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Life Insurance Question

May 19th, 2011 at 01:28 am

My parents opened a life insurance policy for me when I was born. I am just now taking it over and paying the premiums. But I have no clue how it works or functions, and they haven’t explained it in a way that I understand yet.

How does “modified premium whole life” insurance work??? It kind of looks like it has something to do with dividends, and I know I have to pay yearly. Do I keep this insurance or get a different life insurance?

I’m so lost. Can you explain it to me?

5 Responses to “Life Insurance Question”

  1. TarWalker Says:
    1305765166

    Oh, and we don't have life insurance on hubby. The field he's trying to break into would cover that, but he isn't doing it yet. Should we get him life insurance and what type/amount?

  2. MonkeyMama Says:
    1305815787

    I'd cash it out. Those whole life insurance policies are completely useless. How much is the benefit and what are you paying.

    Personally, my dh has one of those and MIL refuses to cash it out. She was going to give it to us, but we didn't want to pay the premiums. Later I asked her to cash it out. I didn't know much about them at the time. I should have said, "Sure - transfer it in our names," and then cancelled it. Would be better used as college money for the kids. Now like I was going to blow the whopping $2k or so. (She has put in FAR more over the years - than $2k - it's a terrible investment).

    It's a rip off - best I can explain it. But you can cash it out. Use the money to buy good insurance.

    Shop for term life insurance for the both of you. IT should be pretty cheap. Example, we pay $500 per year for $1 mil coverage. The price never goes up for the term (20 or 30 years).

    Whatever the coverage your current insurance is, it will be pennies to replace it with a term policy. Buy a term policy first before you cancel it, is all.

  3. MonkeyMama Says:
    1305815938

    P.S. I also think it's good for your dh to buy a policy now. You don't want your insurance to be tied to your employer. It is probably cheaper in the long run to get a term policy while you are young and healthy - and keep it.

    I was just saying in the forums though life insurance prices are supposed to be rock bottom now, the policies we bought in our 20s are cheaper than anything we can buy today. We were young and in perfect health - both in our favor.

  4. Jerry Says:
    1305903425

    I heard that about insurance, as well -- if you get good coverage while young and healthy then you can keep it and it doesn't lead to higher premiums later. I agree with MonkeyMama, you can cash it out and then put it toward something more reasonable. Have a great weekend!
    Jerry

  5. TarWalker Says:
    1305991560

    Thanks Monkey Mama!

    We pay $160ish a year, and I think I could cash out around $5000 and upon my death it would be $38,000.

    How much coverage would you recommend we get? Enough to cover our current debt and funeral expenses? Or that plus enough for a mortgage that we'll (probably) have in several years?

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