Life insurance?

Discussion in 'Off Topic' started by USMCGrunt, Apr 4, 2015.

  1. USMCGrunt

    USMCGrunt Member

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    I have noted a lot of professional insurance and financial people weighing in on various topics on this forum. I have an question on life insurance for a newly commissioned officer that I could use some help with.

    Recently, a financial/ insurance company suggested my DS take out a life insurance policy. Their policy carries a guaranteed rider that allows the holder to double the coverage when they separate from the service. The suggestion was that if he were injured or deemed uninsurable for any reason (forcing his separation from the military) this policy would not only stand but could be doubled without exception thus providing for a future wife/ children upon his death. If instead, he considered only his military life insurance benefits while active duty and a horrific injury (or PTSD or whatever) occurred and necessitated a separation he could be left uninsurable for life insurance.

    Agent advised cost is low now but could go up when he gets his first duty assignment.

    I have been out far too long to even remember what benefits you get as an active duty military officer but what got me thinking was the potential of becoming uninsurable after leaving the service.

    Any recommendations or comments?
     
  2. Capt MJ

    Capt MJ Member

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    My first two questions would be:
    (1) Does the life insurance policy have a combat exclusion clause? Gives it limited availability if something occurs during uniformed time.
    (2) How does the post-military benefit compare to VGLI, Veterans' Group Life Insurance, available to vets upon separation, regardless of physical condition, a benefit designed for those who may be uninsurable?
    VGLI is expensive for healthy vets, but a godsend for those with no other option.

    And, research some of the long-established, non-profit, life insurance companies focused on the military and its unique elements, with policies that do not have a combat, pilot or special ops exclusion, or which offer special benefits for loss of limbs or other traumatic injury. Ones that come to mind are Navy Mutual Aid Assn, Armed Forces Benefit Assn, and I know there are some others.

    USAA also has life policies with benefits for certain injuries, designed for military. USAA is an Association and ".com." Full disclosure: I work for them. There are other military-focused .coms who have products.

    Best advice, shop around!
     
  3. USMCGrunt

    USMCGrunt Member

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    Thank you for the information and advice. Turns out it was a USAA agent we were speaking with. I have been a member since 1981 and do a lot with them but hadn't ever thought of this approach before. Your suggestions on comparing policies with what is available to vets was great. It always helps to know what options are available.

    Thanks for taking the time to respond - hopefully it helps others with graduating seniors as well.
     
  4. scoutpilot

    scoutpilot Member

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    Whole life (or universal life), if that's what this is, is almost always a loser for you and a winner for the insurance company.
     
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  5. osdad

    osdad Member

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    They don't put their names on those big buildings by giving away their money.

    Bottom line: if he has no dependents he doesn't need life insurance.
     
  6. USMCGrunt

    USMCGrunt Member

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    Appreciate the feedback and comments. I too, feel no dependents = no life insurance. Some people worry about a policy to provide for burial costs - I am not one of them. My interest was in the "guaranteed insurability" aspect of this.

    Thanks again.
     
  7. cb7893

    cb7893 Member

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    I am not a financial advisor so take this as an observation from one who has simply seen it all.

    The current return on Whole/Universal Life policies will look very attractive as a safe/"risk free" return. My DS was pitched a policy last summer from Ohio National Life. If I'm not mistaken, the current return is in the neighborhood of +4%. That stacks up nicely against CD's and Treasuries, but it is also a return which is heavily dependent on returns on bonds which were purchased 10-30 years ago. Those risk free returns are history for now which will cause the overall portfolio returns to drop overtime. As interest rates increase those portfolio returns will increase more slowly. There is nothing else for these insurance companies to buy other than real estate whose values have been inflated by those very same low interest rates.

    The agents will pitch also pitch the notion that Social Security will not be available, by the time of retirement age, for those in their 20's. Further they will sell the notion that tax rates will skyrocket, making Whole/Universal life policies even more attractive since those returns aren't taxed. The tax treatment is very attractive and a real benefit. I wouldn't dare commenting of future policy changes other than to say that Insurance Companies also hire the lobbyists with the biggest offices on K street...right next to Washington office of the AARP.

