Dad had a whole life policy but it sounds like term life?!

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Gambler
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Dad had a whole life policy but it sounds like term life?!

Post by Gambler »

my dad passed away (age 73).

apparently he was still paying $200/month for a whole life policy (Met Life) thru his company.
the policy is worth $60k upon his death.

but if its a constant $60k, isn't that term life?
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dm200
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Re: Dad had a whole life policy but it sounds like term life

Post by dm200 »

Gambler wrote:my dad passed away (age 73).

apparently he was still paying $200/month for a whole life policy (Met Life) thru his company.
the policy is worth $60k upon his death.

but if its a constant $60k, isn't that term life?
No.
dhodson
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Re: Dad had a whole life policy but it sounds like term life

Post by dhodson »

As mentioned, no.
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Gambler
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Re: Dad had a whole life policy but it sounds like term life

Post by Gambler »

hm.. ok. here's my (limited) understanding of whole life.
it's a savings vehicle w/a lot of commissions/fees.
when u die, your heirs will get whatever you put into it plus whatever gains over the decades.

thus why I was surprised at the round # of $60k instead of like $60,436.
guess I was wrong.

also, I have no idea when he bought the policy.
but at $200/month for a $60k payout, the max is 300 months (25yrs) if it had 0% gain.
(Update: He worked for the company for 40yrs and retired 3yrs ago.)

hm.. met life sent him an invoice for this month's $200 payment.
so apparently he was still paying premiums.

um.. something tells me he has paid more than $60k in premiums over his lifetime for this $60k policy? :shock: :(
Last edited by Gambler on Fri Jul 18, 2014 12:07 am, edited 1 time in total.
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Re: Dad had a whole life policy but it sounds like term life

Post by White Coat Investor »

You're right that whole life usually, but not always, has an increasing death benefit. Perhaps this was a different type of permanent insurance, such as guaranteed no lapse universal which tends to have a flat death benefit. His premiums for a term policy at 73 would probably be quite a bit higher unless he was toward the end of a 20 or 30 year term.
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Re: Dad had a whole life policy but it sounds like term life

Post by BruDude »

Not all whole life policies pay dividends. This was probably a non participating policy.
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Re: Dad had a whole life policy but it sounds like term life

Post by dhodson »

Also even if it had dividends, depends on what he set them to. If set to decrease premium or pay out cash etc then the death benefit would be level.
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Re: Dad had a whole life policy but it sounds like term life

Post by BigTom »

Gambler wrote:hm.. ok. here's my (limited) understanding of whole life.
it's a savings vehicle w/a lot of commissions/fees.
when u die, your heirs will get whatever you put into it plus whatever gains over the decades.

thus why I was surprised at the round # of $60k instead of like $60,436.
guess I was wrong.

also, I have no idea when he bought the policy.
but at $200/month for a $60k payout, the max is 300 months (25yrs) if it had 0% gain.
(Update: He worked for the company for 40yrs and retired 3yrs ago.)

hm.. met life sent him an invoice for this month's $200 payment.
so apparently he was still paying premiums.

um.. something tells me he has paid more than $60k in premiums over his lifetime for this $60k policy? :shock: :(
No the cash value is only available to you if you cash it out before you die . After you die they pay the death benefit and they keep your cash value for themselves .
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Re: Dad had a whole life policy but it sounds like term life

Post by IPer »

This discussion seems unintelligent. Do you have a copy of the policy in your hand? How on earth is it that you can speculate without reading it? Also, $60K with $200/mo in premiums for 40 years does not add up, even if it was lower before and increased. I say grab a copy of the policy as is your right and then ask questions!
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Re: Dad had a whole life policy but it sounds like term life

Post by Steelersfan »

rkatz0 wrote:This discussion seems unintelligent. Do you have a copy of the policy in your hand? How on earth is it that you can speculate without reading it? Also, $60K with $200/mo in premiums for 40 years does not add up, even if it was lower before and increased. I say grab a copy of the policy as is your right and then ask questions!
Agree - $200 a month is way too much for that level of insurance.

Gambler - Are you sure the premium is monthly? Maybe it's an annual or bi-annual payment.

It doesn't really matter though since you're not going to pay but but call the company instead and arrange to get the death benefit, whatever it is. Right?
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Re: Dad had a whole life policy but it sounds like term life

Post by Gambler »

update:

mom said policy was started in 1998 @ $200/month.
(2014 - 1998) x 12 months x $200 = $38400.

