Update: Life insurance thoughts

short+sassy · February 2017

I met with a life insurance agent on Friday. As a background, I do have a medical condition that has made life insurance prohibitively expensive for me (as compared to the coverage). This is actually the first time I have come across something that seems...quite frankly...a bargain as compared to the coverage. My H is a smoker and his rates are usually outrageous also.

More background. Right now is about the worst time to be adding bills to the pile. My credit card debt is horrible. My job is insecure. But all of that is also fairly temporary problems.

Here is our situation. Including our mortgages and HELOC, we have about $300K of debt. Our total real estate portfolio, including my personal home, is valued at about $575K. But obviously none of that is liquid! Other than a term policy at my work, neither of us have life insurance currently. I also don't have any other assets, except my car and few thousand in cash. But, in the event of my death, there is about $4K/month (gross) from my rental properties that would still be rolling in (soon to be more).

We're thinking about a $200K, 25-year term policy for $110/month. It wouldn't pay all the debt, but it would pay off two-thirds of it. That would make bill paying/cash flow substantially more comfortable for my H.

Oh, but wait. There are more benefits. If I become unemployed, it will pay up to 6 months of my mortgage payments (up to 6 months for the life of the policy, not each time). Obviously that is a distinct possibility at the present time (sigh), but I'm assuming I have to own this policy for a particular period of time before I can use that benefit, so I may not be able to use it, even if I become unemployed.

If I become permanently disabled, I'm assuming I'd need to be collecting SS Disability to qualify, they will pay my mortgage payment plus give me a $900 monthly stipend. So, in essence, there is also a disability insurance component to the policy. I'm hoping for better but, in reality, there's a good chance I'll be permanently disabled sometime over the next 25 years.

So, overall, I'm thinking this is all a go. But wanted to get your all's opinions or if there are questions/concerns I should have and ask about. Does $200K seem like the right amount? More/less? Speaking of, although it was advertised to me as mortgage insurance, it is NOT a policy of diminishing returns. It is $200K, paid out directly to my husband, whether there are 30 years left on the mortgage or there is no mortgage left at all.

For him, I can get a $25K, 15-year term policy for $16/month. I think that is what I am going to pull the trigger on for now, but will increase the policy amount and term in about 6 months. When we'll be on better financial footing.

UPDATE: Forgot to mention the policy would be through Foresters Financial, if anyone is familiar with that company.

brij2006 · February 2017

Double check the verbiage. Is this an AD&D (Accidental Death and Dismemberment) policy? It sounds like it by your description.

I would most definitely look for a larger policy for him. The rule of thumb is that you want 10-12x your annual income. That way your spouse can put it into an investment and pull the interest off every year as though they're still receiving your income.

julieanne912 · February 2017

I think since you're the primary breadwinner, a small policy for your H is fine. For him, you'll want to be able to cover his final expenses (burial/cremation) and any other costs associated with that, and maybe a bit extra to allow you to take some time off work.

short+sassy · February 2017

brij2006 said:

Double check the verbiage. Is this an AD&D (Accidental Death and Dismemberment) policy? It sounds like it by your description.

I would most definitely look for a larger policy for him. The rule of thumb is that you want 10-12x your annual income. That way your spouse can put it into an investment and pull the interest off every year as though they're still receiving your income.

Thanks for the advice. I'm pretty sure it is an AD&D policy. If I remember correctly, I think the policy doubles in the event that I die in an accident.

short+sassy · February 2017

julieanne912 said:

I think since you're the primary breadwinner, a small policy for your H is fine. For him, you'll want to be able to cover his final expenses (burial/cremation) and any other costs associated with that, and maybe a bit extra to allow you to take some time off work.

That was my thought also. He currently doesn't have an income so I don't rely on that. Though he does do a LOT of the repairs and management for our rental properties. So that would be an increased expense for me.

