Parents and Life Insurance

Posted: Tue Feb 19, 2008 11:53 pm Post Subject:

It is smart. However, it is not smart to run out and buy them insurance if they don't have enough. And if they have a fair amount of assets...more than likely you are the beneficiary, and those funds can be used (after the fact) for burial expenses.

Posted: Wed Feb 20, 2008 01:31 am Post Subject:

I don't think it is unreasonable to have insurance in place for parents, to take it a step further, I don't think it is unreasonable to have a plot purchased, a casket picked out and a headstone purchased. You can plan and purchase all of these items before you pass and it makes life a lot easier on the loved ones left behind. It is not a bad idea to discuss the final wishes with an elderly parent as long as you explain to them why you are doing what you are doing. Preparing for the inevitable, we all end up there sooner or later.

I think if the parent were involved in the planning, you will find out that some may feel comforted that their loved ones did not have to deal with this at a very sad time. The simple details, like the arrangements listed above could be done.

The insurance is a great idea, again, keeping the parent involved in the process will be much easier on them. You may also want to make sure that your parents have a final will and testament in place and stored in a place where it is easy to find, along with other items, such as insurance policies and etc.

A lot of people do this planning ahead, it is up to you to decide to what extent that you want to take it and what your family is comfortable with.

Posted: Wed Feb 20, 2008 01:48 am Post Subject:

You bring out some good points goodnatured about discussing this with your parents, If they are mentally stable enough to handle it, you would have to be really careful on how you approach them on this so that you did not make them feel awkward or that they were dying soon.

I think it is a smart idea to take out the insurance, but please do discuss it with them first like the posters here have said, approach it respectfully.

Posted: Sun Feb 24, 2008 05:50 am Post Subject:

Hello Maze,
"Smart" might be to purchase a $15 or $20,000 policy on each of them. This will undoubtedly relieve all or some of the burden on those left behind. Most parents are sensible (in fact, the older I get, the more sensible my parents become) and would understand why [we] want to make sure they have life insurance.
"Greedy" is to take out a $3-5 million policy on them, have the premium financed by one of the premium loan agencies in southern CA and split the death benefit with the agency/brokers when they're gone. That seems to be the rave these days for the more affluent.

I've studied this system rather extensively because I wantto be reday when a case pops up. So far, I can't find any holes in the program though.

Posted: Mon Feb 25, 2008 04:48 am Post Subject:

Actually, the answer to this question...and all insurance questions...is to get the right training. CSS (Career Success School) will do the trick. For details...just ask.

In fact, mark could fill you in...right?

Just rippin on ya Mark. I won't go into details, but I understand your story.

Posted: Mon Feb 25, 2008 05:23 am Post Subject:

Now there's a trip down Memory Lane. I graduated from CSS in December 1990. Working for that company didn't turn out quite like I thought it would. I'll never complain though; their corporate arrogance has been like "the gift that keeps on giving."

Posted: Mon Feb 25, 2008 12:07 pm Post Subject:

I would think that 3-5 million is a little excessive, LOL. I think it should just be enough to cover the final expenses and the bills left behind. Do you think a lot of people take out excess insurance on each other?

Posted: Mon Feb 25, 2008 06:05 pm Post Subject:

Good morning Goodnatured,
Actually, in an increasing number of demographics, $3-5 mil is not all that uncommon. When "bills left behind" include things like a $1 mil house on a golf course, vacation homes in Hawaii and Lake Tahoe, children in their 1st and 3rd year of medical school, a successful personal business with stock options, etc. the 3-5 number is probably not enough.

The "new trend" of life insurance with premium financing doesn't necessarily have anything to do with what is needed - it is more about "what you can get away with." There are, after all, a huge number of older people in America with a net asset value in excess of $3 mil. These people do not take out insurance on each other, their families or their corporations do. And with Premium Financing, nobody on the insured's side of the equation makes the premium payments.

For example; Joe's Dad is 77 years old, relatively healthy, and has an estate worth $4 mil. Joe contacts a broker who deals with premium financing and asks about insuring his old man. The broker arranges for an application to be taken and discovers that Joe's dad can be insured for $5 mil and the annual premium is $100,000.

In this example; If Joe's dad allows his life to be the "measuring instrument" for the life insurance policy, he will get a check for $300,000 up front that he can spend any way he wants. The financing company agrees to make the $100,000 annual payments until the old guy dies - whenever that is.

Let's say the old guy passes away in 7 years. $ 700k in premiums were paid and the $ 300k was given to dad up-front; $1 mil has been spent and this leaves $4 mil to be split between the old guy's family, the financing company, and the broker. The family (Joe, in this example) could walk away with $2 mil WITHOUT EVER HAVING TO PAY ANYTHING OUT OF POCKET!

Who could possibly hate this type of plan? The insurance companies do. To prove my point, take a look at most current life insurance applications. They now ask questions like: Will any portion of the premium for this insurance be financed? Has this client sold, viaticated, or settled any previous life insurance contracts? Or, does this client have any intention to sell or settle this contract, if issued? In most cases, if any of these questions are answered, Yes, the company will not issue the policy.

Among those of us in the business of regulation and/or litigation, there is no question why the insurance companies do not like premium financing - because the premiums are guaranteed to be paid until the insured dies. As you acquire a greater knowledge of the life insurance industry, you'll discover that life insurance policies usually fail at around ages 71-75. Some experts will even argue that policies are designed to do so at that time. Believe it or not; if an insurance company is on the hook for a big policy and there is absolutely no chance of it ever lapsing, they don't like it.

This insurance business is a funny world. Have a great day .
Mark

Posted: Tue Feb 26, 2008 12:28 am Post Subject:

Wow, you are talking some big bucks there, not in my little world. LOL, This must be fun for you to work with, I can imagine the characters that you would run into working this business.

Posted: Wed Feb 27, 2008 05:08 pm Post Subject:

What is meant by "fail"? Unless I am reading it wrong .it makes the insurance company sound as greedy as the person taking out that big policy. I wish i could only afford a policy large enough to pay all outstanding loans at least. My father in law left my mother in law well off. He had insurnace on every loan he had that paid them off so she was dbt free. Also he had life insurance. What did she do? She bought and paid for in cash a home in the city and moved away from the farm.Bought herself a new vehicle that she didn't need) now she complains that she needs money!Made my hubby buy the family farm that he had said he wanted my hubby to have when he passed away.Which put us in debt for many years.How would I go about takling out a policy on her ?That way when she passed we could pay off the farm we had to buy that should have been an inheritance.