NFT: Life insurance question

Is that insurance should just be insurance. Get a level term policy for the number of years you need coverage. Invest the rest of your money elsewhere.

you are purchasing life insurance. The purest form of life insurance is term life. Term life is intended to provide protection for your dependents (presumably your wife) to replace your income. It should go hand in hand with disability insurance (which is also intended to provide replacement for your income).

Whole life (and other related products) combines pure life insurance (i.e. term insurance as income replacement) with a kicker of also trying to be some type of investment product. It has been my experience that the investment portion of anything offered by the insurance industry just isn't worth the high costs (with the possible exception of some annuity products).


But, at the end of the day, you need to get a good handle of your goals. You absolutely need to consider protecting your wife and young children against the possibility of your death while you are still producing income. Beyond that, is the investment portion of life insurance products something that provides you with an unique opportunity in your overall financial portfolio that makes sense (some very high income people who already max out their 401k contrib might find some life insurance products can offer tax relief, but again, it has been my experience that the costs of such products are prohibitively high).

So the fund fees in the GVUL are no higher than the ones we use in our retirement program - which are very low. The investment choices are limited to fund asset classes but have large growth and value, small growth, international, target date funds, bonds and a fixed fund that pay 4%. It is one of the better post tax options we have and not limited to the $5,500 annual limit.

There are advantages including tax advantages to this type of product. However most insurance companies see to profit by that savings as much as they can, so the products are not cheap. YMMV depending on the form, etc. Look closely at loads within the fund offerings and compare them to your options outside of the fund. Of course you must also compare the term rates offered by the insurance company and ensure you will be getting the same rates they offer outside of the policy.

Since it's a group plan you should be getting a very competitive product so sharing the cost details with an agent for competitive analysis shouldn't hurt anything.

of which you are a member is generally the least expensive way to get insurance.

In comment 14018793 DC Gmen Fan said:

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So the fund fees in the GVUL are no higher than the ones we use in our retirement program - which are very low. The investment choices are limited to fund asset classes but have large growth and value, small growth, international, target date funds, bonds and a fixed fund that pay 4%. It is one of the better post tax options we have and not limited to the $5,500 annual limit.

By saying the fees are no higher than the ones in your retirement program isn't tell me much, because there is a pretty good chance the fees in your retirement program are obnoxiously high (and if your retirement funds aren't in Vanguard funds, then the odds just went up astronomically that your fees are obnoxiously high).


And, truth be told, a much better vehicle for someone your age is simply to purchase a stock fund in a taxable account that you never sell until you are in retirement. You pay no taxes until you sell the fund, presumably in retirement, and you will get capital gains tax treatment (it's possible capital gains taxes may no longer exist by the time you retire, but that is very unlikely and shouldn't be a reason to avoid holding stocks long term).


Vanguard offers a total stock market fund with annual fees of 0.04% … you should NOT be paying fees higher than 0.09% on any Total USA Stock Market fund (other funds like international, or small cap may be slightly higher but not more than 0.25%).

I worked for NY Life for a short period of time and the reason my employment was short was because I did not like ripping people off. VULs, Whole Life are great if you're filthy rich and have money to burn and pass on to a future generation, they can truly help build wealth but if you want your loved ones to have some cash to take care of the financial burden of death, get term life. VULs are fine, but the amount of investment declines as the price of insurance increases over time and you're honestly too old to reap the benefits of doing this when you're 18. Buy term life, no frills, no bells, no whistles and yes if you have an employer furnished option take it. Everything else is a long con by overly rich insurance companies.

for my taxable account that mimics the total stock market fund but is actively managed to control what shares are bought/sold because of inflows/outflows caused by investor purchases redemptions - to minimize annual capital gain distributions within the fund (which are taxable each year). Take a look at the link below.
Link - ( New Window )

is something that should be analyzed as a family unit (i.e. if either spouse dies). In other words, you need to be sure that you are financially able to provide for your children if your spouse were to die before retirement (i.e. consider not just your spouse's income, but everything she does for your children that you don't do ... for example, my wife stayed home with my four daughters until each was 10 years old - but I bought life insurance sufficient for me to replace that childcare if my wife were to die, even though she technically didn't have an income at that time in our lives). The issue is what kind of financial impact would there be it either (or god forbid both) spouse died.

BTW, it ends up being an enormous number that is at its maximum the younger you are, and slowly goes down as you age. And, alas, that is half assed backwards … we can't afford the cost of income replacement when we are 30 and we more likely can afford it when we are 60, but it isn't as drastically needed (good chance the kids are out of the house by then).

In comment 14018804 Marty in Albany said:

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of which you are a member is generally the least expensive way to get insurance.

