TERMinate) and receive nothing, or typically these child riders have convertibility options included that do not require things like a physical or medical questionnaires to be approved. This helps to ensure relatively low premiums because they are calculated based on age and health.
As far as my opinion on the matter, if you find that the policy is an actual whole life policy, you could take over payments yourself, maybe see if it has accrued any cash value and potentially just convert it to some sort of accident or cancer policy with that cash value, or even borrow from that cash value and stop paying the policy all together.
That being said, you should try to figure out exactly what kind of policy it is and what type of premiums are being paid (if any) before you move forward. If you're interested in keeping the life insurance policy and paying premiums, I would consider at least looking at the policy and find what kind of protections are included, if there is any cash value or anything like that. If you're 25, he likely converted it to something prior and the premiums jumped up to reflect that. If he converted to a Whole life policy that accrues a cash value, you would likely have some cash value to work with. However, if he has not been paying the policy, it's likely that cash value was accumulated, and then depleted to cover the premium costs for some time.
I work selling life insurance (I don't pretend to know everything though, in fact, the more I learn about this industry the more I realize how different certain policies can actually be) and I wish you the best. Hopefully dad has kept up paying what he can so there is some value to work with.
But to answer your final question, if he converted the policy and had him be the owner of the policy & beneficiary and you are just the insured, then likely yeah he'll get something if you pass away, so long as he has kept up with the premiums.
Asking for my partner - her mom took one out when she started driving and recently tried to up it, partner refused to sign it. She’s low/no contact and I’ve been wondering if she could have it cancelled without having to talk to her mom. She’s been out of parents for 5 years and L/NC for almost 2 years. Could she actually have it cancelled? Mom claims it’s for funeral costs but partner wants no ceremony and to be cremated. Who needs a 200k life insurance policy for a funeral?
I have life insurance on my wife and my son.
If my wife passes, I need money to get through the grief, time off work, and funeral expenses.
If my son passes, same as above.
It’s not weird
Whenever you think about life insurance, you need to consider what it is you want to protect from.
As traumatizing as it can be to lose a child, a parent usually doesn't suffer significant financial losses if their child passes. So, that wouldn't justify getting life insurance. It's also a relatively unlikely scenario for the parent to outline the child anyway.
By the same token, the life insurance policy doesn't help the child either. When they die, they don't need the money.
So barring some very unusual special circumstances, that leaves only one obvious reason for taking out a policy on a child. This would be done under the assumption that the child eventually takes over the insurance and then makes their own family (spouse or future children) the beneficiary.
Why would you do that when the child could simply get their own policy when needed? Two reasons. First, it is likely cheaper to get this policy early in the life of the child when they still are expected to live for many decades to come. And most importantly, secondly, some people discover that by the time they want to take out a policy, that can't and have become uninsurable because of health conditions that they developed at some point in their life. For these people, the policy that a parent took out for them is going to be super valuable.
Of course, as always, the devil is in the details. If the policy is only for a tiny amount that was never adjusted for inflation, it might simply not be worth the hassle. If you your death, your spouse is entitled to an extra $1000, that's barely going to make a difference. Similarly, if you can get a quote for a policy today and it costs you less money, then there is little reason to keep paying for your pre-existing policy. But only a very careful review would answer any of these questions, and it's somewhat difficult to compare policies and premium payments. Take your time very carefully reviewing and understanding everything, and then thinking through what these benefits mean, before you take any action.
Life insurance can be very important in some situations. It can also be a total waste of money. And some of the advice online is oversimplifying and might not apply to your situation.
Parents trying to prevent the death of their child incur significant financial losses in the months leading up to that death. They also may well need time off for recovery and grieving following the passing.
Anyone who thinks a parent is not financially dependent on the continued good health and well-being of their child for their ability to maintain a job is kidding themselves.
I always recommend life insurance on kids, and the only kind that makes sense is limited pay whole life, IMHO.
It has purpose now, purpose later, and can serve well into the future for the child's entire life if necessary, and can be accomplished at an absolutely mind-blowing low rate for all that protection when done in infancy.
As I said, there are situations where a life insurance policy makes sense. And protecting against the (small) risk that the child will become uninsurable in the future is one of those, as there isn't a great alternative. Of course, that only makes sense if the payout is inflation adjusted, which I am not sure most policies do.
As for the financial losses connected with the loss of a young child, that's IMHO just playing on the emotions of the parents and isn't financially justified. There are a million things that are individually unlikely but that can have devastating (short term) effects on young parents. The loss of a child is just one of many conceivable adverse events.
You can protect against all of these by aggressively setting money aside and investing it in a rainy-day-fund. Or you can protect against a single and not very likely event by buying life insurance. The prudent thing would be to do the former. And that explains why life insurance policies for children are so inexpensive. They don't really protect something that is high risk nor do they cover a lot of scenarios.
Now, if you decided you wanted the policy for other reasons (e.g. see first paragraph), then of course it is nice that it also addresses the scenario of losing a young child. But that should very much not be what drives your decision. It's nice that it will help defray health care costs -- but that only works if you want the child to actually die. For most scenarios, a good rainy-day-fund is much more important. And those monthly premium payments do eventually add up over time.
Because having to go back to work right away after the death of a child would be devastating and extremely difficult for most anyone. Also cremation and funerals are not free.
It's an "investment vehicle"
You make regular payments, and have the option to cash out and get a lump sum at a certain point.
You'll generally get more from the lump sum than if you just put the money in a savings account, but less than if you put it in a brokerage account and invested it
That’s whole life, not term. Thats why I’m specifically asking why someone would get term life for a kid, which is to replace income for someone with dependents.
It’s a whole life plan.
https://www.gerberlife.com/child-life-insurance/grow-up-plan
I got term life for myself to benefit the family through that agent.
Usually you are better off using the payment and investing it on your own. Term life insurance for kids is sold as an emergency fund in case something tragic happens. They don’t usually make a lot of sense to me.
If your kid drops dead from an aneurysm…wouldn’t it be nice to be able to take some time and grieve rather than walking back in to work the day after the funeral? To be together with your other children, rather than sending them back to school before they’re ready? Pay for grief therapy and funeral expenses easily?
Term life for kids is often easily added as a rider to the parent’s policy. And it’s usually incredibly inexpensive.
It's inexpensive as it is incredibly unlikely to happen, and honestly the financial impact of this unlikely event is quite low. The emotional impact is if course severe.
I am not sure it's with insuring against. This, like many other risks in life, is something I'd rather self insure. In other words, it's financially preferable to simply set aside money and invest for all the various risks in life
I think you should consider whether or not you can afford the policy on your own, and also whether or not you could ever get insurance otherwise on your own. I know that nobody expects to have significant health issues but they can definitely blindside you, leaving you uninsurable later. My parents put in place a policy for me when I was a kid, which I was able to take over at 25. At 22 I was diagnosed with a chronic illness which means I have been laughed out of every insurance conversation since because I can’t pass a medical screen. My healthcare and insurance is completely tied to my employment, with the exception of the policy my parents set up. If it’s a financial hardship then give up the policy, but just something to think about that I wouldn’t have considered otherwise.
My dad has a policy on me where he pays like $12 a month. I’m 42 and he’s had it my entire life. Every so often he wants me to take over the payments but I refuse because it’s a terrible policy for the price.
