Insurance knowledge havers

[Ike]

So now that the paperwork for me has finally gotten through the entire system of my new employer (damn that was sloooow), I am eligible to enroll for all the company benifits.

Anyway I get most of the health insurance stuff...what I don't quite get is the life insurance stuff. They are offering both an "employee-paid life insurance" and an "accidental death and dismemberment" insurance. It seems like they'd both cover the same thing. Which should I choose? Or both?


These things tend to make my head explode.

[Hamhock]

if it is on your dime, get your own, term-life insurance policy.

[Ike]

what does "term-life" insurance mean? How is it different than just plain "life insurance"?

[Frozen Sooner]

So now that the paperwork for me has finally gotten through the entire system of my new employer (damn that was sloooow), I am eligible to enroll for all the company benifits.

Anyway I get most of the health insurance stuff...what I don't quite get is the life insurance stuff. They are offering both an "employee-paid life insurance" and an "accidental death and dismemberment" insurance. It seems like they'd both cover the same thing. Which should I choose? Or both?


These things tend to make my head explode.

Life insurance pays if you die from any cause (with a waiting period for suicide.)

AD&D pays if you die accidentally or lose a limb.

[Hamhock]

you want term life.

term life - you're just buying an insurance policy. I pay $60/month to Banner life. If i die, they send Mrs. hamhock $2mm. They've agreed to keep the premium the same for 15 years.

whole life- you're buying an insurance policy and making an investment. the same coverage costs a whole lot more. you are building up a "cash value", but the rate of return usually sucks. also, if you die, the cash value is lost.

i say don't get term thru your employer because it is not "portable". if you get fired, you lose the insurance. i say go to selectquote.com and buy your own policy.

[Frozen Sooner]

what does "term-life" insurance mean? How is it different than just plain "life insurance"?

Term life is written for a (usually) fixed premium to cover a certain term-10, 20, 30 years. If you die inside the term, you get the death benefit. Die outside the term, no benefit.

Permanent life encompasses whole life, universal life, etc. These policies are designed to at some point be "paid up" and stay in force forever.

[Frozen Sooner]

Ike, please do me a favor and don't listen to insurance advice from people who aren't licensed to sell insurance products. In fact, since I'm not licensed wherever the heck you are, don't even listen to me. Anyone who tries to give you insurance advice without knowing your actual situation isn't giving you great advice. Yes, there are times when permanent life is a better option than term.

[Hamhock]

mike's right. i am not licensed to sell insurance.

i'm only a CPA who has advised hundreds of clients over 10 years. i can honestly say that 1 out of 100 people i have advised are better served by something other than term life.

i can also say that the MAJORITY of clients I have advised have been OVERSOLD an insurance product by someone trying to earn a larger commission.

Ike, you need to get advice from someone you know and trust. i know very few CPAs who, will ever recommend a whole life insurance product.

the bottom line is that you are dealing with professional opinions, so you need to be comfortable with the person giving it.

btw, i was licensed to sell insurance in OK for the first half of my career.

[sooner_born_1960]

As a licensed insurance salesman (any kind of salesman), I'd be inclined to steer you towards the product that generated the most commission for me.

[Frozen Sooner]

mike's right. i am not licensed to sell insurance.

i'm only a CPA who has advised hundreds of clients over 10 years. i can honestly say that 1 out of 100 people i have advised are better served by something other than term life.

i can also say that the MAJORITY of clients I have advised have been OVERSOLD an insurance product by someone trying to earn a larger commission.

Ike, you need to get advice from someone you know and trust. i know very few CPAs who, will ever recommend a whole life insurance product.

the bottom line is that you are dealing with professional opinions, so you need to be comfortable with the person giving it.

btw, i was licensed to sell insurance in OK for the first half of my career.

Where does the bobcat come in?

I wasn't singling you out, Hamhock. I just really dislike seeing people advocate one particular insurance product over another without knowing someone's entire situation or the details of the products being compared.

And yes, term insurance purchased under a group plan through your employer can in many cases be portable. HR departments do a really bad job of informing separated employees of the option, but it's there.

[Hamhock]

Where does the bobcat come in?

