Life insuranceFollow

The military has an obligatory policy (SGLI: Servicemembers Group Life Insurance) for all soldiers that pays out like 400k . Also added Traumatic Injury Protection recently, should I survive something that should kill. It pretty much covers anything from being shot and losing a lung to falling down the stairs and shattering my knee. It's pretty much active as long as I'm in the military, and it can be converted to a civilian policy once I'm out should I choose to continue it when I eventually get out.

If you're going to look for anything, I'd say look into injury coverage as well. A lot of people seem to forget that when looking into stuff like this. After all, being injured can be just as bad as dying for your finances.

One is part of my benifits package. It's nothing huge though.

You have to remember that you're basically gambling that you'll die within a relatively short period of time. Don't ever forget that the insurance company is going to make more money on average than they pay out, so statistically you'll pay them more than you'll get. You're banking on the assumption that you'll die soon enough that you (well, your beneficiary) will get more money than you paid into the policy. The odds are against you here, but your doing this because it's a possibility and you want to be covered for it.

That said, each policy type has its pluses and minuses. Term life policies are great *if* you die early within the term. The problem is that if you don't, you either get nothing back or a relatively small amount (don't forget the inflation and loss of interest effect that 30 years of them holding your money has). Whole life seems like a poor choice, however the terms are set when you first start the policy. So starting a whole life policy when you're young and healthy means you're paying a lower premium but for a longer time. Lower is relative in this case. With a term policy, once it expires if you want to get another one for another term, you're going to be paying a higher premium because you are older and thus a higher risk.

Ideally, you should have both a long and short term plan. Figure out what you can afford to pay for something like this. I'd then put about half into a term life policy with the assumption that you will die during that term (so do the math on the premium cost versus payout between 2 and 3, remembering that 3's clause assumes you *wont* die during the term). Take the other half and put it into some kind of annuity for your sister. That way, if you do live to a ripe old age, you can support her while you're living and then if you die before she does (or if you just feel like giving it to her earlier), she's got that investment money there for her. You'll have to look at tax implications and figure out the best way to manage this, but I know there are investment types that act as gifts to another person which avoid most or all taxes on the back end.

And if you do die during the term she'll get the term insurance payout. This way you cover your bases. IMO, you should always think in term of near term unexpected death when buying life insurance. If you're thinking long term, you're probably better off investing the money directly with a will/trust set up to manage it when you die.

When I was young my dad had a 2 million accidental death policy on me. After I started work at the company the workers would kid me about it. "Your dad would make out really well if you died." I was told many times. Dad also used my policy for other things like collateral for buying things. When I turned 18 he could no longer use it for such things. Finally years later in an attempt to save my home in Austin I cashed it in for what I could get to pay on my home. Of course Dad was pissed but Meh! His bet on me dying didn't pay off.

Term Insurance is robbery. If you want to go that route, just give me your money.

This is kind of where I'm at. The only reason I'm considering term life at this point is because I'm still fairly young and while I have a decent 401k and some small savings, it simply wouldn't be enough for my sister to take care of her self long term if I should suddenly meet my end.

Yes, I could just put the insurance payment in savings instead, but if I die in 5 years, that savings account will have nowhere near the value of a $100k life insurance payout. When people say term life is a rip off or that the money is better spent elsewhere, I think they assume the goal is long term security, which is not the case here.

Then get a 20 year term policy, term life lasts till you die but has much higher premiums.

Invest the difference and if you die in 21 years you should have a decent amount of cash but you're still covering the interim while you save up.

Only insure what you can't plan for, you can plan for 20 years from now.

Critical Illness insurance might be something to check out. I don't really need it since we have disability benefits up here for just such situations. If you end up a vegetable or get cancer you generally don't get your life insurance, it's actually a worse situation than if you die since your family now has to care for you as well as themselves.

Edited for quote fail


Edited, May 3rd 2012 2:15pm by Yodabunny

What kind of fool do you think I am?
I ain't falling for you over again.
I ain't playing a game that I know I can't win.
What kind of fool do you think I am?

*hums quietly*