It’s cheaper, but it’s a bad choice. If you leave your job or get fired, the insurance ends. Then you have to go out and get new insurance. It’ll be more expensive because your older, and maybe a lot more if your health has changed.

It’s fine for a supplemental extra, but it should not be your primary insurance.

metlife is permanent and portable.

In comment 14018818 DC Gmen Fan said:

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metlife is permanent and portable.

I was reffering to term insurance, which usually is not portable. IMO term is a better choice than GVUL.

in permanent life insurance. But you need to analyze your personal reasons for having it. Is it for family protection? Estate planning? etc. Many people say term is the way to go however "life" is what it is. Unexpected things come up later in life that may generate a need for life insurance but the premiums will be much higher as you get older. Locking in a policy at reasonable premiums now will guarantee you have it later in life when the need may arise.

In comment 14018853 Bubba said:

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in permanent life insurance. But you need to analyze your personal reasons for having it. Is it for family protection? Estate planning? etc. Many people say term is the way to go however "life" is what it is. Unexpected things come up later in life that may generate a need for life insurance but the premiums will be much higher as you get older. Locking in a policy at reasonable premiums now will guarantee you have it later in life when the need may arise.

Put the premium savings you get by choosing term into real investments and you’ll have more money later in life than your permanent policy amount.

Without all the bells and whistles of a VUL? Maybe mix term with a VUL. And 800k may sound like a lot of money, but in reality it is not. I would do some homework to determine the proper level of insurance. Tough mistake to make if you do it wrong and tragedy strikes.

with having your own term life policy and taking advantage of your employer sponsored term life policy (because it's cheap).

My plan was to get a term policy that would carry my family beyond the time my youngest graduated college. And then I actually added a second term policy to take my kids into their 30's.

the key with term life is (obviously?) the younger you are when you get the policy and the better health you are in the cheaper the premiums. when I was 28 or so and got my first 20 year term it was much cheaper than the second 20 year term I got when I was 38, and both times I was in the highest health rating.

My employer offers term life at no cost for 2x my annual salary and then I can "buy up" this policy for a small fee, for an additional 3 times my salary, so this is a huge options (while I'm employed there) to get some "bonus" life insurance.

I now found the allure of whole life to be worth it given the other options to spend that money on.

my employer offers group life, I believe, not term.

but I’m lookig to buy a term life policy and smoke cannabis a few times a week. It looks like some insurance companies will automatically give me a smokers’ rate while others are a lot more lenient. Prudential looked like the best from what I can see.

Anyone else have any experience with this and/or recommendations?

I thought the Insurance companies ask the question as "Are you a tobacco user ??"

To which you should reply " No".

In comment 14018956 Named Later said:

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I thought the Insurance companies ask the question as "Are you a tobacco user ??" To which you should reply " No".

Not when you get into larger policies. Most require a physical, usually in home, that includes blood work. Also, in the event the insured dies and they discover a false/fraudulent application it is possible they won't pay the benefit. In this scenario the premiums paid to date would be reimbursed but nothing beyond that. If your primary objective is to protect your family you are best to be honest on the application.

In comment 14018966 Rick in Annapolis said:

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Not when you get into larger policies. Most require a physical, usually in home, that includes blood work. Also, in the event the insured dies and they discover a false/fraudulent application it is possible they won't pay the benefit. In this scenario the premiums paid to date would be reimbursed but nothing beyond that. If your primary objective is to protect your family you are best to be honest on the application.

How and when is the "false/fraudulent application" determined? Wouldn't this be something that is determined BEFORE the policy goes into effect?

I've never bought such a large enough policy to warrant a medical history, but I'm guessing there could be a ton of questionable medical incidents even in healthy individuals. And who is going to spend the time to review every piece of your medical history (especially if most of it is in paper form)?

We have Group Universal life and I bought up to 5X the salary. I'm in 40s too (for a while more lol) and my kids are at the time where they will need real money from me (a few years from college then when just starting out. 5X is not really enough for them and my wife -not in the long run. I got a term policy that carries them until they are 27 and 25 respectively. Between the two insurances, my wife and kids should be solid if I kick the bucket.

When the term ends, I can convert some to whole insurance and IIRC, the rates will be based on 40s me who got the insurance and not late 50s me who I will be when the term ends. It's more expensive than term, but can provide some coverage.

In comment 14019213 Knineteen said:

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In comment 14018966 Rick in Annapolis said: Quote: Not when you get into larger policies. Most require a physical, usually in home, that includes blood work. Also, in the event the insured dies and they discover a false/fraudulent application it is possible they won't pay the benefit. In this scenario the premiums paid to date would be reimbursed but nothing beyond that. If your primary objective is to protect your family you are best to be honest on the application. How and when is the "false/fraudulent application" determined? Wouldn't this be something that is determined BEFORE the policy goes into effect? I've never bought such a large enough policy to warrant a medical history, but I'm guessing there could be a ton of questionable medical incidents even in healthy individuals. And who is going to spend the time to review every piece of your medical history (especially if most of it is in paper form)?