I wasn't singling you out, Hamhock. I just really dislike seeing people advocate one particular insurance product over another without knowing someone's entire situation or the details of the products being compared.

And yes, term insurance purchased under a group plan through your employer can in many cases be portable. HR departments do a really bad job of informing separated employees of the option, but it's there.


the bobcat is going to eat your face off if you call me out again about not knowing about insurance. ;)

you are correct. Ike's total situation needs to be taken into account before he makes a decision. i'm just stating from experience as both a financial advisor and a guy who used to get paid to sell life insurance, that most of the time, in my opinion, term is the best answer. i have never had someone come to me and say "help me get out of this terrible term life product".

as to portability, the product usually is more expensive than a stand alone term policy, especially when you are dealing with more than the standard $50k value.

[AggieTool]

Consult an independent CFP (certified financial planner). Most will tell you, there is almost never a reason to waste money on whole life. Especially with all the various investment vehicles that are out there are now.

20-30 year fixed term covering about 8 times your income is the standard.

[Okla-homey]

Ike,
Don't you still smoke? If so, whole life might be kinda 'spensive for ya.

At any rate, as others have posted, your inshorance needs are peculiar and particular to your situation. Lots of stuff to factor in...e.g. your overall continued insurability, mortgage or renting, debt, your health, kiddoes (or not), your surviving spouse's needs, whether or not she can support hersellf without turning to prostitution, that kinda stuff.

Surely someone in your new outfit can give you advice on this stuff. Otherwise you would have to bare your soul and share a lot of personal info...something that is generally not recommended on the innerweb.

[AlbqSooner]

I just really dislike seeing people advocate one particular insurance product over another without knowing someone's entire situation or the details of the products being compared.
When I practiced law I liked seeing laymen give people legal advice. Where I might charge them $50 for legal advice, I could charge them $5,000 to clean up the mess they got into from following free legal advice.:D

[Harry Beanbag]

i can also say that the MAJORITY of clients I have advised have been OVERSOLD an insurance product by someone trying to earn a larger commission.


Kind of like your $2 million policy?


;)

[Spray]

I take advantage of the employer offered life through my company because its about $1.00/mth- I figure take advantage of the cheap benefit in case anything happens while I am working for them. Of course, I also back that up with my own policies through my insurance agent.

[Hamhock]

Kind of like your $2 million policy?


;)


why would you think $2mm is too much? i bought the policy through selectquote. while i'm sure they are technically earning a commission on it, it ain't much and it costs bout 1/10th of what the same coverage would cost with whole life.

[Hamhock]

besides, my wife will have money in order to get someone else to put up with her crap.

[1stTimeCaller]

besides, my wife will have money in order to get someone else to put up with her crap.

sweet, I've always wanted to be a millionaire and have a bobcat on my mantle.

;)

[Frozen Sooner]

besides, my wife will have money in order to get someone else to put up with her crap.

I wouldn't say $2mm of life insurance for someone with any kind of debt at all and dependents is all that high. Sounds about right, in fact.

You and I seem to have some differing experience-the vast majority of people I meet are woefully under insured.

[Harry Beanbag]

What kind of debt are we talking about here? It is life insurance isn't it, not the lottery.

[Frozen Sooner]

What kind of debt are we talking about here? It is life insurance isn't it, not the lottery.

Figure the average family has a mortgage and a couple of car loans. You generally want to set things up so that the surviving spouse can keep the same quality of life (minus the decedent, of course) post-death.

So, you know, about $300k for the house and both vehicles.

Now, are both spouses working, or is one staying home with the kids? If one is staying home with the kids, you want to either completely replace the income of the working spouse for his expected work life or you want to (at the very least) put in enough to pay for daycare for the kids while the surviving spouse is out making a living.

You also want to look at the cost of educating the kids.

It can all add up pretty quickly.

No, it's not the lottery, but people don't really realize how much easier it is to live on two incomes than one-particularly when there's kids involved.

[Harry Beanbag]

Figure the average family has a mortgage and a couple of car loans. You generally want to set things up so that the surviving spouse can keep the same quality of life (minus the decedent, of course) post-death.