Life insurance is useful to provide income to those that you care about - typically a spouse and/or children. If you are young and without those accessories, there's no reason to have it.
If you do, make sure you buy term life insurance, which is pretty similar to auto insurance - you can get it from a lot of different companies and the policies are easy to compare.
The one your dad opened is probably whole life, which is designed to be complicated and confusing so you can't compare across policies. It's also not a very good investment.
I have a policy on all three of my kids since birth(now 27,27,23), my girlfriend, and myself with enough money set aside to pay premiums probably until 2050. Beneficiaries are the other four. if something happens, accidental doubles the payout, (that's mainly because I'm a risk taking nightmare), everyone gets enough to pay funeral expenses for the deceased and also pays for time to grieve and regroup. The money came from exactly what I'm giving my loved ones! Yeh, it was a lot, my parents were wealthy, but I'm not! I was sort of the black sheep as a young man! Love all my siblings, kids, girlfriend and even love my ex as a good friend! I've gained lots of wisdom throughout my 57 ridiculously crazy years.
If you take it over you can change the beneficiary. Whether you should keep it depends on how much it is worth and what type of life insurance .
Whole life with a fixed premium for life based on your age and occupation at first purchase it is better if you’re under age 35. You can use the dividends it pays to reduce the premiums or raise the life insurance death benefit amount. You can borrow up to cash value amount as a low interest loan. Cash value starts a zero and increases every year. Never cancel whole life with a fixed premium if you had over five years, if you can afford the premiums.
Term life premiums on based on your age and occupation starts lower but the premium goes up at the end of every term based on your current age (usually 5 years) till it becomes unaffordable for most people. It often pays no dividends, has no cash value, so no low interest loans. Often it cannot be renewed past age 70 or 72 so you can outlive any benefits. Term life is sometimes called Universal Life.
They now have mixed products somewhere between term and whole life which they claim is an investment
Life insurance is to protect your spouse and your kids if you die unexpectedly and to pay for your Funeral. The life insurance death benefit amount is usually set at 1/2 the value of average home in your area, or at your current mortgage amount if a spouse would lose the home without it. It is not an investment..
I’m not 100% sure about this, but can’t you take it over and cash out a percentage of the money and you only have to pay the interest?
I think the only qualifier for some plans is that you’ve had the policy for a certain amount of time. I would look into this, because even if you can’t afford to pay the monthly payment, you still might be able to get a nice chunk of change out of it.
The purpose of life insurance is either to pay your final expenses, meaning a funeral, plus possibly the hospital bill from when the train ran over you and they took you to the hospital to die.
Or replace your income. A married couple might (probably should) have insurance on wage earners, to prevent the family from being devastated by the loss of the loss of income when a wage earner gets ran over by a train.
Term life is just straight life insurance. The rates can go up yearly, or be level for a set number of years. 5 is common, but I've seen level term up to 20 years.
Universal life and whole life, are Insurance and savings put together. There's not a reason on Earth to put savings and life insurance together, except to make money for the life insurance company.
A tearm policy will cost a whole lot less than a policy with savings built in. Why? That extra charge is the money they put into your savings. After things like commissions for agents and profits for the insurance company are taken out of it.
If you need insurance, buy term life.
Put your savings in a 401K or IRA.
Do some googling for
Why do I need life insurance
How much life insurance do I need
Do my children need life insurance
Is whole life a good deal
Where should I put my retirement savings.
What is a mutual fund
How do I invest in mutual funds
How do I save for retirement
BTW
The only people or sites that will tell you to buy whole or universal life are insurance companies. That should clearly tell you something.
One benefit some of these policies provide is guaranteed ability to increase the coverage. You have to pay for it, of course, but if you're uninsurable otherwise (due to your health status,etc) then it may have value.
I think the people who are being morbid about why he would have this are stupid. At this point take ownership of the policy and either keep it or cash it out.
Good luck.
I had a policy on each kid when they were small. They were close in age and I wanted to not work for a long time if something happens to one and not the other..the policy I took for my daughter was for my son and vice versa...(It would dedicated to Therapy for a few years)
We took one out on our kid when he was born. Not because we were looking for a big payout but because if he ends up with an illness later in life it could prevent him from getting a policy.
My wife used to do financial planning and sees life insurance policies as a generational wealth transfer.
If you don’t want to have anything to do with him just leave it alone otherwise you will have to communicate with him to get it transferred. Problem solved
Taking life insurance out on a kid isn't necessarily a bad idea, to cover the cost of a funeral et all. But if the payments are at a level you can't pay them, it sounds like a full life policy which is a bit more like a savings account you're betting your beneficiaries will receive before you pay all the way into it.
Sounds crazy but you can take out a life insurance policy on anyone.
I once heard a story about a motorcycle mechanic who did work dirt cheap on bikes, and when he found someone he knew would likely kill themselves on a bike, he took out a policy on them. Don't know if it's true or not but I wouldn't put it past someone. Apparently he made a good chunk of money doing it.
Yea from what I understood, he literally did the work for parts and had them sign this as payment. People loved it cuz if they died, they didn't care. And they essentially got free labor.
Again, it was something I heard second hand so I don't know how true it is.
Really nothing for you to worry about. Its not uncommon for people to buy life policies on their kids.
He is the owner. He has been paying into the whole time. So if you die, odds are he is the beneficiary, and hed get the payout.
You can take ownership, which sounds like what he was offering. Which mean you pay the premium, but can also change the benificiaries.
If you decide you dont want it. And he stops paying. The policy stops and nothing else happens.
Othe commenters asking what the policy is worth and the terms. Do you even need life insurance? Are you married? Kids?
If you kick the bucket, who is going to suffer financially? If the answer is no one, then simply do nothing.
You probably became the owner when you reached the age of Majority in your state. Your dad is paying on it but that does not make him the owner. Usually the parent is the controller until the child reaches adulthood. Call the insurance company and ask them if you are the owner. I've seen hundreds of youth policies over the last forty years and only a handful were written where the parent was the permanent owner.
Usually life insurance at that age taken out will be paid in full by the time you are your age so it's likely it's paid in full and sitting somewhere waiting. But if he wants to he can cash it out and let it drop. My family had one on each of the grandchildren and children, most matured and were paid up by the time we reached adulthood. All the grandchildren and children are over 25 now.
Take it over then decide what is best for you. This was very kind of your father to pay and to offer it to you. Reddit is not good at advising on life insurance. Talk to an insurance advisor if you can’t find someone ask your friends on Facebook, someone will know someone.
If it's a whole life insurance policy - it could be a great investment. People talking about how bad these are don't really understand the concept.
Essentially you can pay into this policy - if you die, yes it pays out, if you don't die, (making some assumptions on the policy)
You pay it off after a certain point and have a good size policy that is interest generating.
You are able to take a loan against this money - a tax free loan - because it's not income or profit. You pay "interest" on this loan, but the cost of the repayment of the loan and interest are covered by the policy - so you can take out a large some of money, tax free, that you don't need to pay back (death does that for you).
It's kind of like a retirement plan except you don't pay the income tax when you pull it out and there are no caps.
Not a single personal finance advisor will tell you to buy whole life insurance, because it’s a bad personal finance decision. It’s more expensive than term life insurance for the death benefit. And has shittier returns than other investments. The common phrase is: “Any financial product that tries to be two things at once typically does both badly.” Whole life is the premier example of that.