(60000 - 38400)/60000 = 36%

36% / 14yrs = 2.6% gain per year

Does this sound right?
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Re: Dad had a whole life policy but it sounds like term life

Post by IPer »

why have you not seen the policy?!
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Re: Dad had a whole life policy but it sounds like term life

Post by Gambler »

rkatz0 wrote:why have you not seen the policy?!
I've seen it briefly after the funneral.

the only #s I remember was the $60k death benefit and $200/month premium.

I'm back home now, which is several hrs away from my mom's house.
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Re: Dad had a whole life policy but it sounds like term life

Post by justus »

Sorry to hear about your father's passing. Please accept my sincere condolences.
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Re: Dad had a whole life policy but it sounds like term life

Post by IPer »

Gambler wrote:
rkatz0 wrote:why have you not seen the policy?!
I've seen it briefly after the funneral.

the only #s I remember was the $60k death benefit and $200/month premium.

I'm back home now, which is several hrs away from my mom's house.
Yeah, my condolences. Take some time and then get it together and it should be clear.
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Re: Dad had a whole life policy but it sounds like term life

Post by dodecahedron »

My condolences as well. At this point, I am not sure why it matters whether it is whole life or term or universal. The only question is what will the actual death benefit be (net of any loans he might have taken out, if those were allowed.)

interesting note: when my husband died last year, he had a term policy which was a (large) round figure. When the statement of proceeds arrived in the mail, I was surprised to see that it was a somewhat higher non-round amount. There were two factors:

1) We always made on annual premium payment each January because it was slightly cheaper than monthly payments would have been. As usual, we had paid the entire year's payment fin January 2013, so the insurance company included a rebate of the prorated premium covering the part of 2013 after his death.

2) The insurance company also paid accrued interest to us at 3% per annum running from the date of death until they processed the claim a few weeks later. (In fact, they offered me the option of leaving the proceeds there in a fully liquid account paying 3% interest indefinitely. This is known as a retained assets account, and because the company has the highest credit ratings, I chose to leave the funds there while considering a long term investment strategy.
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Re: Dad had a whole life policy but it sounds like term life

Post by dmlauffer »

Ok a lot of mixed up info on this thread. Whole life does not have an increasing face value It has an increasing cash value. The face value stays the same. If you buy 60k of insurance and die next month, it pays 60k. If you die in 10 years, it pays 60k. But in ten years you can cash it out for more than if you cash it out sooner.
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Re: Dad had a whole life policy but it sounds like term life

Post by MossySF »

Gambler wrote:36% / 14yrs = 2.6% gain per year

Does this sound right?
No. The entire concept of "return" is inapplicable when applied to death benefits (unless you are in the mafia). Think it through -- the best financial scenario would be to die immediately after paying your first premium. You'd have a return of $60K / $200 = 30000%. If you annualize that number, it comes out to 360000%. But in exchange, you're dead. Hence, insurance is simply protection against specific circumstances.

As other's have mentioned before, whole life's death benefit never changes regardless of how long you've been paying premiums. (Universal life can have an "increasing" death benefit that pays face + cash value.) In terms of death benefits, that's not any different from term life. The difference is you are paying extra money for two features: (1) coverage lasts as long as you can pay premiums while term has a set lifespan, (2) you can cash-out whole life if you ever decide you want the money more than the insurance coverage.

Term almost always makes more financial sense but sometimes age/health might limit you to whatever your employer offers.
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Re: Dad had a whole life policy but it sounds like term life

Post by Gambler »

MossySF wrote:
Gambler wrote:36% / 14yrs = 2.6% gain per year

Does this sound right?
No. The entire concept of "return" is inapplicable when applied to death benefits (unless you are in the mafia). Think it through -- the best financial scenario would be to die immediately after paying your first premium. You'd have a return of $60K / $200 = 30000%. If you annualize that number, it comes out to 360000%. But in exchange, you're dead. Hence, insurance is simply protection against specific circumstances.

As other's have mentioned before, whole life's death benefit never changes regardless of how long you've been paying premiums. (Universal life can have an "increasing" death benefit that pays face + cash value.) In terms of death benefits, that's not any different from term life. The difference is you are paying extra money for two features: (1) coverage lasts as long as you can pay premiums while term has a set lifespan, (2) you can cash-out whole life if you ever decide you want the money more than the insurance coverage.