So, you know, about $300k for the house and both vehicles.

Now, are both spouses working, or is one staying home with the kids? If one is staying home with the kids, you want to either completely replace the income of the working spouse for his expected work life or you want to (at the very least) put in enough to pay for daycare for the kids while the surviving spouse is out making a living.

You also want to look at the cost of educating the kids.

It can all add up pretty quickly.

No, it's not the lottery, but people don't really realize how much easier it is to live on two incomes than one-particularly when there's kids involved.


Oh I understand all of that. I guess the main question is how long of a period of time of income for the spouse are we talking about? And if there is enough insurance to pay off the house, vehicles, and all other debt, does your spouse really need say another $1.5 million to "survive" on? Maybe I'm a little selfish, but if I go early I'd like the wife to actually miss me a little bit. ;)

And I wasn't bagging on Hamhock, $60 a month for that kind of life insurance actually sounds like a great deal.


Edit: Is life insurance taxed? I really don't know.

[Hamhock]

What kind of debt are we talking about here? It is life insurance isn't it, not the lottery.


3 kids. 1 on the way.


That =
3 weddings (maybe 4)

4 college educations

wife stays at home. i'd like for her not to have to get a job and maintain the current standard of living without touching corpus.

[Hamhock]

Edit: Is life insurance taxed? I really don't know.


no

[critical_phil]

You and I seem to have some differing experience-the vast majority of people I meet are woefully under insured.

i think ham's point was that people are sold the wrong product (over sold), not under insured.

i've sold a brazilian dollars worth of life insurance in my time. as many people have already said, it's kind of silly to give a recommendation w/o knowing the complete financial picture.

and ham has a completely valid point. there's a reason why the reputation of insurance agents is rated just above used car salesmen in the public eye. most would gouge their own mother on a life insurance policy if they thought she'd sign an app for a whole/variable life policy and write a them check for the first month's premium.

i never experienced so much success in insurance as i did when i started listening to what people said instead of trying to calculate the FYC in my head while they were talking. this is the same time i really changed my mind about the insurance business, and term life in particular. most insurance agents don't know that they can make FAR more money by replacing a term policy every couple of years (it's not churning. there's no cash value at stake. it keeps their premium down and extends the term of the policy. it also means that the insurance agent isn't married to one company and is looking out for the best dealio for the client). it also keeps the agent in front of the client on a regular basis as their needs change and they grow financially - again, a win/win for both agent and client.

and not all whole life/variable life/universal life is bad. my opinion, however, is that i would sell you one if you could prove to me that you needed it. when i retired, i bet i didn't have two dozen of those policies in force that i had written (and two of them were mine, and for very specific reasons).

ike, get a referral for a local agent. hear his/her pitch and bring it back to the board. there's a lot of experience here.

[Ike]

Well, basically what I was looking for was a definition of terms. I think I pretty much understand. I had no idea what the difference between "term life" and "whole life" insurance was (nor did I have a need to know that difference before the other day). Now I think I know.



Insurance peoples like to use a bunch of terms that seem to be designed to confuse people.


i think ham's point was that people are sold the wrong product (over sold), not under insured.

i've sold a brazilian dollars worth of life insurance in my time. as many people have already said, it's kind of silly to give a recommendation w/o knowing the complete financial picture.

and ham has a completely valid point. there's a reason why the reputation of insurance agents is rated just above used car salesmen in the public eye. most would gouge their own mother on a life insurance policy if they thought she'd sign an app for a whole/variable life policy and write a them check for the first month's premium.

i never experienced so much success in insurance as i did when i started listening to what people said instead of trying to calculate the FYC in my head while they were talking. this is the same time i really changed my mind about the insurance business, and term life in particular. most insurance agents don't know that they can make FAR more money by replacing a term policy every couple of years (it's not churning. there's no cash value at stake. it keeps their premium down and extends the term of the policy. it also means that the insurance agent isn't married to one company and is looking out for the best dealio for the client). it also keeps the agent in front of the client on a regular basis as their needs change and they grow financially - again, a win/win for both agent and client.

and not all whole life/variable life/universal life is bad. my opinion, however, is that i would sell you one if you could prove to me that you needed it. when i retired, i bet i didn't have two dozen of those policies in force that i had written (and two of them were mine, and for very specific reasons).

ike, get a referral for a local agent. hear his/her pitch and bring it back to the board. there's a lot of experience here.