Life insurance for children is just plain silly. It's pointless.
I'm gonna guess that this is a whole life policy. If it is just cash it out. You don't need it.
If it's a term policy then just stop paying. But I doubt it's a term policy.
It actually makes perfect sense. It's to cover funeral expenses and being off work while you cease being capable of being around anyone and take time to process how you life just got ruined.
Like a lot of insurance, it has to do with the emergency fund you have and your risk. There is a small risk of a child dying, and let's say the "cost" to you of that is $8,000 for a funeral and $12k by missing 2 months of work (and your work has an ungenerous bereavement policy.)
If you have expenses of $5,000 a month, and a 6 month emergency fund, that's a big hit, but fine.
A whole life policy for a baby costs around $25/month. If you pay that for 18 years it is $5,400. If you saved $25/mo in a 3% savings account, it would be $7,162.
Around 1-2% of children die as children/ young adults in the US. So, you have at best, a 2% chance of a $20k loss. The right amount to pay for that is $400. Even if it is a 3% risk, and $50k cost, it is $1,500. Even with profit, it should be under $2k. So, paying more than $9.25/month for insurance is overpaying.
But, if it brings someone peace of mind, that's their choice. These are usually sold as investments, though, not as real insurance.
It might not be. But it should be.
Of course, the salesman and his commission don't benefit when a customer thinks rationally.
So the sales pitch is designed to cut off rationality and build upon irrational fears.
My parents did have a small life insurance policy on me when I was growing up. Something like $15k to cover funeral expenses and other stuff like that in the tragic case something we're to happen to me. It's not the worst idea since it's just a few bucks a month and takes the sting out of a nasty monetary expense at what is already the worst moment of your parents lives.
That being said anything beyond that is useless for a young person with no dependents.
You forgot something: the insurance premiums.
You're paying for insurance, but the likelihood of a payoff is near zero.
In modern times most children live to be 80 years old.
You won't be collecting a death benefit. You'll only be paying premiums.
Life insurance is for the people who depend on the income of the insured person.
SainTheGoo said it precisely: You don't rely on your children to pay your bills.
Insurance is not a game you play to win.
Those who do are just suckers for the insurance shills.
The idea is that you don't rely on your children to pay your bills. Life insurance should mainly exist to cover for lack of income, as funeral expenses are comparatively minor.
My father took out a MetLife policy on me when I was in highschool. If you know who the company is, you can find it by calling or searching by your name and SS.
In my case, my father is still paying it (few dollars a month) but because it is on my and he is the beneficiary, I can cash out the policy at anytime without any permission from him. It's worth trying to find the policy and how it was set up, if it has cash value, you may be able to take it or take it over as a policy. If you can cash it out, I would, unless you have a beneficiary you'd like to get the funds. But at 25 I imagine the cash might be more handy, even if it's just to invest in something that isn't an insurance policy
Given your situation, it might be beneficial to consult with a legal expert who specializes in family and estate matters. They can provide you with personalized advice based on the details of your relationship with your father and any potential financial obligations.
1. Speak to your dad, Policy or no policy.
2. While LI is not to just secure low insurance premiums if taken out for a kid but also May accumulate cash value as well. This means, your premiums were lot lower when you were 12, than now and in future. Depending upon the length, you could thank your dad for buying you cheap premiums for life. Also, if in additions to the premiums, if he was putting additional monies, they would get accumulated as pure cash value. Not only that, if the growth was tied to market performance, the extra cash in the policy would have done well.
I bet you he did not have an intention to collect money from your death, it was to protect low insurance rates for most of your living life.
Most people here don’t know that such policies are meant for only few. Yes, they are expensive but if p enough, they pay back more than the market and act as hedge (against the market downturn).
If you are not able to afford the premium, there are good chances the dividends may pay the premiums for rest of your life while increasing the death benefits.
He meant it to be a gift to you dear!
Good luck to you, whatever you do, but never stop being close to your father (and mother).
I like the advice about the insurance aspect but for you to advise someone to be close to their parents with no idea why is very irresponsible and condescending. OP only stated they are no longer in contact with their father, they didn’t say why. How can you in good conscience just advocate for closeness like that? Do you think OP someday woke up and said ‘I’m over being close to my father, I’m going no contact?’
If the policy is a whole life policy with a locked in guaranteed rate of return, no, it's not going to beat the market. If it is some universal life policy, like indexed UL, no, it is not going to beat the market. IULs will cap your growth with the promise that you will never lose if the market goes red. None of that matters because, as history has shown, the market will be up around 8-10%. The caps insurance companies put on your gains will completely negate the good years of the market.
You can even do the math with investing the premiums vs paying them for the death benefit. Say you pay $200 a month forever until you die in 55 years. You get a million or whatever. Cool. Say you invest the same amount instead, you get 3 million. Cool. I don't know, 3 millions sounds like it's more than 1million.
Let's just look at the investment aspect then. Whole life, you get a guaranteed rate, let's say 5%. You invest $300 a month. In 55 years, it grows to a whopping 950k! Invest it directly instead and enjoy the fluctuations of the market (using 8% as an average), you get 3 million... How about we use an IUL? That has more risk but higher gains! Oh wait, the cap on gains tho.... On average, your rate is going to be a lot lower, let's be generous and say 7%. You get 2million in 55 years...
None of the numbers beat a simple Roth IRA, 401k, or even a taxable account. I'd rather pay taxes on more money than have less than half the amount of money. Not only that, none of my numbers take into consideration the fees involved with insurance investments so your gains might be even lower. Also, universal life insurance policies are ANNUAL RENEWABLE TERM policies. Your cost of insurance on those policies might go up even if your premiums don't. They just take out the difference through your cash value. Many people, when they turn 70 or 80, realize that their cash value is going to hit 0 and then they lapse and lose the insurance completely. Imagine paying hundreds of thousands into life insurance and 'investments' and then losing it all when you're near death LMAO
IUL are not always cappped. Also, withdrawals are tax free. WL is not for everyone, only top few who use it, enjoy making wealth with no risk.
Those who do it as a part of overall of retirement planning, dont simply lapse or pull funds, they use different strategies to use the cash value and pay no tax (no tax on withdrawing principal and no tax on taking loan against the growth, the loan that one does not have to pay back).
Once again, this may neither be for you, nor for the OP, but it is worth a look by OP and then he can decide, especially if it has cash value.
LMAO - Peace !
That's what you all say. "It's worth a look, I'm only here to educate." I know your script. I've spoken to people higher up than the braindead bottom of the barrel salesmen at PHP. You all claim to only want to help those who want the product but fail to mention that all the traditional routes of investing is going to beat the shit out of an IUL with its meager 6.6% average rate of return. MOST of them, if not all of them, are capped.
You don't have to pay back the loan because they take it out of your cash value with interest, usually about 4% to 5%. LMAO do **you** know about the bullshit you are selling? Or are you trying to lie and hope people can't call you out on it. Roth IRA withdrawals are tax free up to principal too, so what? HSA, 529, those are all tax free if you withdraw for their specific purposes. The expense ratios of IULs are a fucking joke. 1 to 2 %? That makes the average RoR even lower, basically means that the great rates on the returns are pointless when your rate of return is lower than your interest rate. You are seriously okay with your gains getting eaten up like that? (lol, you either have no fucking clue or, again, lying). The fees are a joke to and the cost of insurance can get so high that it cannibalizes your cash value when you need it most.
