On Wednesday I wrote and published a blog post called Do You Have Life Insurance? When I got home after work last night, Thursday, not even 24 hours after publishing the post, what to my wondering eyes had appeared in my mailbox but a letter from the company managing my life insurance policy.
It appears that my term life insurance was in effect for 10 years, and I am approaching the end of the initial term. My policy anniversary is November 10, 2012.
Next month, my premium will increase from $18.79 to $102.38. Going forward, my premium will change annually.
As I read the letter, my heart sank. Shoot. All my grand plans to leave my loved ones an inheritance dissolved since I can't afford the new premium, and I will be cancelling my policy.
Okay, maybe I could afford that new premium if I stopped paying extra toward our debt. But to be honest, even though I am not your typical personal finance blogger (since I don't invest in stocks, bonds, do not have a Roth IRA or 401K and no retirement savings and don't know a lot about these things) I think I could do better, if I had $102.38 each month (and the amount will increase yearly) to invest that money in some way. Just socking $100 a month into my mattress for twenty years would be $24,000!
Early this morning I read the great comment by Kosmo on my original post which brought up a lot of good points, and actually made me feel a lot better about my decision to cancel. I especially liked the part where he mentioned that a person nearing retirement themselves should not be relying on their parents for money. Yes, an inheritance would be a nice bonus… bonus being the key word.
Here is my next consideration… about a week ago I received a letter from my credit union informing me that I have $2000 credit union paid coverage for Accidental Death and Dismemberment Insurance through Minnesota Life Insurance. For an additional $5, they will increase that to $50,000. I tucked the letter beside my computer monitor to have a closer look at it later. It says my additional coverage is already pre-authorized and will go into effect as soon as I submit the form enclosed. I have received these notices over the years, but have never really paid much attention to them. I will definitely read the fine print and see what exactly is covered. I do see that all coverage is reduced by 50% when I turn 70 (in 2033).
Accidental Death and Dismemberment insurance has always seemed kind of weird because who wants to think about these things? Who wants to think about losing a hand, or an eye? It almost seems if you have this kind of insurance you're opening some kind of gateway to something happening, tempting fate in some way. Of course that isn't logical, but my superstitious upbringing gets the best of me at times.
So what do you think? Should I pay $5 for this Accidental Death and Dismemberment insurance?
Have you shopped around for a better rate?
Term definitely does get considerably more expensive as you age. If you do your math on your current rate, you’d need to pay premiums for 2661 months in order for the insurance company to collect the $50K in premiums they’d need to pay you if you died. That’s more than 221 years. I’m oversimplifying a bit because the insurance company is going to invest your premiums, but you can obviously see why you can’t pay a flat $18.79 premium forever.
AD&D also pays out in cases of accidental death, such as an auto accident. I have a fairly large amount of AD&D coverage because it’s pretty inexpensive through my employer. Again, I’d recommend shopping around. AD&D should be considerably less expensive, simply because it only covers certain types of death (as well as dismemberment). For example if you die of lung cancer, AD&D isn’t going to pay, but your normal term policy would.
There are a lot of different types of life insurance products. You should be able to find an agent who will be happy to sit down with you, listen to your needs, and find something that’s a good fit.
Kosmo recently posted..Women in the Election
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:23 pm
Hi Kosmo, no I haven’t shopped around. I did get a quote for my husband with the broker that holds his business insurance and our auto insurance and they wanted $50/month for him for I think $50K and he’s 2 years younger than me. So they probably wouldn’t have anything better for me. I will check around though. Thank you for your input.
[Reply]
Absolutely.
Also, check your various benefits at work. First, sometimes you can get life insurance through your workplace for a reasonable premium. Second, some work-related bennies have a death & dismembership policy associated with them–it’s usually not much, but it’s better than a hit in the head.
And third, look into whole life policies. These do not expire at the end of a term; instead you keep paying into them, and they accrue principal for you. Over time, this can add up to a fair amount. If you die before you elect to withdraw the principal, then the policy pays a benefit to your survivor.
I have an insurance broker who seems honest. He may be able to help you find a policy that’s more affordable…if you’d like his name, e-mail me.
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:22 pm
This really irks me – there is life insurance at my job, but only five people have it. My boss says it is too much trouble to put anyone else on the policy. But of course SHE is on the policy herself. So for the rest of us it’s too much trouble. Thanks for the input, Funny.
[Reply]
Hi, Mrs. A!
As for term life, check with AAA; we just got $50,000 for 15 years for less than $66 a month on my husband and he’s 62 years old and not in perfect health. I’ll send you the agent’s ph. # in a separate email.
I’d personally pay the extra $5 on the accidental death & disability. A cappuccino at Starbucks costs nearly that.
Deborah
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:20 pm
Hi Deborah, great suggestion for AAA. I do have them. I’ll see what they can do for me. Best, Mrs. A
[Reply]
Ignoring my instinct to push whole life insurance (if for no other reason than to avoid this situation)…I would find a TRUSTED insurance broker that can sell any company and let them get you some 20 year term.
If you are looking for inheritance purposes I would check out a WL or a Whole Life Blended policy. If you need any questions answered please feel free to email me.
Evan recently posted..What Does 1% Look Like for Investing? Inflation? Debt?
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:20 pm
Thanks for the suggestions, Evan, I’ll look into them, and I may take you up on your offer with an email. Thanks again.
[Reply]
First, you think about why long you need life insurance.If it is so the other person can pay the mortgage, you’ll only need it until the loan is paid. If it is to help out a child with problems,that can be a different story.
The big problem is the difference in price between term and whole life. I expect whole will be more than you want to pay. I’d get some quotes on the internet. That will give you an idea of costs.
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:24 pm
Thank you Linda, that helps. Best, Mrs. A
[Reply]
Regarding accident insurance……if that accident was caused by you they may not pay. My husband’s son died in a car accident and the insurance company required the coroner’s report and the accident report from the state police. It was apparent that if he had been drinking or had drugs in his system they would not have paid. Read the fine print.
By the way, he was on his way to school that morning and overcorrected. The insurance company made it very difficult to collect. It just added to my husband’s grief.
[Reply]
Mrs. Accountability Reply:
October 27th, 2012 at 8:19 pm
Hi Joyce, thanks for the heads up on that little fine detail! You’re right we have to be vigilant and read all the fine print. I’m so sorry for your husband’s loss, it is tragic to lose a child. We are supposed to outlive our children!
[Reply]