I do plan to at least double his policy in about six months and extend the term. But, for right now, I'm trying to get some protection without adding too much to our current bills. For him, $50K for a 20-year term is $47/month.

brij2006 · February 2017

In that case, it's better than not having anything at all. But know that they are very stingy with payout. They're not necessarily the best policies, but if you can't get a traditional policy then it will at least cover if you pass from something non-medical.
That's what my brothers' policy was and I had to get a lawyer involved in order to get paid, even though my brother was in a car accident and passed, and we had statements from the investigating officer that it was 100% an accident.

short+sassy · February 2017

brij2006 said:

In that case, it's better than not having anything at all. But know that they are very stingy with payout. They're not necessarily the best policies, but if you can't get a traditional policy then it will at least cover if you pass from something non-medical.
That's what my brothers' policy was and I had to get a lawyer involved in order to get paid, even though my brother was in a car accident and passed, and we had statements from the investigating officer that it was 100% an accident.

Ooohhh. Maybe I misunderstood then. I assumed it would be paid out for death from any reason (except suicide). That IS a good question to ask and would explain why she wasn't that concerned about my diabetes or my H's smoking.

That's a bummer to hear they have bad reviews for being stingy with payouts. I'll research more into that also.

I know this agent represents other companies, but that was the one she recommended and quoted me on.

brij2006 · February 2017

Whichever company she's quoting you with, Google them + claim payout and see what there is.
That is correct, that is most likely why she wasn't concerned about medical issues.

MommyLiberty5013 · February 2017

This is an insurance tied to your home loan. Right? It has options for unemployment, death and/or disability. I'm somewhat familiar with this if that's the case as during my time as a banker/loan officer, I did give loan quotes with this on it.

That said, I have no experience with payouts and whether or not it's easy to get those. IF you sell this house, the insurance goes away, correct? I would be certain this policy remains in force if the mortgage is $0 owed because I've only ever heard of this sort of thing on loans that have a balance.

Get a copy of all the disclosures and fine print before signing anything.

MommyLiberty5013 · February 2017

Separately, I cannot recall if you've stated this before, but does your income/rate of return on the rental property outweigh the interest you're paying on the debts? Or are the debts draining you faster than the rate of return?

short+sassy · February 2017

@MommyLiberty5013, I initially thought this was tied to the mortgage and had diminishing returns, but that is not the case. The only way it is tied to the mortgage is they pay the mortgage payment if I become unemployed (up to 6 months) or permanently disabled.

But, if I passed away and had no mortgages, the policy would still pay the full $200K value.

Thanks, yeah, I would definitely want all the paperwork before signing anything or agreeing to pay. So far, everything has been told to me verbally during my meeting with the agent.

------------------------------------------------------------

My rental income and ROI far outweigh my debts, including the interest. So that's the really good news. Where I really got in a jam was I purchased a duplex last October that needed renovation work. My loan fell through because of the flooding in Baton Rouge (where my bank's escrow dept. was located), so I bought the duplex with cash from my HELOC. Then financed the repairs with my credit cards (ugh!).

Once its rented out, which will finally be very soon, it will add an additional $1850 (gross) to my rental income. About $1,000/month net, after taxes, insurance, interest for that portion of HELOC, and set-aside for repairs/future vacancies.

It will take me about 5 months to get my 'cc balances back down below a 25% utilization. Than I'm going to do a cash-out refi and pay my HELOC back down. The HELOC is harsh, because it is a 10-year amortization, instead of a 20 or 30-year one. So the monthly payment is large.

I've also been toying with the idea of making this a "fix and flip" and sell it. After the purchase price, renovations, and holding costs, I'd clear about a $20K-$25K profit. Nothing fantastic, but it would clear out a lot of debt and I'd still come out ahead.

But that's more Plan B. I'd rather keep it and increase my net income by $1,000/month.

short+sassy · February 2017

I just got off the phone with the agent and the policy we discussed is NOT an AD&D policy.

The insurance would be paid out upon my death, no matter how I died. Same for my H on his policy. Except maybe suicide. We didn't go into that, but I certainly don't have any of those plans!