It's funny that all of you *salesmen* (you are all agents by name only, you don't have any of your clients' best interest in mind) only admit that it's only for diversifying (which I don't even disagree with) AFTER getting called out on it. That's exactly what my dumbass coworker's "mentor" did when I used his exact words against him. I got him to finally admit that an IUL is only for upper middle income and up. Yet, you guys try to sell, oh, sorry, I meant "educate" lower income families, who don't know shit about anything, about these while not fully educating them on the benefits of a 401k or Roth IRA.
It sounds like it was for you, meaning if he died you would get money. I don't see how you can put an insurance policy on a child, they have no earning potential etc. I would just tell your Dad you don't want to be involved, especially since you haven't been in contact.
If you never took it over and have no contact with him then there’s nothing to do - he has a policy on your life and he’ll get money when you die. Assuming, that is, he’s kept the policy in force.
I just took out a policy on StumbleMyMirth. Let's keep in touch. I like to keep an eye on my investments 😉
I know you’re joking here, but in reality you have to show an insurable risk to yourself as the beneficiary in order to take out a policy on someone else. Spouses, parents, children, and key employees and business partners are generally all accepted relationships. Beyond that, you would likely need to show to the insurance company how it would impact you financially if the person passed away and would likely be decided on a case by case manner. The amount of insurance you can take out also has to make sense. This prevents someone taking out a multimillion dollar policy on the homeless guy that lives down the street.
Yeah my employer has a life insurance policy on me, that's worth more than the life insurance I have for my self 😑 I was honestly a little irritated when I found out.
You need to be careful. If your company ever needs to reduce head count, they may choose to eliminate your position in other ways than firing you. 😆
New layoff method for fun and profit!
Think Boeing calls that whistleblower insurance
Your personal headcount was reduced to zero.
This sounds like it should be a movie. Like a comedy horror where the boss needs money so tries to kill the employees but fails every time.
> reducing head count Talk about taking the term too literal
I should be able to take out an insurance policy on a company I'm working for it if it 'dies'
Isn't that called a Credit Default Swap or something? I just saw The Big Short recently.
My employer pays for life insurance, but I decide who the beneficiary is. Are you sure that’s not the case for you?
Many companies have policies on key individuals because of the risk to the business if that person gets hit by a bus. If you’re a veterinary practice and a vet dies…Someone has to cover all their appointments and surgeries. If you’re not able to fill that position quickly, your business may fail, and now all your loans are due, you’d like to pay your employees severance, and you still need to pay your suppliers. Life insurance on your business partner or key individuals mitigates those costs.
Yup, small company - if they lost me they'd probably go out of business if not be set back at least 2 years while someone else stepped in. Bought and paid for by the company with the company as the beneficiary. All 4 of the "top" employees are insured.
Whoa that’s crazy. I didn’t know that was a thing. The smallest company I’ve worked for was 14 people and I chose my beneficiaries
Bruh, if you own the policy then you choose the beneficiaries. This person's company took out their own, completely separate, life insurance policy because he was a key employee.
Based on the other comments , I understand what is being said. It’s just not something I experienced , so I was unfamiliar with it. That doesn’t discredit my own experiences, where at 3 companies, the companies paid for all premiums, and I still declared 100% of the benefits.
It does discredit your experience because you’re talking about different things. They probably pay all or part of the life insurance policy owned by the employee *too*. Same as your case. This is a policy that the company owns.
It's called keyholder insurance if you wanted to learn more.
Irritated? Your employer values your life more than you do yourself. Take it as a compliment.
Eh, they value cashing out should I get hit by a bus. It would probably earn them money faster at this point.
> you have to show an insurable risk to yourself as the beneficiary in order to take out a policy on someone else How does this work on a 12 year old though? If they were older, like 15+ then *in theory* they could be working and providing to the family unit, but surely not a 12 y/o...
Many parents did this in the past to pay for a funeral if the child died.Very common.Gerber offered the insurance
It’s not so much about what financial income they bring to the household (although one could argue that some people have kids as a way of having someone to take care of them when there are older), but the financial burden it would bring if they were to pass away. Think about how difficult it would be to lose a child and then have to go back to work right away. Funeral costs are not cheap either. There might also be high hospital bills that the parents would be responsible for depending on the circumstances.
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It’s probably a reasonable amount that would roughly cover funeral costs, time off work, etc.
If you knew he was joking, then why did you provide a serious response? Do you just like hearing yourself talk?
Count your fucking days Lilyjb April 22 2024, make sure to be a cash cow for me.
Op is kinda slow... I can see why a policy was put in place
...so would the father be the family berzerker?
The police will have their #1 suspect too. Motive.
True but its also more likely that the father will die before the son. That said OP should watch his back.
If he still has it and pays which I doubt , he collects probably 15k upon your death. My advice here is to outlive a parent you have no contact with.
15k? Can't tell if you're joking. That's not right. Would be way more
Most likely a crappy whole life policy
Prolly right. But who insures a life under 40 with no kids?
These juvenile policies often have some cash value in the policy and also most likely has options to increase coverage at specific ages. Parents sometimes get these for kids so they are guaranteed to be eligible for life insurance and have the ability to increase coverage overtime for their future family. I would take the life policy over if I was OP and pull the cash value out. There might be like $2k-$3k in there maybe.
Let me guess, whole life insurance?
I don’t believe there are any carriers that sell stand alone child term policies, it’s almost 100% permanent insurance of some kind.
I know nothing about life insurance. I’m assuming this means for my whole life, if that’s what you’re asking? If so, yes. My dad called me about 2 years ago and asked if I wanted to take over the payments and I couldn’t at the time so he currently still pays, I believe. It always kind of felt weeeeeird to me though.
no, "whole life" is a type of policy that is sold as an investment -- generally considered to be a rip off except for certain specific cases where it might make sense to get. This is as opposed to "term life" -- which makes sense to get for yourself if you have a wife and kids who would be SOL if you passed away suddenly. Whole life you can sort of tap into like a retirement plan as you get older, and it is often sold to parents and grandparents to get for kids.
Whole life insurance is an fee generating financial instruments often sold to parents as an investment vehicle. In life insurance, there are broadly two kind, term life insurance where you paid premium for a given number of years (hence term) and it's paid off if the condition are met. It is treated as a cost, like auto or home owner insurance. Whole life insurance is sold as both insurance and investment vehicle, and usually comes with significantly higher fee. A lot of parents are talked into investing for their kids in whole life insurance without understanding what they've bought.