[critical_phil]

Insurance peoples like to use a bunch of terms that seem to be designed to confuse people.

confuse? there's this one dude on the board who has his PhD in physics. you should try to read his posts in the Science Knowledge Haver threads.


:texan:

[Okla-homey]

I would add one other tiny thing...but pertinent.

Insurance agents/brokers under contract to a particular insurer work for that company and are obligated to advance its interests. IOW, if it comes down to selling you stuff you don't need, the agent is under no duty to you beyond ordinary fair dealing. As an agent of the insurer, his job is to sell a lot of policies at the highest premium the market will bear. He can load you up if you haven't done your homework.

Just remember, the inshorance man is not your counselor, advisor or guardian. He's just a guy who makes his living selling stuff.

[Hamhock]

Insurance peoples like to use a bunch of terms that seem to be designed to confuse people.


my opinion is that someone with a highschool education should never enter into a financial transaction he doesn't understand and can't explain to a buddy over a beer.

[Harry Beanbag]

my opinion is that someone with a highschool education should never enter into a financial transaction he doesn't understand and can't explain to a buddy over a beer.


So are you of the opinion that college makes you smarter and/or more intelligent? From my experiences, I've found no such correlation. If you would have worded your statement differently though I would certainly agree.

[C&CDean]

I never went to high school, but I've got a couple college degrees. I guess I'm uber-smart.

And $2mil worth of insurance is crazy. At least it is in my world. My wife and I have agreed that if either of us dies, we want our insurance to pay off all the bills so that the surviving spouse can start with a clean slate. I'll be damned if I'm gonna work my fingers to the bone just so she can have a bunch of jack to run off with Sancho when I kick it. And she'll be damned if she's gonna work her *** off so that I can end up with a bunch of bucks for hookers.

Besides, I don't need to give her any more incentive to slip some strychnine into my chicken fry.

[critical_phil]

I would add one other tiny thing...but pertinent.

Insurance agents/brokers under contract to a particular insurer work for that company and are obligated to advance its interests. IOW, if it comes down to selling you stuff you don't need, the agent is under no duty to you beyond ordinary fair dealing. As an agent of the insurer, his job is to sell a lot of policies at the highest premium the market will bear. He can load you up if you haven't done your homework.

Just remember, the inshorance man is not your counselor, advisor or guardian. He's just a guy who makes his living selling stuff.

with all due respect colonel, i disagree on both counts.

a.) i kind of addressed agent captivity in the above post. i have always viewed this as a potential conflict of interest and one of the major downfalls of the industry. if your insurance agent only wants to hawk the wares of Company A without ever showing you any other comparisons, the buyer should beware. i'm not saying that he is trying to put the screws to you, i'm only saying it increases those chances.

one way to guard against this is to find an agent who is working for the client and not for an insurance company. trust me, they exist.

any contract i ever signed with an insurance company was for my right, not my obligation, to bring them business. i never won any fancy trips to hawaii or led the region in persistency rating, but i was always able to sleep at night knowing i did right by the client.

b.) if your insurance man isn't a trusted counselor/advisor, you've got the wrong insurance man.

a good agent/registered rep/broker/planner will save/make you a bushel of money in the long run - which should be both his and your goal.

[Hamhock]

So are you of the opinion that college makes you smarter and/or more intelligent? From my experiences, I've found no such correlation. If you would have worded your statement differently though I would certainly agree.


my statement was poorly worded. i should have said with at least a high school education

my point was that nobody (apart from someone not able to care for themselves) should enter a financial decision that they can't explain to a buddy over a beer.

my statement definitely didn't mean to imply that someone with a college education should enter a financial transaction they don't understand. nor did it imply that a college degree makes you automatically financially savvy

to be completely honest, the number one offender of entering into transactions they don't understand, in my experience, hands down, are doctors.