She's coming over this evening to sign us up. I'll definitely read over all the fine print before agreeing and paying but (crossing fingers), it looks like this will be a green.

julieanne912 · February 2017

If you don't mind, what was the company that is giving you the policy? H recently got denied for additional coverage through his work because of Crohn's. He has whatever his work is providing but it'd be nice if he had extra, my goal would be for him to have enough to pay off our house.

short+sassy · February 2017

Foresters Financial.

Per brij2006's advice, I did look up reviews for them. I didn't find much, either way. I stumbled across a forum for insurance agents. Some of them said they were fine to deal with when a client has died. Some of them said they were very difficult to deal with and took a long time to even make a determination on if they would pay. But the theme I found for the negative reviews was the client had died within 1-2 years of the policy being started and was still in the "conditional" phase? I might have that phrase wrong. There was a lot of lingo I wasn't familiar with in the posts, lol. And it also sounded like some of those policies might have been AD&D policies.

short+sassy · February 2017

I wanted to add, when I asked my agent the type of life insurance it was and expressed my concerns about it being an AD&D policy. She assured me it wasn't and told me horror stories of some AD&D policies.

Like, a person is in a car accident, but isn't dead on the scene. Then they die later in the ambulance or shortly after arriving at the hospital. And the insurance denies payment because the deceased died of injuries from the accident, not the accident itself.

brij2006 · February 2017

short+sassy said:

I wanted to add, when I asked my agent the type of life insurance it was and expressed my concerns about it being an AD&D policy. She assured me it wasn't and told me horror stories of some AD&D policies.
Like, a person is in a car accident, but isn't dead on the scene. Then they die later in the ambulance or shortly after arriving at the hospital. And the insurance denies payment because the deceased died of injuries from the accident, not the accident itself.

Yup. With being in this industry I've heard horror stories from other agents. Our agency refuses to write them and we won't contract with a company who offers them. We can add it onto an auto policy with 2 of our companies, but we know there's so much grey area that we recommend clients get a true life policy separately.

FFC (Flame Free Confession): We had no clue my brother had the life insurance policy he did, but we knew he had something. When I came across the papers in his files I cringed when I read it was an AD&D policy. Even though we knew 100% that it was an accident and he died immediately upon impact. I was crossing my fingers that the EMT's didn't work on him for one second, because if they did then there could be a grey area. I told my H that I hoped nothing would come out in the accident investigation that they resuscitated him because I knew the policy could fight paying out. It was a rough 7 months of being on pins and needles not knowing whether or not the company was going to pay out. I cried the day our lawyer called and said he had checks from the life insurance company at his office. Granted, small town lawyer, but I cried and gave him a hug when he handed me the checks.
Some policies even exclude paying out from accidents for drunk driving or driving while under drug use. My brother was drunk when he had his accident. So our lawyer had to dig into the verbiage to see exactly what it read for that exclusion. Thankfully it wasn't excluded in this policy.

For anyone reading this. Check your insurance policies! Some through employers can be AD&D only policies and you don't know it. Don't put your loved ones through the fight it takes to get one to pay out. Trust me, the last thing they want is to be in limbo on whether or not your life insurance is going to pay out and cover the liabilities.

LillibetteV · February 2017

brij2006 said:

short+sassy said:

I wanted to add, when I asked my agent the type of life insurance it was and expressed my concerns about it being an AD&D policy. She assured me it wasn't and told me horror stories of some AD&D policies.
Like, a person is in a car accident, but isn't dead on the scene. Then they die later in the ambulance or shortly after arriving at the hospital. And the insurance denies payment because the deceased died of injuries from the accident, not the accident itself.

Yup. With being in this industry I've heard horror stories from other agents. Our agency refuses to write them and we won't contract with a company who offers them. We can add it onto an auto policy with 2 of our companies, but we know there's so much grey area that we recommend clients get a true life policy separately.

