“What do you think about the need for a life insurance policy when there is significantly more wealth in investments, bank accounts and assets?” (The subject of the photo is a model.) – Getty Images/iStockphoto
My recently widowed mother asked me if I thought we should get a life insurance policy (it was still fresh in my mind when we were handling everything for Dad). She is 72, in good health and independently wealthy. She has two financially stable children, one of which is me.
My brother, sister and I don’t feel like we really need a policy, even though it was generous of our mother to offer one. There will be more than an abundance of wealth to bury her and distribute property generously, even if she lives another thirty years, God willing.
What are your thoughts on the need for a life insurance policy when there is significantly more wealth in investments, bank accounts and assets, etc. than the value of the actual policy? We were looking at a $75,000 to $100,000 policy.
One of the children
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I don’t see the logic or financial sense of taking out life insurance at your mother’s age, since she is independently wealthy. – MarketWatch illustration
Life insurance is a product.
Few insurance companies or financial institutions will advise you NOT to purchase life insurance. Industry experts will always have an angle worth exploring: you can’t have enough protection or diversification, it’s useful for funeral costs, you might want to consider a joint policy if you have a partner and/ or every little bit helps.
However, in your mother’s case, I don’t see the logic or financial sense in taking out a life insurance policy at her age, given that she is independently wealthy, and assuming that the premiums will reflect the fact that she is already in her life insurance. 1970s. More than half of Americans have a lie insurance policy; they are especially useful for people who do not have a large estate.
A term life policy has a term of ten to thirty years, and if your mother were to survive that period, the policy would expire and the beneficiaries would receive no money. A whole life policy has a cash value and is therefore more expensive than a whole life policy. Once a whole life policy has built up significant cash value, the insured can cash out or borrow against it.
The average annual rate for term life insurance for a 70-year-old woman is about $7,943, according to Covr Financial Technologies, a digital insurance platform that has clear vested interests in the industry. That increases to $25,510 for life insurance for a non-smoking woman. Also take those premiums into account: age, lifestyle, health, family history and occupation.
However, long-term care insurance can be helpful. The cost of nursing home care can vary dramatically depending on the type of care, the state a person lives in, and the individual facility, but the cost can be as much as $125,000 per year for a high-quality facility. Medicare and most health insurance plans do not pay for long-term care, so it’s best to be prepared. Read more here.
For some, an indexed universal life insurance policy with a death benefit and a cash component may also be an investment option, as an alternative to a 401(k). This type of permanent life insurance, which has a cash value, is also available as adjustable life insurance, indexed life insurance, variable life insurance and whole life insurance. You pay more premiums and the extra money is invested. That’s a simple answer. It gets much more complicated.
Other options for that $100,000: In December, your mom can still get a certificate of deposit with an interest rate above 4%. That’s not bad, considering she was able to get a 6% CD interest rate during a period of high inflation last year. CD ladders allow her to buy one-, two-, three-, four- and five-year CDs, so she has one maturing each year.
The Federal Reserve is expected to cut interest rates by a quarter of a percentage point this week. Rates for high-yield savings accounts currently hover just below 5%. Unlike most CDs, she can make deposits at any time, but there may be a limit to the number of withdrawals she can make within a given period.
Related: ‘I’ve had three offers in 11 months’: With the Fed’s 50 basis point cut, will I finally sell my house?
More columns from Quentin Fottrell:
‘This goes against my morals and ethics’: My father cut my sisters out of his six-figure estate. Should I push back?
Sometimes the pain is unbearable’: My daughter cut me out of her life. I have a conflict: do I exclude her from my will?
‘I have no regrets’: I’m 84 and estranged from my two adult sons. My 48-year-old wife gets my seven-figure estate. Is that selfish?