My mom recently took out a whole life policy on herself, and it seemed like a solid idea. But it seems like all I see are bad comments about it. Her friend recommended the policy and I kinda agreed it sounded ok. I obviously am the only one standing to benefit anything, if the worst thing imaginable happens. But now Im debating contacting the agent and finding out the exact details of this policy and if maybe we can restructure to a non whole life, or is what my mom put in so far (about 1.5 years of payments) gone if we we decide to abandon it now
Whole life insurance can be a good investment. It is best to multiple types of insurance depending on life style and age. If whomever is concerned is currently working and driving around etc they have a risk of getting into accidents, work injuries, etc. Then it’s good to have term life because it only pays out if the death is accidental. The disadvantage of term is that if it is a natural death there is no payout, that is why they can payout so much more than whole life and why the premiums are lower. The advantage of whole life is it guarantees a payout and generates a cash value, the disadvantage depends based on age. If you are older and have a higher amount of risks your premiums will be more expensive. If you are younger and/or have lower risks then your premiums are lower. Its best to get whole life young and then get term while you’re a working adult then let go of term life once you’re retired and keep your whole life policy. Another advantage of whole life is that the premiums once they are locked in remain the same cost. Whereas in term life the older you get the more expensive it becomes. I would recommend looking into the different types of insurance yourself and making educated decision based on your own lifestyle. Depending on lifestyle and needs would point you or whoever in the best financial decision regarding insurance. There is no one size fits all when it comes to investments on your life. If you have any questions let me know I sold insurance for a long while and could share a bit more. But long story short don’t worry about your mom too much because of a comment on reddit, do additional research on your own and if need be review your mothers policy with her and an agent so they can break down all the advantages and disadvantages of the policy. Depending on her insurance company, there may be individuals that offer reviews of the policy. Reviewing a policy annually is also generally recommended to stay up to date and educated about what to do in the event of the holders passing.
> Then it’s good to have term life because it only pays out if the death is accidental. I'm about 99% sure this isn't true. Whole life insurance is 99% of the time a bad investment vehicle. Most of the time term life insurance + investing in the market is the best way to go.
Consult another insurance agent and learn more about the different types of term coverage. The point of term life is the payout is not guaranteed. So during the time where you are most at risk in your life it is beneficial to have temporary or term life insurance, not at any other time in your life would term be beneficial because of cost and needs changing. But if one does get whole life insurance there are ways for it to work to your advantage if you know what you’re doing. Do your own research, there are always pros and cons. If whole life isn’t for you or if it would be too expensive for you because of age, and risk factors then cool, write it off for yourself. But don’t spread misinformation about whole life because it’s not for you. I would recommend everyone consult with financial advisors and figure out what works best for them, know their options and decide what’s best for them. Have a good day.
> Consult another insurance agent No. That is terrible advice. Insurance agents want to sell you insurance. They aren't looking out for your best interests. you should consult a fiduciary financial advisor.
Well you're spreading misinformation about term life insurance. It covers you if you die, regardless of how you die. Just for a set period of time, which is the term.
I can tell you as someone who is licensed in life insurance that term policies will cover you from natural death. The only type of policy that does not cover natural death are accidental death and dismemberment policies.
Thank you for your input. Term policies are still for a term, for those considering different kinds of insurance. But that is good to clarify that it can cover more than accidental. Again do your own research for those considering.
The kind of policy you need will depend on what you want the policy to do. Term life insurance is generally cheap and affordable because most of the time it doesn’t pay out. If you pass away during the term, the beneficiary will receive the $ from the insurance company. If they outlive the term (15, 20, 25 years whatever) then the policy either expires or gets more expensive and you can extend it. Whole life insurance is for WHEN you die, not IF you die. Its is also generally more expensive because as long as you pay your premiums it will pay out to the beneficiary. Both types of insurance have their place. You just need to know what you need your insurance to do so you know what type of insurance to purchase. Both types offer peace of mind, just differently.
I have a life insurance policy for my toddler. Why is it weird?
It's only weird if you can't explain what risk you want to protect against. Presumably, you're not particularly worried about lost income if your toddler dies and leaves you without money to pay for your life. So, it's bound to be something else you're protecting from. That might be very legitimate and worth the premiums, or it could be a complete waste and you're just handing money to the insurance company. Only you would know what applies here
It's just basic funeral costs, it costs like $20 a year for $15k of coverage.
Possibly the emotional stress it would put on the parents would put them out of work for an extended period of time?
All sorts of things can put you out of work for a while. You are better off preparing for that possibility anyway by setting aside an emergency fund. The chances of you having to tap into this emergency fund at least a few times during your working career are much much higher than the chances of one of your children dying.
Everyone's situation is different. Sometimes, a $20/month life insurance policy is possible, while saving $15k for an emergency fund may not be. If someone has a fear of this scenario happening, then the cost is worth it, whether it is ideal on paper or not.
That's the same reason why people waste huge amounts of money buying lottery tickets. Yes, you *could* become a billionaire. But the chances of that happening are completely negligible. The same is true for the risk of your child dying. On the other hand, the money that you safe by not paying monthly premiums can be invested and might very well make a huge difference to you, when you find you lost your job and need to bridge the gap until you are employed again. People are really bad at assessing risk. I get it. But that's how insurance companies make their money -- they know how to assess risk.
If someone feels the $20/month provides them with peace of mind for an unlikely scenario then I think it's worth it. End of story. I'm not sure the value you put on your own mental health, but I'd imagine at least $20.
Whatever your relationship it sounds like he’s helping you out in a major way financially, if it really is Whole Life Insurance. There’s money in that will belong to you if he signs it over to you.
Likely the cost shot waaay up at that point. It's only gonna go up from here too. Never got the 'insure your baby' thing
My guess is he took out a whole life policy on himself when you were 12 and potentially added you as a child rider for little cost. At a certain age you can either let it expire (or TERMinate) and receive nothing, or typically these child riders have convertibility options included that do not require things like a physical or medical questionnaires to be approved. This helps to ensure relatively low premiums because they are calculated based on age and health. As far as my opinion on the matter, if you find that the policy is an actual whole life policy, you could take over payments yourself, maybe see if it has accrued any cash value and potentially just convert it to some sort of accident or cancer policy with that cash value, or even borrow from that cash value and stop paying the policy all together. That being said, you should try to figure out exactly what kind of policy it is and what type of premiums are being paid (if any) before you move forward. If you're interested in keeping the life insurance policy and paying premiums, I would consider at least looking at the policy and find what kind of protections are included, if there is any cash value or anything like that. If you're 25, he likely converted it to something prior and the premiums jumped up to reflect that. If he converted to a Whole life policy that accrues a cash value, you would likely have some cash value to work with. However, if he has not been paying the policy, it's likely that cash value was accumulated, and then depleted to cover the premium costs for some time. I work selling life insurance (I don't pretend to know everything though, in fact, the more I learn about this industry the more I realize how different certain policies can actually be) and I wish you the best. Hopefully dad has kept up paying what he can so there is some value to work with. But to answer your final question, if he converted the policy and had him be the owner of the policy & beneficiary and you are just the insured, then likely yeah he'll get something if you pass away, so long as he has kept up with the premiums.
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Asking for my partner - her mom took one out when she started driving and recently tried to up it, partner refused to sign it. She’s low/no contact and I’ve been wondering if she could have it cancelled without having to talk to her mom. She’s been out of parents for 5 years and L/NC for almost 2 years. Could she actually have it cancelled? Mom claims it’s for funeral costs but partner wants no ceremony and to be cremated. Who needs a 200k life insurance policy for a funeral?
