Monday, February 22, 2010

Shopping for Term Life Insurance

I considered getting term life insurance about a year ago, but since I'm single, with no children and no mortgage, I concluded it wasn't necessary.

But my recent trip to visit my folks made me reconsider. Although my parents are currently living independent lives (despite my father's dementia), I now have serious doubts that this will continue indefinitely. Only God knows whether or when my father or my mother will suffer some illness that would substantially impair their ability to handle basic ADLs (Activities of Daily Living) such as bathing, dressing, transferring, eating, toileting, and continence.

My parents don't have long-term care insurance and I am still in the process of getting my parents qualified under Medicaid. I still haven't quantified my parents' assets or income, so I have no idea whether they would even qualify.

Anyhow, I've now come to the realization that I will be sharing the caretaking duties of my parents with my sister when my parents are disabled or incapable of caring for themselves. Should I die an untimely death, the responsibility will fall squarely and solely upon my sister. I don't think this is fair or right, so I've decided to buy term life insurance.

I am already getting 1x my yearly salary automatically from my employer and the beneficiary to that policy is my mother. In addition to that policy, I got quotes from for a $500,000, 30-year guaranteed level term policy.

Why 30 years? I don't expect my father to live that long, after all, the average life expectancy of a man over 65 with dementia is only 10.7 years. But I expect my mom to live well into her 90s. Members of her side of the family (and our ethnic group in general), live close to 100 years old. (Egads.)

Based upon a "preferred" rate class, A+ rated insurance company, my policy would run about $40/month. The quote already includes an accelerated death benefit rider (aka living benefits rider) where the policy will pay 50% or $250,000 (whichever is less), when I become terminally ill. If I added a waiver of premium rider (i.e., the premium is waived should I become totally disabled), my premium would run approximately $50/month.

I was also quoted a "Return of Premium" policy for $78.80/month or $104.17/month (with a waiver of premium rider). I think this is a bogus policy, a bit like giving the government an interest-free loan every year in exchange for getting a tax refund (but for 30 years!) And if I surrender the policy early, I may or may not get back some or all of the premiums I've paid. No thanks, I'd rather invest the $50 difference into my IRA.

I should be getting my application in the mail soon. Next, I'll need to see about getting myself some supplemental disability insurance. I already get 66.67% of my annual salary from my employer.


Revanche said...

Will you change the beneficiary of your current policy to your sister? It seems like (barring tax issues which can be complex) it might be a good choice because you can trust your sister to make good choices with a large amount of money?

I'm still kicking myself for not purchasing long term care insurance for my parents when I still could, but as my dad's a smoker, he would not be been affordably insured, if at all. *sigh*

It's definitely a good idea to go with 30-year because, aside from the longevity on your mom's side, from the quotes I was getting, 30 year gives you more for your money.

cecilgrass said...

Just wanted to say great blog. Stumbled on it while headed to a term life insurance calculator and was really impressed. Keep it up!

Insurance SA said...

Although the idea behind life insurance is to help your dependents cope financially in the event of your death, it is still best to get a cover even if you're still single or living with your parents so as not to put them in hardship to at least bury you. Besides, the same policy will cost you more as you get older so better to take care of it early.

Laura from