FFC (Flame Free Confession): We had no clue my brother had the life insurance policy he did, but we knew he had something. When I came across the papers in his files I cringed when I read it was an AD&D policy. Even though we knew 100% that it was an accident and he died immediately upon impact. I was crossing my fingers that the EMT's didn't work on him for one second, because if they did then there could be a grey area. I told my H that I hoped nothing would come out in the accident investigation that they resuscitated him because I knew the policy could fight paying out. It was a rough 7 months of being on pins and needles not knowing whether or not the company was going to pay out. I cried the day our lawyer called and said he had checks from the life insurance company at his office. Granted, small town lawyer, but I cried and gave him a hug when he handed me the checks.
Some policies even exclude paying out from accidents for drunk driving or driving while under drug use. My brother was drunk when he had his accident. So our lawyer had to dig into the verbiage to see exactly what it read for that exclusion. Thankfully it wasn't excluded in this policy.

For anyone reading this. Check your insurance policies! Some through employers can be AD&D only policies and you don't know it. Don't put your loved ones through the fight it takes to get one to pay out. Trust me, the last thing they want is to be in limbo on whether or not your life insurance is going to pay out and cover the liabilities.

Even if there wasn't a policy concern you'd get zero judgment from me. When my sister died in a car accident I was grateful to learn she was killed instantly on impact (broken neck). I would hate to think my sister experienced even one second of fear that she was going to die.

brij2006 · February 2017

LillibetteV said:

brij2006 said:

short+sassy said:

I wanted to add, when I asked my agent the type of life insurance it was and expressed my concerns about it being an AD&D policy. She assured me it wasn't and told me horror stories of some AD&D policies.
Like, a person is in a car accident, but isn't dead on the scene. Then they die later in the ambulance or shortly after arriving at the hospital. And the insurance denies payment because the deceased died of injuries from the accident, not the accident itself.

Yup. With being in this industry I've heard horror stories from other agents. Our agency refuses to write them and we won't contract with a company who offers them. We can add it onto an auto policy with 2 of our companies, but we know there's so much grey area that we recommend clients get a true life policy separately.

FFC (Flame Free Confession): We had no clue my brother had the life insurance policy he did, but we knew he had something. When I came across the papers in his files I cringed when I read it was an AD&D policy. Even though we knew 100% that it was an accident and he died immediately upon impact. I was crossing my fingers that the EMT's didn't work on him for one second, because if they did then there could be a grey area. I told my H that I hoped nothing would come out in the accident investigation that they resuscitated him because I knew the policy could fight paying out. It was a rough 7 months of being on pins and needles not knowing whether or not the company was going to pay out. I cried the day our lawyer called and said he had checks from the life insurance company at his office. Granted, small town lawyer, but I cried and gave him a hug when he handed me the checks.
Some policies even exclude paying out from accidents for drunk driving or driving while under drug use. My brother was drunk when he had his accident. So our lawyer had to dig into the verbiage to see exactly what it read for that exclusion. Thankfully it wasn't excluded in this policy.

For anyone reading this. Check your insurance policies! Some through employers can be AD&D only policies and you don't know it. Don't put your loved ones through the fight it takes to get one to pay out. Trust me, the last thing they want is to be in limbo on whether or not your life insurance is going to pay out and cover the liabilities.

Even if there wasn't a policy concern you'd get zero judgment from me. When my sister died in a car accident I was grateful to learn she was killed instantly on impact (broken neck). I would hate to think my sister experienced even one second of fear that she was going to die.

and hugs to you. It's a hard thing to go through. My mom would constantly have scenarios on how he could have felt pain and would ask me if I thought it was possible. It gave us relief having the coroner tell us he passed instantly.

AprilZ81 · February 2017

Even if there wasn't a policy concern you'd get zero judgment from me. When my sister died in a car accident I was grateful to learn she was killed instantly on impact (broken neck). I would hate to think my sister experienced even one second of fear that she was going to die.

and hugs to you. It's a hard thing to go through. My mom would constantly have scenarios on how he could have felt pain and would ask me if I thought it was possible. It gave us relief having the coroner tell us he passed instantly.

DH and I also took comfort (sounds weird for sure) that Ava was stillborn. We didn't want her to be in any pain and with no lung tissue to be found we felt that if she survived to birth she would be in pain trying to breathe. We selfishly wanted a few minutes with her before she died but we were glad she didn't suffer.

Update: Life insurance thoughts

Re: Update: Life insurance thoughts

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