    To me there are two very attractive aspects to these policies. The first and most important is "insuring insurability in perpetuity", which Capt MJ explained in the military context. The second is systematic unemotional saving; just treating savings as the next payroll deduction following taxes.

    Grunt, thanks for starting this thread. My DS commissions in May, works the summer, and hits the Army payroll in Sept with a decent bank, no debt and a feeling of invincibility. You don't need life insurance if you're never going to die. He has actually been asking questions like these in the abstract and my answers have been extremely general, so I'm all ears for specifics.
     
    Last edited: Apr 6, 2015
  8. Aberj391

    Aberj391 New Member

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    Why do you feel that permanent life insurance is a loser for the policy owner? This is a topic of great interest to me.
    Thank you
     
  9. Pima

    Pima Parent

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    I can see purchasing it for a different reason. As he gets older the premiums cost more. The policy we got had 2 distinct things.
    1. It allowed you to purchase more at certain age increments, basically every 3 years until 41. The premium was set at the same price when he was 25, even if he purchased at 38 or 41 thus it was cheaper in the long run.
    2. Bullet was allowed to have the premium reduce when he took a desk assignment and it would remain at that cost. Fliers typically have higher premiums due to risk.

    Now, with that said I was pregnant when we took out life insurance, we had the SGLI only up to that point. We took a c combination of whole and term.

    I don't see taking life insurance out under the basis of what the USAA agent was stating.
    1. If anything happens at this point 400k should be enough to cover any outstanding debt they may have incurred, and that includes a MTG.
    2. If they end up being medically separated, chances are they would be eligible for VGLI. (Veterans)
    3. I am not sure how much the military gives for burial costs, but I recall it was several thousand for AD members.

    If I was to advise anyone, including my DS, I would say get a mixture of both, but more term than whole. Term decreases substantially after 40 or 50. However, if you invest properly over the long term, than your investments can offset the insurance. Theoretically your home can also be listed on the asset side. Additionally, you will have a second career. Most companies offer life insurance as part of their compensation package. Bullets life insurance is tied to his pay. I believe it is 3 years salary. We did not take VGLI upon retirement because we already had purchased private when he was 25.

    We did also take term out on me. Although I was not working, it was a wise decision, because if anything happened while the kids were young Bullet would be able to bring into the home a fulltime caregiver for them.

    We also took out life insurance on our children. Small policy so that if something happened to them as they grow up and could not get life insurance they would have some. It was only 25k. It was whole life.

    I am not someone that would advise whole term as an investment., just like I am not someone that goes for front load mutual funds. In the long run, the stock market has a much higher return on investment. 5 years ago today the Dow closed at 10,044. It is over 18 now. Granted there were painful years for a while, but I am talking about long term. Back in 95 the Dow was in the 4Ks.
     
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  10. MemberLG

    MemberLG Member

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    Appears that the insurance agent is redirecting the focus to secondary matters - rider and cost, rather the why your DS should get a life insurance in the first place.
    Why should someone get a life insurance? My personal opinion is for anyone that the person supports don't financially collapse or big expanses, such as mortgage and college eduction are taken care of when the person suddenly dies. My case, my personal life insurace policies, besides from SGLI, is $750K, with a whole life and a term. When I leave the service (NG and Federal) and I suddently die, my wife will about $750K (goes down to $250K when my term life expires) plus surivial benefits/retirement. No plan to convert my SGLI to VSGLI. I also declined my FEGLI. I still have childern that are not grown up yet, but based on our finanical situation, I believe my personal life insurance policies sufficient for my wife to be comfotable. I got a term life insurance before I deployed. It expires about the time when my last child supposed to finish finish college. Some folks consider term life insurance as throwing money away, but it's just like having an auto insurance without never getting into an accident.