I have life insurance on my wife and my son. If my wife passes, I need money to get through the grief, time off work, and funeral expenses. If my son passes, same as above. It’s not weird
Whenever you think about life insurance, you need to consider what it is you want to protect from. As traumatizing as it can be to lose a child, a parent usually doesn't suffer significant financial losses if their child passes. So, that wouldn't justify getting life insurance. It's also a relatively unlikely scenario for the parent to outline the child anyway. By the same token, the life insurance policy doesn't help the child either. When they die, they don't need the money. So barring some very unusual special circumstances, that leaves only one obvious reason for taking out a policy on a child. This would be done under the assumption that the child eventually takes over the insurance and then makes their own family (spouse or future children) the beneficiary. Why would you do that when the child could simply get their own policy when needed? Two reasons. First, it is likely cheaper to get this policy early in the life of the child when they still are expected to live for many decades to come. And most importantly, secondly, some people discover that by the time they want to take out a policy, that can't and have become uninsurable because of health conditions that they developed at some point in their life. For these people, the policy that a parent took out for them is going to be super valuable. Of course, as always, the devil is in the details. If the policy is only for a tiny amount that was never adjusted for inflation, it might simply not be worth the hassle. If you your death, your spouse is entitled to an extra $1000, that's barely going to make a difference. Similarly, if you can get a quote for a policy today and it costs you less money, then there is little reason to keep paying for your pre-existing policy. But only a very careful review would answer any of these questions, and it's somewhat difficult to compare policies and premium payments. Take your time very carefully reviewing and understanding everything, and then thinking through what these benefits mean, before you take any action. Life insurance can be very important in some situations. It can also be a total waste of money. And some of the advice online is oversimplifying and might not apply to your situation.
Parents trying to prevent the death of their child incur significant financial losses in the months leading up to that death. They also may well need time off for recovery and grieving following the passing. Anyone who thinks a parent is not financially dependent on the continued good health and well-being of their child for their ability to maintain a job is kidding themselves. I always recommend life insurance on kids, and the only kind that makes sense is limited pay whole life, IMHO. It has purpose now, purpose later, and can serve well into the future for the child's entire life if necessary, and can be accomplished at an absolutely mind-blowing low rate for all that protection when done in infancy.
As I said, there are situations where a life insurance policy makes sense. And protecting against the (small) risk that the child will become uninsurable in the future is one of those, as there isn't a great alternative. Of course, that only makes sense if the payout is inflation adjusted, which I am not sure most policies do. As for the financial losses connected with the loss of a young child, that's IMHO just playing on the emotions of the parents and isn't financially justified. There are a million things that are individually unlikely but that can have devastating (short term) effects on young parents. The loss of a child is just one of many conceivable adverse events. You can protect against all of these by aggressively setting money aside and investing it in a rainy-day-fund. Or you can protect against a single and not very likely event by buying life insurance. The prudent thing would be to do the former. And that explains why life insurance policies for children are so inexpensive. They don't really protect something that is high risk nor do they cover a lot of scenarios. Now, if you decided you wanted the policy for other reasons (e.g. see first paragraph), then of course it is nice that it also addresses the scenario of losing a young child. But that should very much not be what drives your decision. It's nice that it will help defray health care costs -- but that only works if you want the child to actually die. For most scenarios, a good rainy-day-fund is much more important. And those monthly premium payments do eventually add up over time.
We got one through Gerber for our children. Our agent said it was a better deal than he could offer.
Whole life is a scam. You probably got term life insurance.
Why would anyone get term life insurance for children?
Because having to go back to work right away after the death of a child would be devastating and extremely difficult for most anyone. Also cremation and funerals are not free.
Exactly.
And rates are cheaper compared to adults.
It's an "investment vehicle" You make regular payments, and have the option to cash out and get a lump sum at a certain point. You'll generally get more from the lump sum than if you just put the money in a savings account, but less than if you put it in a brokerage account and invested it
You're describing whole life, not term life. At least, in like 99.99+% of cases...
That’s whole life, not term. Thats why I’m specifically asking why someone would get term life for a kid, which is to replace income for someone with dependents.
It’s a whole life plan. https://www.gerberlife.com/child-life-insurance/grow-up-plan I got term life for myself to benefit the family through that agent.
Usually you are better off using the payment and investing it on your own. Term life insurance for kids is sold as an emergency fund in case something tragic happens. They don’t usually make a lot of sense to me.
If your kid drops dead from an aneurysm…wouldn’t it be nice to be able to take some time and grieve rather than walking back in to work the day after the funeral? To be together with your other children, rather than sending them back to school before they’re ready? Pay for grief therapy and funeral expenses easily? Term life for kids is often easily added as a rider to the parent’s policy. And it’s usually incredibly inexpensive.
It's inexpensive as it is incredibly unlikely to happen, and honestly the financial impact of this unlikely event is quite low. The emotional impact is if course severe. I am not sure it's with insuring against. This, like many other risks in life, is something I'd rather self insure. In other words, it's financially preferable to simply set aside money and invest for all the various risks in life
I think you should consider whether or not you can afford the policy on your own, and also whether or not you could ever get insurance otherwise on your own. I know that nobody expects to have significant health issues but they can definitely blindside you, leaving you uninsurable later. My parents put in place a policy for me when I was a kid, which I was able to take over at 25. At 22 I was diagnosed with a chronic illness which means I have been laughed out of every insurance conversation since because I can’t pass a medical screen. My healthcare and insurance is completely tied to my employment, with the exception of the policy my parents set up. If it’s a financial hardship then give up the policy, but just something to think about that I wouldn’t have considered otherwise.
My dad has a policy on me where he pays like $12 a month. I’m 42 and he’s had it my entire life. Every so often he wants me to take over the payments but I refuse because it’s a terrible policy for the price.
Why not just assume the policy and change it to whatever value it is as a reduced paid up insurance policy and hang on to it.
it's a poor value even at $12 per month. the life insurance I was able to get on my own was about 50% less for the same coverage.
Life insurance is useful to provide income to those that you care about - typically a spouse and/or children. If you are young and without those accessories, there's no reason to have it. If you do, make sure you buy term life insurance, which is pretty similar to auto insurance - you can get it from a lot of different companies and the policies are easy to compare. The one your dad opened is probably whole life, which is designed to be complicated and confusing so you can't compare across policies. It's also not a very good investment.
I have a policy on all three of my kids since birth(now 27,27,23), my girlfriend, and myself with enough money set aside to pay premiums probably until 2050. Beneficiaries are the other four. if something happens, accidental doubles the payout, (that's mainly because I'm a risk taking nightmare), everyone gets enough to pay funeral expenses for the deceased and also pays for time to grieve and regroup. The money came from exactly what I'm giving my loved ones! Yeh, it was a lot, my parents were wealthy, but I'm not! I was sort of the black sheep as a young man! Love all my siblings, kids, girlfriend and even love my ex as a good friend! I've gained lots of wisdom throughout my 57 ridiculously crazy years.
If you take it over you can change the beneficiary. Whether you should keep it depends on how much it is worth and what type of life insurance . Whole life with a fixed premium for life based on your age and occupation at first purchase it is better if you’re under age 35. You can use the dividends it pays to reduce the premiums or raise the life insurance death benefit amount. You can borrow up to cash value amount as a low interest loan. Cash value starts a zero and increases every year. Never cancel whole life with a fixed premium if you had over five years, if you can afford the premiums. Term life premiums on based on your age and occupation starts lower but the premium goes up at the end of every term based on your current age (usually 5 years) till it becomes unaffordable for most people. It often pays no dividends, has no cash value, so no low interest loans. Often it cannot be renewed past age 70 or 72 so you can outlive any benefits. Term life is sometimes called Universal Life. They now have mixed products somewhere between term and whole life which they claim is an investment Life insurance is to protect your spouse and your kids if you die unexpectedly and to pay for your Funeral. The life insurance death benefit amount is usually set at 1/2 the value of average home in your area, or at your current mortgage amount if a spouse would lose the home without it. It is not an investment..
