Term vs. whole/universal life

**mateosbaby** · 06-27-2008, 09:29 PM

My husband and I are going to meet with our insurance agent and get off of universal life and go to 20-year term like Dave recommends. What about the kids (we have 3, ages 5 and under)? They are on universal, as well. I don't remember seeing anything about insurance for kids in his books. Any thoughts? Thanks much!

Sara

**Bethany** · 06-27-2008, 09:44 PM

My understanding is that kids don't need life insurance because they don't have any dependants. I guess you can get a cheap "burial policy" if you want. Does Dave Ramsey address this? The Money Show guy (Rick Shafer) says kids don't need it.

**mateosbaby** · 06-27-2008, 10:23 PM

Dave Ramsey doesn't address it, as far as I've found. A "burial policy" sounds like what we'd need, at least for now. So maybe a cheap term for them, until they're old enough to have their own insurance and/or we're better off financially. Wonder how much we have for the kids? I'm not even entirely sure how much insurance we got for them. Probably $5 or $10,000, but knowing me and my limited "understanding" of insurance, it could be more. Luckily, our insurance agents (it's a team) are really nice and never push. At least they haven't yet... We'll see when they come and find out we want to change down to term.

Thanks for your response,
Sara

**lisettelovebug** · 06-28-2008, 12:42 AM

Gerber has policies for kids that the amount you pay each month is based on their age when you start the policy. This never goes up and I guess when they grow up they can get a real policy.

http://www.gerberlife.com/gl/view/index.jsp

**hmabbott** · 06-28-2008, 09:56 AM

We have insurance on our kids through dh employer. It's only $1500 per child, but at $0.05/mth per child, we would have been crazy not to get it. I'm not sure if it's whole or term.

From my understanding on the Gerber life insurance, once the child reaches 24 they can apply for their own insurance policy through the same company. We had it on our daughter when she was born, but due to being younger and dumber, we let it laps

Why does DR recommend term life insurance? That's something I've never understood. My grandfather sold insurance for 20 years and always preached about NOT buying term insurance because young people would be throwing their money away if one of them didn't die.

**Buckeye5** · 06-28-2008, 10:03 AM

We have a $10,000 insurance policy on our kids thru DH's job. It costs very little, but it is better to be prepared for a funeral (I know we don't like to think about our kids passing) but funerals costs can be in the thousands. You could also, ask your AUto, life, home, insurance commpany for a quote, and you may get a discount for multiple policies. You really should have some kind of ins. on kids for this purpose, not for an investment.

**Momof4cats** · 06-28-2008, 11:06 AM

Originally Posted by hmabbott

We have insurance on our kids through dh employer. It's only $1500 per child, but at $0.05/mth per child, we would have been crazy not to get it. I'm not sure if it's whole or term.

From my understanding on the Gerber life insurance, once the child reaches 24 they can apply for their own insurance policy through the same company. We had it on our daughter when she was born, but due to being younger and dumber, we let it laps

Why does DR recommend term life insurance? That's something I've never understood. My grandfather sold insurance for 20 years and always preached about NOT buying term insurance because young people would be throwing their money away if one of them didn't die.

Because whole life is way more expensive than the same amount of term coverage.

I just went to State Farm's website and got some quotes. I put in a 30 year old non-smoker wanting $250,000 worth of coverage. For 30 year term (rate stays the same for 30 years, then can convert) the premium would be $260 a year. Same coverage for whole life, $2030 a year.

Assuming I keep the coverage for 30 years then let it lapse, the term life would cost me a total of $7800. The whole life, $60,900 for the same time period. If I were to die with the whole life, my beneficiary would get the $250,000. Any cash value would be gone. I'd rather get the term life and put the $1770 a year difference in savings. If I died at the end of the 30 years, my beneficiary would get the $250,000 PLUS I could leave them the savings, which by that time would be around $70,000 if it earned 3% interest.

The reason insurance companies push whole life is because they make more money off of it, the agent with the commission and the company because of the cash value.