From my understanding, if I apply for a policy and say that I don't ever partake in Cannabis, and if I pass away within a few years of purchasing the policy, they'll routinely order a toxicology exam on the autopsy before paying out and if it comes up positive for THC, they could contest paying out the claim.

Seems like better solution is just to disclose it all up front and let them price it however they want. The reason I'm asking the question is because some insurance companies are a lot more progressive on this than others and I'd rather not pay more than I have to for the same product.

In comment 14019439 Metnut said:

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From my understanding, if I apply for a policy and say that I don't ever partake in Cannabis, and if I pass away within a few years of purchasing the policy, they'll routinely order a toxicology exam on the autopsy before paying out and if it comes up positive for THC, they could contest paying out the claim. Seems like better solution is just to disclose it all up front and let them price it however they want. The reason I'm asking the question is because some insurance companies are a lot more progressive on this than others and I'd rather not pay more than I have to for the same product.

Well, it's not lying if you start smoking pot AFTER applying for the policy. But I digress...

I can understand fully egregious violations where you fail to disclose heart surgery or an instance of cancer. But it's the smaller things that I question.
Does short term treatment for depression due to a family member's death, qualify you for "depression" (which raises rates)?
Do multiple measurements for high cholesterol put you in the unhealthy rating class (even though a doctor might not feel the need to treat it based on one's overall health)?

It just seems like A LOT of things can be subjectively spun to either raise your rates or claim fraud upon death.

In comment 14019500 Knineteen said:

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In comment 14019439 Metnut said: Quote: From my understanding, if I apply for a policy and say that I don't ever partake in Cannabis, and if I pass away within a few years of purchasing the policy, they'll routinely order a toxicology exam on the autopsy before paying out and if it comes up positive for THC, they could contest paying out the claim. Seems like better solution is just to disclose it all up front and let them price it however they want. The reason I'm asking the question is because some insurance companies are a lot more progressive on this than others and I'd rather not pay more than I have to for the same product. Well, it's not lying if you start smoking pot AFTER applying for the policy. But I digress... I can understand fully egregious violations where you fail to disclose heart surgery or an instance of cancer. But it's the smaller things that I question. Does short term treatment for depression due to a family member's death, qualify you for "depression" (which raises rates)? Do multiple measurements for high cholesterol put you in the unhealthy rating class (even though a doctor might not feel the need to treat it based on one's overall health)? It just seems like A LOT of things can be subjectively spun to either raise your rates or claim fraud upon death.

Our NY Life agent explained to me that the earlier in the policy the death occurrs, the more likely it is to be investigation, specifically in the first two years. Circumstances of the death also come into play.

If you have a non smoker rate and you die in a car accident in the first year they won’t likely investigate. But if you have a non smoker rate and die of some sort of cancer or heart related illness early in the policy they will most definitely request blood work post mortim.

As for changing habits after the application, I suppose one could start smoking later in life, but the actuaries are betting that someone like myself, in their forties is not likely to take up smoking.

It isn’t a perfect science, and they know that one might be treated for ‘depression’ without having a chronic issue of it. In the end they look at your application, medical history, work history, etc and come up with a date of death for you. It’s a gambling but they are the house, so the odds are strongly in their favor.

In comment 14019439 Metnut said:

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In comment 14019213 Knineteen said: Quote: In comment 14018966 Rick in Annapolis said: Quote: Not when you get into larger policies. Most require a physical, usually in home, that includes blood work. Also, in the event the insured dies and they discover a false/fraudulent application it is possible they won't pay the benefit. In this scenario the premiums paid to date would be reimbursed but nothing beyond that. If your primary objective is to protect your family you are best to be honest on the application. How and when is the "false/fraudulent application" determined? Wouldn't this be something that is determined BEFORE the policy goes into effect? I've never bought such a large enough policy to warrant a medical history, but I'm guessing there could be a ton of questionable medical incidents even in healthy individuals. And who is going to spend the time to review every piece of your medical history (especially if most of it is in paper form)? From my understanding, if I apply for a policy and say that I don't ever partake in Cannabis, and if I pass away within a few years of purchasing the policy, they'll routinely order a toxicology exam on the autopsy before paying out and if it comes up positive for THC, they could contest paying out the claim. Seems like better solution is just to disclose it all up front and let them price it however they want. The reason I'm asking the question is because some insurance companies are a lot more progressive on this than others and I'd rather not pay more than I have to for the same product.

It's usually better not to lie. That's just sort of a general rule.