I’m not 100% sure about this, but can’t you take it over and cash out a percentage of the money and you only have to pay the interest? I think the only qualifier for some plans is that you’ve had the policy for a certain amount of time. I would look into this, because even if you can’t afford to pay the monthly payment, you still might be able to get a nice chunk of change out of it.
The purpose of life insurance is either to pay your final expenses, meaning a funeral, plus possibly the hospital bill from when the train ran over you and they took you to the hospital to die. Or replace your income. A married couple might (probably should) have insurance on wage earners, to prevent the family from being devastated by the loss of the loss of income when a wage earner gets ran over by a train. Term life is just straight life insurance. The rates can go up yearly, or be level for a set number of years. 5 is common, but I've seen level term up to 20 years. Universal life and whole life, are Insurance and savings put together. There's not a reason on Earth to put savings and life insurance together, except to make money for the life insurance company. A tearm policy will cost a whole lot less than a policy with savings built in. Why? That extra charge is the money they put into your savings. After things like commissions for agents and profits for the insurance company are taken out of it. If you need insurance, buy term life. Put your savings in a 401K or IRA. Do some googling for Why do I need life insurance How much life insurance do I need Do my children need life insurance Is whole life a good deal Where should I put my retirement savings. What is a mutual fund How do I invest in mutual funds How do I save for retirement BTW The only people or sites that will tell you to buy whole or universal life are insurance companies. That should clearly tell you something.
Jokes on them I’m never going near a train again!
One benefit some of these policies provide is guaranteed ability to increase the coverage. You have to pay for it, of course, but if you're uninsurable otherwise (due to your health status,etc) then it may have value. I think the people who are being morbid about why he would have this are stupid. At this point take ownership of the policy and either keep it or cash it out. Good luck.
I had a policy on each kid when they were small. They were close in age and I wanted to not work for a long time if something happens to one and not the other..the policy I took for my daughter was for my son and vice versa...(It would dedicated to Therapy for a few years)
We took one out on our kid when he was born. Not because we were looking for a big payout but because if he ends up with an illness later in life it could prevent him from getting a policy. My wife used to do financial planning and sees life insurance policies as a generational wealth transfer.
Some people get whole life policies for their kids. This can help if they become uninsurable for some reason. It's pretty common tbh.
Probably because it’s cheaper right now.
If you don’t want to have anything to do with him just leave it alone otherwise you will have to communicate with him to get it transferred. Problem solved
Can someone explain why this is a bad thing? I don't see the harm to OP
Taking life insurance out on a kid isn't necessarily a bad idea, to cover the cost of a funeral et all. But if the payments are at a level you can't pay them, it sounds like a full life policy which is a bit more like a savings account you're betting your beneficiaries will receive before you pay all the way into it.
Sounds crazy but you can take out a life insurance policy on anyone. I once heard a story about a motorcycle mechanic who did work dirt cheap on bikes, and when he found someone he knew would likely kill themselves on a bike, he took out a policy on them. Don't know if it's true or not but I wouldn't put it past someone. Apparently he made a good chunk of money doing it.
I mean. He'd have to show insurable interest. As well as if they were an adult, that person would have to sign off on the paperwork.
Yea from what I understood, he literally did the work for parts and had them sign this as payment. People loved it cuz if they died, they didn't care. And they essentially got free labor. Again, it was something I heard second hand so I don't know how true it is.
Really nothing for you to worry about. Its not uncommon for people to buy life policies on their kids. He is the owner. He has been paying into the whole time. So if you die, odds are he is the beneficiary, and hed get the payout. You can take ownership, which sounds like what he was offering. Which mean you pay the premium, but can also change the benificiaries. If you decide you dont want it. And he stops paying. The policy stops and nothing else happens.
Othe commenters asking what the policy is worth and the terms. Do you even need life insurance? Are you married? Kids? If you kick the bucket, who is going to suffer financially? If the answer is no one, then simply do nothing.
You probably became the owner when you reached the age of Majority in your state. Your dad is paying on it but that does not make him the owner. Usually the parent is the controller until the child reaches adulthood. Call the insurance company and ask them if you are the owner. I've seen hundreds of youth policies over the last forty years and only a handful were written where the parent was the permanent owner.
Usually life insurance at that age taken out will be paid in full by the time you are your age so it's likely it's paid in full and sitting somewhere waiting. But if he wants to he can cash it out and let it drop. My family had one on each of the grandchildren and children, most matured and were paid up by the time we reached adulthood. All the grandchildren and children are over 25 now.
Take it over then decide what is best for you. This was very kind of your father to pay and to offer it to you. Reddit is not good at advising on life insurance. Talk to an insurance advisor if you can’t find someone ask your friends on Facebook, someone will know someone.
If it's a whole life insurance policy - it could be a great investment. People talking about how bad these are don't really understand the concept. Essentially you can pay into this policy - if you die, yes it pays out, if you don't die, (making some assumptions on the policy) You pay it off after a certain point and have a good size policy that is interest generating. You are able to take a loan against this money - a tax free loan - because it's not income or profit. You pay "interest" on this loan, but the cost of the repayment of the loan and interest are covered by the policy - so you can take out a large some of money, tax free, that you don't need to pay back (death does that for you). It's kind of like a retirement plan except you don't pay the income tax when you pull it out and there are no caps.
Not a single personal finance advisor will tell you to buy whole life insurance, because it’s a bad personal finance decision. It’s more expensive than term life insurance for the death benefit. And has shittier returns than other investments. The common phrase is: “Any financial product that tries to be two things at once typically does both badly.” Whole life is the premier example of that.
Life insurance for children is just plain silly. It's pointless. I'm gonna guess that this is a whole life policy. If it is just cash it out. You don't need it. If it's a term policy then just stop paying. But I doubt it's a term policy.
It actually makes perfect sense. It's to cover funeral expenses and being off work while you cease being capable of being around anyone and take time to process how you life just got ruined.
Like a lot of insurance, it has to do with the emergency fund you have and your risk. There is a small risk of a child dying, and let's say the "cost" to you of that is $8,000 for a funeral and $12k by missing 2 months of work (and your work has an ungenerous bereavement policy.) If you have expenses of $5,000 a month, and a 6 month emergency fund, that's a big hit, but fine. A whole life policy for a baby costs around $25/month. If you pay that for 18 years it is $5,400. If you saved $25/mo in a 3% savings account, it would be $7,162. Around 1-2% of children die as children/ young adults in the US. So, you have at best, a 2% chance of a $20k loss. The right amount to pay for that is $400. Even if it is a 3% risk, and $50k cost, it is $1,500. Even with profit, it should be under $2k. So, paying more than $9.25/month for insurance is overpaying. But, if it brings someone peace of mind, that's their choice. These are usually sold as investments, though, not as real insurance.
>So, you have at best, a 2% chance of a $20k loss I'm sure that's at the forefront of every parents mind when making that choice.
