110

as a safety net for emergencies, is purchasing life insurance a practical investment? Life insurance is not an investment. It is a necessary expense if anyone depends on your income. You should expect to lose money on life insurance (otherwise, it means you've died). You should absolutely get life insurance ASAP. If you were to die today, your family ...


101

I think the key to this question is your last sentence, because it's applicable to everyone, high net-worth or not: How would one determine whether they are better off without insurance? In general, insurance is a net good when the coverage would prevent a 'catastrophic' event. If a catastrophic event doesn't happen, oh well, you wasted money on ...


63

https://www.investopedia.com/terms/s/secondtodieinsurance.asp What is Second-To-Die Insurance Second-to-die insurance is a type of life insurance on two people (usually married) that provides benefits to the beneficiaries only after the last surviving person on the policy dies. This differs from regular life insurance in that the surviving partner ...


54

Yes, and the math that tells you when is called the Kelly Criterion. The Kelly Criterion is on its face about how much you should bet on a positive-sum game. Imagine you have a game where you flip a coin, and if heads you are given 3 times your bet, and if tails you lose your bet. Naively you'd think "great, I should play, and bet every dollar I have!" -- ...


47

First of all, congratulations on being in an incredible financial position. you have done well. So let's look at the investment side first. If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) -...


46

There are 2 maxims that help make sense of insurance: never insure anything you can afford to replace always insure anything you can't afford to lose Following those 2 rules, "normal" insurance makes sense. Can't afford to replace your car? insure it. Can afford to lose your TV? Don't insure it. People with a net worth in the low millions have very ...


45

Life insurance should be used to replace your income for someone that depends on it. Since that is not the case, and you have enough in your estate to cover funeral costs, it sounds like you do not need life insurance. It's a "nice to have" at this point. I'm just asking if my surviving family would be able to use my estate to pay funeral costs? Could ...


44

The answer to your question will depend on your own preferences and circumstances, but I would argue that generally at your stage of life you do not need nor want term life insurance. Life insurance exists because having someone die when they are critical to the financial well-being of the family is a disaster. This is often true for people with children ...


38

If you have dependents that rely on you financially, you buy life insurance so as to not disrupt their life if you were to die. You have a spouse who would have to pay the mortgage and probably couldn't on a single or no remaining income. You have kids who need to eat and go to school. It's the most effective product for that because you can rollup the ...


36

Life insurance is the perfect emergency safety net if your family would need a safety net in the emergency of your death.


27

The product is called "second to die," as mentioned in RonJohn’s answer, or "survivorship life," as you saw. I think you’ll find that the premiums for 2nd to die aren’t enough cheaper to make it the right choice for you. Especially considering that you would either continue to pay the premium after the first spouse dies or pay a higher initial premium if a ...


26

While this is a totally personal decision, I still think it would be a good idea to have some life insurance simply because you have someone that is currently dependent on your income. Yes you have about 22 years in retirement, but if you consider taxes and market risk, there's still some uncertainty there. Also, while your wife may be willing and able ...


26

There are two common types of life insurance, term and permanent/whole. Term life insurance policies have no payout if you don't die during the term of the coverage, they are just insurance. Permanent life insurance is both insurance and an investment vehicle, but for the majority of people it is not a wise investment. It's prudent to carry term life ...


24

You are exactly right, life insurance is income insurance to replace your income for people who depend on it. If you are retired or have assets to take care of those that rely on you then you are self insured. Also consider the duties of a parent that may not generate an income; maybe child care, housework, meal preparation, tutor, transportation, etc. ...


24

The point of insurance is to trade high variable costs for much lower fixed costs. The question isn't whether you can afford what would be a catastrophic event for anyone else, but whether it would be better to pay a small amount regularly vs. a possibly larger amount occasionally. One of the reasons to buy insurance is to avoid costly litigation (rich ...


21

There is only ONE legitimate reason to purchase life insurance - to protect your family from the loss of your income should you die unexpectedly. No other considerations should factor in. The most effective product for that purpose is simple Term Life.