[Harry Beanbag]

my statement was poorly worded. i should have said with at least a high school education

my point was that nobody (apart from someone not able to care for themselves) should enter a financial decision that they can't explain to a buddy over a beer.

my statement definitely didn't mean to imply that someone with a college education should enter a financial transaction they don't understand. nor did it imply that a college degree makes you automatically financially savvy

to be completely honest, the number one offender of entering into transactions they don't understand, in my experience, hands down, are doctors.


Now that makes sense. Substitute doctors for engineers and we're in complete agreement. :)

[critical_phil]

Now that makes sense. Substitute doctors for engineers and we're in complete agreement. :)


show me an insurance man that can sell a policy to an engineer and i'll show you the greatest salesman in the world.

[Vaevictis]

Heh, you've seen the debt load that Americans carry on average, right?

Engineers, doctors, it doesn't matter. Most people in the USA don't know the first thing about managing their finances.

(... and the funny thing is, you can get most everything you need to know out of David Copperfield: "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." Not that most Americans read Dickens anymore.)

[Frozen Sooner]

show me an insurance man that can sell a policy to an engineer and i'll show you the greatest salesman in the world.

I've sold several.

Then again, they were all GL and PL policies, not life. :D

[critical_phil]

I've sold several.

Then again, they were all GL and PL policies, not life. :D


GL/PL policies are bought; life policies are sold.

[Okla-homey]

with all due respect colonel, i disagree on both counts.

a.) i kind of addressed agent captivity in the above post. i have always viewed this as a potential conflict of interest and one of the major downfalls of the industry. if your insurance agent only wants to hawk the wares of Company A without ever showing you any other comparisons, the buyer should beware. i'm not saying that he is trying to put the screws to you, i'm only saying it increases those chances.

one way to guard against this is to find an agent who is working for the client and not for an insurance company. trust me, they exist.

any contract i ever signed with an insurance company was for my right, not my obligation, to bring them business. i never won any fancy trips to hawaii or led the region in persistency rating, but i was always able to sleep at night knowing i did right by the client.

b.) if your insurance man isn't a trusted counselor/advisor, you've got the wrong insurance man.

a good agent/registered rep/broker/planner will save/make you a bushel of money in the long run - which should be both his and your goal.

I was merely alluding to the fact that under Oklahoma law, insurance agents/brokers under contract to, or in the employ of a particular insurer, do not have a fiduciary reponsibility to their insureds.

[Okla-homey]

So are you of the opinion that college makes you smarter and/or more intelligent? From my experiences, I've found no such correlation. If you would have worded your statement differently though I would certainly agree.

I think certain courses of study in college can "make you smarter" by teaching a person how to thimk. ;) Not necessarily "what" to think, but "how" to do so. IMHO, the most important thing a person can learn in college is how to think critically. Sure, a lot of folks are born with the innate ability to to do that, but many aren't.

Thus, when someone reads a statistic in a magazine declaring the inherent dangers of living beneath high tension electrical lines based on the statistical probability it will make them stupid or cause birth defects -- they often do not consider that the numbers are skewed by the fact most who live directly underneath high tension power lines live in trailer parks.:D

That there be critical thinkin'

[Ike]

I think certain courses of study in college can "make you smarter" by teaching a person how to thimk. ;) Not necessarily "what" to think, but "how" to do so. IMHO, the most important thing a person can learn in college is how to think critically. Sure, a lot of folks are born with the innate ability to to do that, but many aren't.

Thus, when someone reads a statistic in a magazine declaring the inherent dangers of living beneath high tension electrical lines based on the statistical probability it will make them stupid or cause birth defects -- they often do not consider that the numbers are skewed by the fact most who live directly underneath high tension power lines live in trailer parks.:D

That there be critical thinkin'

Bingo. which is why I want to learn the definitions of all of these legaleese terms that now are probably going to matter at some point in my life. I can usually figure out where to go from there if I just know what the hell they mean....and if I can't I know I can come here and ask people questions.


Being edumacated (IMHO) isn't about what you already know, but rather is about how well you can learn the things you don't know.