**Momof4cats** · 06-28-2008, 11:13 AM

Oh, and as for the kids, I agree you should have about $10,000 or so to bury them with. You may also want to consider carrying a bit more on them, because let's be honest, if you lost a child, would you be able to go back to work in 3 days (typical berevement leave) to avoid losing any pay? Not everyone has leave time they would be able to use if they weren't emotionally ready to go back to work. Having an extra $5,000 or $10,000 would reduce some of that stress.

**Domestic Gal** · 06-28-2008, 10:57 PM

I have life insurance on the kids through globe life. I think I have $5000 and pay like $20 a year each.
I have term life insurance on myself and Dh keeps telling me I need more insurance. He has whole life and the agent was trying to talk me into getting whole life. I said I do not need any insurance for about another 8 years as I have a 20 year term.
DH says if I wait until the term is up I will not be able to afford insurance. I told him when my term expires all of the kids will be over the age of 18 and able to care for themselves so I will not need that much insurance.
He will not get term insurance. The agents have him so full of bull that whole life is the greatest he will not change.

**Bethany** · 06-28-2008, 11:39 PM

Originally Posted by Momof4cats

Oh, and as for the kids, I agree you should have about $10,000 or so to bury them with. You may also want to consider carrying a bit more on them, because let's be honest, if you lost a child, would you be able to go back to work in 3 days (typical berevement leave) to avoid losing any pay? Not everyone has leave time they would be able to use if they weren't emotionally ready to go back to work. Having an extra $5,000 or $10,000 would reduce some of that stress.

I never thought of that, good point.

**rachelj** · 06-29-2008, 07:56 AM

Actually Dave says not to have coverage on your kids. You'd be better off building your EF so that you could pay funeral expenses with the EF. Chances of losing a child are minimal - invest that money more wisely.

**Momof4cats** · 06-30-2008, 08:28 AM

Originally Posted by rachelj

Actually Dave says not to have coverage on your kids. You'd be better off building your EF so that you could pay funeral expenses with the EF. Chances of losing a child are minimal - invest that money more wisely.

In most cases I agree with Dave, but this is one thing I would make exception for. I wouldn't have a $100,000 policy on a child because I was afraid they would be uninsurable later in life, but something like the $5000 for $20 a year that Domestic Gal has would, to me, be a fair investment. When I buried my mother 8 years ago, it cost around $7000 (she had not done any preparations-I even had to get the plot) and I did it cheap; no telling what it would cost today. Most people consider a full-fledged EF to be around $10,000. I wouldn't want to deplete my EF to bury a child.

**Greebo** · 06-30-2008, 08:57 AM

Originally Posted by Momof4cats

In most cases I agree with Dave, but this is one thing I would make exception for. I wouldn't have a $100,000 policy on a child because I was afraid they would be uninsurable later in life, but something like the $5000 for $20 a year that Domestic Gal has would, to me, be a fair investment. When I buried my mother 8 years ago, it cost around $7000 (she had not done any preparations-I even had to get the plot) and I did it cheap; no telling what it would cost today. Most people consider a full-fledged EF to be around $10,000. I wouldn't want to deplete my EF to bury a child.

I have heard Dave say not to get life insurance for your kids, but yes definitely get a rider added to your policy or a policy to pay enough for burial, if the worst happens. Dave considers life insurance as a means to replace income lost if an income producer dies. A child isn't an income producer.

So yeah, he's not AGAINST insuring your kids, its how you insure them. Sometimes Dave's lingo confuses me. Like today we were watching a show from last week, and he said you can't close a CC while it has a balance. Well, thats wrong - you can close the account for new charges, but you still have to pay it off, which is what I think he was trying to say, but didn't communicate well.

**peanut** · 06-30-2008, 11:21 AM

Life insurance on kids is basically unnecessary from my point of view. They do not support me and I do not lose income if they die.

Instead we have term life insurance on DH, the main breadwinner here, until the girls graduate from university. He wants to keep it till it expires at 70, but we'll see. It's going up every year now, and it's really unnecessary after the girls are grown. Except it could be used to provide for me in my old age. As a SAHM I don't have any pension to draw on except DH's survivor benefits and our government pension.

Jean