20

The catch is in the Premium amount you pay. In a pure term insurance, there is no survival benefit. You get paid only for the event, i.e. when you die during the policy term, the sum assured is paid to your nominee. The money back on the other hand, charges a huge premium, typically 5X more than the pure term, part of it is for the risk cover. The balance ...


20

The purpose of life insurance is normally to protect your dependents in the event of your death. Since you don't have any dependents, I would say you don't need life insurance. (See this question for a fuller answer). However, you may choose to buy life insurance now on the basis that you hope to have dependents in the future, and depending on your ...


20

The thing that is a red flag for me is your statement of "investing in life insurance". No. You probably need to fire her. Investments are great, and life insurance is necessary. Mixing the two is bad, and very bad. The right solution is to buy Level Term Insurance. It is pretty darn cheap. The level part is the number of years the premiums will ...


19

The way to think about this is: what would happen to the family if stay-at-home Mom were to die. You obviously can't do anything about the loss, grief and trauma, but think about the financial implications. Assuming that Dad continues to work, and that the child is young, you are going to have to find someone to take care of him/her. If you have relatives ...


16

In the United States, yes it will generally cover suicide. However there is usually a "suicide clause": Usually, this clause states that no death benefit will be paid if the insured commits suicide within two years of taking out a policy. Whenever an insured person replaces an existing life insurance policy with a new one, the time clock for the ...


15

First, you need to understand how modern insurance companies operate. On the front end, they write contracts with customers, collecting up front premiums, and promising to pay out to cover future losses. Efficient premiums cover exactly what's paid out; if you charge too much customers leave for competition, and if you charge too little the company goes ...


15

No you are not. Sorry about the goings on in your life that is certainly a lot of drama in addition to the loss of your mother. An advantage of having assets pass without going through probate is they do not have to stand for debts of the estate (usually). The life insurance is yours free and clear. You do not need to pay for any final expenses, but I ...


15

This is not the answer you were hoping for. I recommend that you stay out of it and let your parents do what they want with their money. They are obviously very good savers and very thrifty with their money. At this point, they likely have more money than they need for the rest of their lives, even if it doesn't grow. It sounds like your parents are ...


14

Adam Davis's answer is pretty good. However, I think he misses something with regard to the costs of a funeral. According to funeralplanning101.com, a traditional funeral can cost upwards of $15,000. Having just planned and paid for a funeral for an adult, I can assure you that this figure is low. I've heard "$10,000 - $30,000", and that seems a reasonable ...


14

After a bit of searching, I found a Wall Street Journal article from 2012, “MetLife Settles Unclaimed Life-Benefit Probe”, and a follow-up article the same year “Michigan Joins Metlife Settlement Regarding Unclaimed Life Insurance Benefits”. Apparently, MetLife was involved in a class action suit in 2012 regarding their practice of closing life insurance ...


13

The average of a dozen good answers is close to what would be right, the wisdom of crowds. But any one answer will be skewed by one's own opinions. The question is missing too much detail. I look at $400K as $16K/yr of ongoing withdrawals. How much do you make now? When the kids are all in school full time, can your wife work? $400K seems on the low side ...


13

If I was in your shoes I would have some term insurance, and it is pretty darn cheap at your age. Your wife is dependent upon your income, and it will take sometime to transition from non-working to working. As she could probably get a job doing anything, it will probably take many years to build up to the lifestyle she is accustomed. She may never be ...


12

Whole Life is just an insurance product and an investment product wrapped into a single package. The only advantage is that since you're forced to make payments to maintain the insurance, you're forced to invest. It's really just the "Christmas Club" or payroll-deduction idea, though it tries to claim otherwise. If you're unable to make yourself set aside ...


12

It depends. "High net worth individuals" is very subjective. Lets say a person is worth 1.5 million. High, but not super high. For one, they should have an umbrella policy. Until your net worth is above 300K, you really don't need an umbrella policy. They should insure their home and cars, but should probably have high deductibles. Health insurance ...


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