    If a person wants to get a life insurnce so the love don't have to work for the rest of the life, not sure if that is the right goal or it's going to cost a lot.

    I believe rider is how insurance companies make money. My understanding is that the significant portion of the insurance preimum is for the rider. So the quesiton you DS should ask the insurance agent is if he can get a whole life insurance without a rider and what the cost will be. My guess is a lot cheaper or they don't offer an option without a rider. If you DS gets a $500,000 whole life insurance without a rider, would that $500,000 will be sufficient to provide "insurance" to his family until his childern grow up (assuming your DS wants to have a family)? I would argue that as long as we don't seee the life insurance as an "inheritance," as we get older the amount of life insurance we need decreases. It would be nice to for my childern to get an huge inhertiance when I die, but I think good upbrining and college education with limited or no loan are move valuable.
     
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  11. Pima

    Pima Parent

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    LMAO MemberLG

    My Mom is 77. I don't know if she even has life insurance anymore. She has already prepaid her funeral. That is common now. My MIL and FIL also have prepaid their funeral.

    Her running joke is get the best price for my house because that is all I am leaving you!:p. I want to see you smile while I am alive.

    That being said I have the best Mom in the world. The post office knows her by name because she sends packages to her kids/grandkids constantly...finals, Easter, birthday, name the holiday and there will be a box in the mail. She isn't joking when she says get the best price.

    Back on topic, I do believe a small amount in Whole is a good idea. Not 100K, but 50K. If you intend to do 20 than there is no reason for more. If you intend to do 5 and dive, than you are still insanely young. That 100 bucks invested now will offset the cost at 27/28 you will pay later on for life insurance premiums.
    ~ More importantly, investing in mutuals will allow you to sell to pay for the down payment of a home. Will whole Life do that?
    ~~ If you decide to leave and need to live off savings during the transition you can if it is a mutual fund investment.

    The devil is in the details. Can you pull the money at the 5 year marker for whole life insurance? You can pull from an IRA if you meet the requirements.

    Just saying, I think buying term is smart, but buying Whole, not so much at this age. If they will charge 100/mo for 250k, but 50/mo for 50 whole and 50 term for 250k Take that 50 bucks and invest it., because there will be enough term left when you are 50 years old.

    I haven't even touched upon the get married and G Forbid die with a dependent. Your child's spouse and children will get a monthly allotment. If the children are considered dependents they will also get SS until emancipation. They should be able to live quite comfortably between all 3, SGLI, Survivor benefits and SS.
    ~ Unfortunately, I have many friends that lost a spouse. They are permanently engaged. The reason why is financially the loss of their military survivor benefits would be too much.

    It really becomes a true issue in my opinion is when you retire. Bullet dies tomorrow, and his retirement paycheck ends. Our kids are too old to collect SS as a dependent. He is only 51, so I would need to survive for many years. If it did happen. My home would be up for sale within 6 months, so I could survive without tapping into anything.

    Finally, remember one thing....they work on commission or quotas. Their job is to sell a product so they can put food on their table. Not attacking them, just saying that is their job...sell a product to remain employed.

    JMPO, but shame on that USAA rep. They work for a company that is tied to the military. They know that your child has 400k through the military. Seriously, what 23 year old needs more than 400k? Just saying.
     
  12. USMCGrunt

    USMCGrunt Member

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    I have no beef with the USAA rep. His job is to sell product. My job is to be an informed consumer (and advise my DS as best I can). My entire civilian career has been in sales which can make me, at times, the best or the worst prospect for the guy on the other end of the phone. There is a wide range of skills and approaches in sales which means we have all been subject to the good and the bad. We all know when we have been "sold" and when we have "bought" something. As a student of the sales process, I learn from all of them.

    Back on subject, I appreciate everyone's comments and opinions. They serve as a great starting point to learning more about this particular insurance offer as well as those benefits available to active duty and former servicemen. Thanks!
     
  13. parentalunit2

    parentalunit2 Parent

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    Pitching the product on the fear that something may happen to make one ‘uninsurable’ in the future is quite ridiculous. I could try and sell you lots of products based on fear. It doesn’t mean that you actually need any of them.