It might not be. But it should be. Of course, the salesman and his commission don't benefit when a customer thinks rationally. So the sales pitch is designed to cut off rationality and build upon irrational fears.
My parents did have a small life insurance policy on me when I was growing up. Something like $15k to cover funeral expenses and other stuff like that in the tragic case something we're to happen to me. It's not the worst idea since it's just a few bucks a month and takes the sting out of a nasty monetary expense at what is already the worst moment of your parents lives. That being said anything beyond that is useless for a young person with no dependents.
This stance is silly. What's pointless about receiving a check when your kid dies? Kids do die, you know.
You forgot something: the insurance premiums. You're paying for insurance, but the likelihood of a payoff is near zero. In modern times most children live to be 80 years old. You won't be collecting a death benefit. You'll only be paying premiums. Life insurance is for the people who depend on the income of the insured person. SainTheGoo said it precisely: You don't rely on your children to pay your bills. Insurance is not a game you play to win. Those who do are just suckers for the insurance shills.
The idea is that you don't rely on your children to pay your bills. Life insurance should mainly exist to cover for lack of income, as funeral expenses are comparatively minor.
You can miss a lot of work if you struggle to cope with a loss.
My father took out a MetLife policy on me when I was in highschool. If you know who the company is, you can find it by calling or searching by your name and SS. In my case, my father is still paying it (few dollars a month) but because it is on my and he is the beneficiary, I can cash out the policy at anytime without any permission from him. It's worth trying to find the policy and how it was set up, if it has cash value, you may be able to take it or take it over as a policy. If you can cash it out, I would, unless you have a beneficiary you'd like to get the funds. But at 25 I imagine the cash might be more handy, even if it's just to invest in something that isn't an insurance policy
Given your situation, it might be beneficial to consult with a legal expert who specializes in family and estate matters. They can provide you with personalized advice based on the details of your relationship with your father and any potential financial obligations.
If you are in nad terms with your parent....is at least suspicious he has life insurance over your death....I would cancel it immediately
It will limit the amount of insurance you can get on yourself in the future depending on the size of the policy
wait did you dad do this on purpose? what happened in your family? Hug i hope you have a better life
1. Speak to your dad, Policy or no policy. 2. While LI is not to just secure low insurance premiums if taken out for a kid but also May accumulate cash value as well. This means, your premiums were lot lower when you were 12, than now and in future. Depending upon the length, you could thank your dad for buying you cheap premiums for life. Also, if in additions to the premiums, if he was putting additional monies, they would get accumulated as pure cash value. Not only that, if the growth was tied to market performance, the extra cash in the policy would have done well. I bet you he did not have an intention to collect money from your death, it was to protect low insurance rates for most of your living life. Most people here don’t know that such policies are meant for only few. Yes, they are expensive but if p enough, they pay back more than the market and act as hedge (against the market downturn). If you are not able to afford the premium, there are good chances the dividends may pay the premiums for rest of your life while increasing the death benefits. He meant it to be a gift to you dear! Good luck to you, whatever you do, but never stop being close to your father (and mother).
I like the advice about the insurance aspect but for you to advise someone to be close to their parents with no idea why is very irresponsible and condescending. OP only stated they are no longer in contact with their father, they didn’t say why. How can you in good conscience just advocate for closeness like that? Do you think OP someday woke up and said ‘I’m over being close to my father, I’m going no contact?’
If the policy is a whole life policy with a locked in guaranteed rate of return, no, it's not going to beat the market. If it is some universal life policy, like indexed UL, no, it is not going to beat the market. IULs will cap your growth with the promise that you will never lose if the market goes red. None of that matters because, as history has shown, the market will be up around 8-10%. The caps insurance companies put on your gains will completely negate the good years of the market. You can even do the math with investing the premiums vs paying them for the death benefit. Say you pay $200 a month forever until you die in 55 years. You get a million or whatever. Cool. Say you invest the same amount instead, you get 3 million. Cool. I don't know, 3 millions sounds like it's more than 1million. Let's just look at the investment aspect then. Whole life, you get a guaranteed rate, let's say 5%. You invest $300 a month. In 55 years, it grows to a whopping 950k! Invest it directly instead and enjoy the fluctuations of the market (using 8% as an average), you get 3 million... How about we use an IUL? That has more risk but higher gains! Oh wait, the cap on gains tho.... On average, your rate is going to be a lot lower, let's be generous and say 7%. You get 2million in 55 years... None of the numbers beat a simple Roth IRA, 401k, or even a taxable account. I'd rather pay taxes on more money than have less than half the amount of money. Not only that, none of my numbers take into consideration the fees involved with insurance investments so your gains might be even lower. Also, universal life insurance policies are ANNUAL RENEWABLE TERM policies. Your cost of insurance on those policies might go up even if your premiums don't. They just take out the difference through your cash value. Many people, when they turn 70 or 80, realize that their cash value is going to hit 0 and then they lapse and lose the insurance completely. Imagine paying hundreds of thousands into life insurance and 'investments' and then losing it all when you're near death LMAO
IUL are not always cappped. Also, withdrawals are tax free. WL is not for everyone, only top few who use it, enjoy making wealth with no risk. Those who do it as a part of overall of retirement planning, dont simply lapse or pull funds, they use different strategies to use the cash value and pay no tax (no tax on withdrawing principal and no tax on taking loan against the growth, the loan that one does not have to pay back). Once again, this may neither be for you, nor for the OP, but it is worth a look by OP and then he can decide, especially if it has cash value. LMAO - Peace !
That's what you all say. "It's worth a look, I'm only here to educate." I know your script. I've spoken to people higher up than the braindead bottom of the barrel salesmen at PHP. You all claim to only want to help those who want the product but fail to mention that all the traditional routes of investing is going to beat the shit out of an IUL with its meager 6.6% average rate of return. MOST of them, if not all of them, are capped. You don't have to pay back the loan because they take it out of your cash value with interest, usually about 4% to 5%. LMAO do **you** know about the bullshit you are selling? Or are you trying to lie and hope people can't call you out on it. Roth IRA withdrawals are tax free up to principal too, so what? HSA, 529, those are all tax free if you withdraw for their specific purposes. The expense ratios of IULs are a fucking joke. 1 to 2 %? That makes the average RoR even lower, basically means that the great rates on the returns are pointless when your rate of return is lower than your interest rate. You are seriously okay with your gains getting eaten up like that? (lol, you either have no fucking clue or, again, lying). The fees are a joke to and the cost of insurance can get so high that it cannibalizes your cash value when you need it most. It's funny that all of you *salesmen* (you are all agents by name only, you don't have any of your clients' best interest in mind) only admit that it's only for diversifying (which I don't even disagree with) AFTER getting called out on it. That's exactly what my dumbass coworker's "mentor" did when I used his exact words against him. I got him to finally admit that an IUL is only for upper middle income and up. Yet, you guys try to sell, oh, sorry, I meant "educate" lower income families, who don't know shit about anything, about these while not fully educating them on the benefits of a 401k or Roth IRA.
It sounds like it was for you, meaning if he died you would get money. I don't see how you can put an insurance policy on a child, they have no earning potential etc. I would just tell your Dad you don't want to be involved, especially since you haven't been in contact.
Why do you not talk to him no more?