Term almost always makes more financial sense but sometimes age/health might limit you to whatever your employer offers.
so if my father lived longer, he could have paid in more than $60k for this $60k policy?
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Re: Dad had a whole life policy but it sounds like term life

Post by bberris »

Gambler wrote:
MossySF wrote:
Gambler wrote:36% / 14yrs = 2.6% gain per year

Does this sound right?
No. The entire concept of "return" is inapplicable when applied to death benefits (unless you are in the mafia). Think it through -- the best financial scenario would be to die immediately after paying your first premium. You'd have a return of $60K / $200 = 30000%. If you annualize that number, it comes out to 360000%. But in exchange, you're dead. Hence, insurance is simply protection against specific circumstances.

As other's have mentioned before, whole life's death benefit never changes regardless of how long you've been paying premiums. (Universal life can have an "increasing" death benefit that pays face + cash value.) In terms of death benefits, that's not any different from term life. The difference is you are paying extra money for two features: (1) coverage lasts as long as you can pay premiums while term has a set lifespan, (2) you can cash-out whole life if you ever decide you want the money more than the insurance coverage.

Term almost always makes more financial sense but sometimes age/health might limit you to whatever your employer offers.
so if my father lived longer, he could have paid in more than $60k for this $60k policy?
Keep this on the down low. What if the insurance companies discovered the secret to making money in the life insurance business?
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Re: Dad had a whole life policy but it sounds like term life

Post by bluemarlin08 »

If a whole life policy is from a dividend paying company, and the dividends are used to buy paid up additions or left to accumulate your death benefit certainly can increase.
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Re: Dad had a whole life policy but it sounds like term life

Post by MossySF »

Gambler wrote:so if my father lived longer, he could have paid in more than $60k for this $60k policy?
Somebody who knows why they picked this kind of policy would have checked it every year and decided whether they'd rather have the cash value versus leaving it for a death benefit. The policy itself might have an auto-cashout option that triggers at $X cash value.

In general though, agents probably call people up when this kind of situation looms and upsells them into newer policies to hide this crazy fact (and also generate a new set of commissions).

Yes, whole life is almost always a terrible deal. IF your father's employer had term life options, the payout probably would have been $150K-$250K.
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Re: Dad had a whole life policy but it sounds like term life

Post by Gambler »

MossySF wrote: Yes, whole life is almost always a terrible deal. IF your father's employer had term life options, the payout probably would have been $150K-$250K.
term life is available to people in their 70s? at $200/month?

and from what I understand, his company also had term life. for some reason he picked whole life.
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Re: Dad had a whole life policy but it sounds like term life

Post by MossySF »

Gambler wrote: term life is available to people in their 70s? at $200/month?

and from what I understand, his company also had term life. for some reason he picked whole life.
Well when he picked it, that was 1998 which meant he was in the late 50's. Yes, you can get term at that age.

I guess he was sold on the permanent aspect. Term has some uncertainty -- it's like damn "I picked 15 years and I'm still alive after 15 -- that's wasted money". By comparison, whole life guaranteed $60K for any time period (as long as premiums are paid) and probably seemed simpler. The more accurate comparison would have been to pay $35/mo for a $60K term policy and invest the difference -- but without Bogleheads back in 1998, it would have been hard to get this kind of insurance + investing advice.
Last edited by MossySF on Thu Jul 24, 2014 10:44 am, edited 1 time in total.
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Re: Dad had a whole life policy but it sounds like term life

Post by HomerJ »

Gambler wrote:
MossySF wrote:
Gambler wrote:36% / 14yrs = 2.6% gain per year

Does this sound right?
No. The entire concept of "return" is inapplicable when applied to death benefits (unless you are in the mafia). Think it through -- the best financial scenario would be to die immediately after paying your first premium. You'd have a return of $60K / $200 = 30000%. If you annualize that number, it comes out to 360000%. But in exchange, you're dead. Hence, insurance is simply protection against specific circumstances.

As other's have mentioned before, whole life's death benefit never changes regardless of how long you've been paying premiums. (Universal life can have an "increasing" death benefit that pays face + cash value.) In terms of death benefits, that's not any different from term life. The difference is you are paying extra money for two features: (1) coverage lasts as long as you can pay premiums while term has a set lifespan, (2) you can cash-out whole life if you ever decide you want the money more than the insurance coverage.

Term almost always makes more financial sense but sometimes age/health might limit you to whatever your employer offers.
so if my father lived longer, he could have paid in more than $60k for this $60k policy?
He did pay more than $60k... $200 a month for the last 16 years at 6% return would have grown to $65k...
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Re: Dad had a whole life policy but it sounds like term life

Post by sscritic »

I have had both kinds of life:

Death benefit = face value
Death benefit = face value plus cash value

Guess which one was less expensive.

My last premium payment on the one I still have was March, 1999. The earnings more than cover the cost of insurance. Yes, it is Universal.
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