    No one just graduating from college without a spouse and kids needs life insurance anyway. Agree with cb7893 - they’re all quite invincible at that age!
     
    Last edited: May 19, 2015
  14. Pima

    Pima Parent

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    I don't disagree, but I also don't agree parentalunit2

    Some do need life insurance. Many kids that commission took student loans. ROTC and OTS commission can have 100K+ in loans. AROTC does not guarantee AD like AF/NROTC. I don't know how it works for them regarding life insurance aka SGLI. It might be that they go to college with loans, parents cosigning. If they die the folks legally can be on the hook for those loans. They need impo life insurance regardless if they have a spouse or child because of the loans.

    However, if they are AD, I agree with you...no reason to purchase life insurance if they took SGLI.

    It really is a financial decision. Not every poster here attended or had a child attend an SA. Many went ROTC. The majority of ROTC cadets are not scholarship. Basically less than 20% are on scholarship. The rest had to find a way to pay for college, in other words loans.

    For AF/NROTC they will go AD, but for AROTC it is a different story. They may need life insurance at 23.

    Please do not flame me. I am only saying if an AROTC cadet goes IRR, they may not be eligible for the 400K, thus I get buying insurance. If they are eligible for the 400K, than I see no reason to buy insurance.
    ~ I am sure someone will clarify this aspect.
     
  15. kinnem

    kinnem Moderator

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    Good points Pima. You got me thinking.
     
  16. USMAROTCFamily

    USMAROTCFamily Member

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    I can tell you countless stories of our young service members being uninsurable when they leave the military for many reasons to include PTSD. A young, healthy non-smoker can get a large amount of term insurance that can be locked in for 30 years for a very low cost. Even if they are not married now, many will get married and have children during the term and their families would be grateful to have the insurance should something happen. I can tell you from first hand-experience, that I wish I had bought more life insurance when I was younger and healthier.
     
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  17. USMCGrunt

    USMCGrunt Member

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    USMAROTC: this gets to the root of my initial post. Some of the other posters missed this aspect of the inquiry.
     
  18. Pima

    Pima Parent

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    We purchased young. Bullet was 25. Back then it was 250k SGLI.

    I am curious now. Let's assume they are released from the military for PTSD....would they not be medically retired and eligible for VGLI? If so, than doesn't that make this moot? They have life insurance.

    I am not being argumentive. I am trying to figure out if they are medically discharged are you saying that they are ineligible for VGLI? If so, shame on our country. If they are eligible than why buy life insurance from an outside company?

    I have 2 cousins, 1 has PTSD. Both were Army. Both say they were medically retired and can use the VA. So that is where I am coming from...if they can use the VA and were medically retired, how is it they can't get VGLI. The PTSD cousin is single and young (early30s). The other cousin is married, used his GI Bill to get a law degree after discharge and got an edge for a govt job, thus I doubt he has used VGLI.
     
  19. billyb

    billyb Member

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    If you want a more financial answer to the question, post it on the bogleheads forum. They are gurus at this stuff.
     
  20. hornetguy

    hornetguy USAFA Cadet

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    For a better understanding of VGLI -

    Main site with eligibility: http://www.benefits.va.gov/insurance/vgli.asp
    Rates- http://www.benefits.va.gov/insurance/vgli_rates_new.asp
    Short version, coverage per $10K per month by age is:
    29 & Below $0.80
    Age 30-34 $1.0
    Age 35-39 $1.30
    Age 40-44 $1.70
    Age 45-49 $2.20
    Age 50-54 $3.60
    Age 55-59 $6.70
    Age 60-64 $10.80
    Age 65-69 $15.00
    Age 70-74 $23.00
    Age 75 & Over $46.00

    For a healthy person, it's pretty expensive. For a person who can't get coverage or coverage is outrageous due to medical conditions, it's pretty good. The enrollment period is very important though.
     

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