Should the elderly have life insurance? (parents & "third party contact")

[Anonymous]

My parents are in their 70s and in questionable health. I did not realize they still carried life insurance. It came up because their insurer keeps asking them if they want to name a third party to be alerted if payments on the policy lapse (this seems like a marketing thing to me) and they asked if I wanted to be the contact.

Mom is retired, has a pension with health insurance, and pays into a long term care plan. Dad works part time, no retirement benefits at all, health insurance through Medicare. Their home is paid off, but they have an income property that still carries a mortgage; rental income covers the mortgage. I suspect they could reduce their spending to live on Mom's pension, but they prefer not to.

Apparently they both have $500k policies that they pay into. Should they?

[Anonymous]

No. Life insurance is to replace income that someone else depends on. Also this sounds like a whole life policy which is always a bad financial deal.

[Anonymous]

Yes, you definitely want to be notified. You want to be able to make a morbid ROI decision to pay a premium if they suddenly have a major health decline.

You need to learn more about the policies. Are these term life? Whole life?

[Anonymous]

Do the math- my 80 year old mom has a measly $80k policy where she pays like $100 per month toward. Even if she were to live to some ridiculously old age it’s still a good return on her investment to keep paying at this point. So it really depends on how much they’d pay and their life expectancy (and if they can afford the premiums). In the long run they may be paying $200k for a $500k return or something similar.

[Anonymous]

Your highest priority is to make sure your mother keeps up with the premiums of her long term care insurance.

[Anonymous]

Anonymous wrote:My parents are in their 70s and in questionable health. I did not realize they still carried life insurance. It came up because their insurer keeps asking them if they want to name a third party to be alerted if payments on the policy lapse (this seems like a marketing thing to me) and they asked if I wanted to be the contact.

Mom is retired, has a pension with health insurance, and pays into a long term care plan. Dad works part time, no retirement benefits at all, health insurance through Medicare. Their home is paid off, but they have an income property that still carries a mortgage; rental income covers the mortgage. I suspect they could reduce their spending to live on Mom's pension, but they prefer not to.

Apparently they both have $500k policies that they pay into. Should they?

I would love to know the name of this life insurance company as their practices are consumer friendly & deserve acknowledgement & praise.

It would be wise to maintain the policies, but, if unaffordable, there are third parties who will buy these in force life insurance policies for a substantial amount of money.

Are the policies with a mutual life insurance company or with a stock insurance company ? (Huge, meaningful difference.)

[Anonymous]

Anonymous wrote:Do the math- my 80 year old mom has a measly $80k policy where she pays like $100 per month toward. Even if she were to live to some ridiculously old age it’s still a good return on her investment to keep paying at this point. So it really depends on how much they’d pay and their life expectancy (and if they can afford the premiums). In the long run they may be paying $200k for a $500k return or something similar.

This is uninformed advice.

Are the life policies with a mutual or a stock life insurance company ?

[Anonymous]

Anonymous wrote:No. Life insurance is to replace income that someone else depends on. Also this sounds like a whole life policy which is always a bad financial deal.

Uninformed advice. Please ignore.

Are the policies with a mutual or stock life insurance company ?

[Anonymous]

Anonymous wrote:Yes, you definitely want to be notified. You want to be able to make a morbid ROI decision to pay a premium if they suddenly have a major health decline.

You need to learn more about the policies. Are these term life? Whole life?

Good basic advice. Again, are the policies through a mutual or a stock life insurance company ?

[Anonymous]

Not enough information to answer, although I agree that having a third party notified if payment lapses is a good thing to offer/implement.

If you can get all the terms and details of the policies you could try posting at bogleheads— some people over there are pretty good at analyzing policies or at least things to consider

[Anonymous]

Anonymous wrote:Not enough information to answer, although I agree that having a third party notified if payment lapses is a good thing to offer/implement.

If you can get all the terms and details of the policies you could try posting at bogleheads— some people over there are pretty good at analyzing policies or at least things to consider

Some people are pretty good at this here as well.

This is not rocket science; this is a very simple matter.

Are the life policies from a mutual or from a stock company ?

[Anonymous]

This is OP. For the poster who asked, the company is publicly traded, not a mutual. I don't have any information on the type of policy yet.

[Anonymous]

The PP who mentioned that the purpose of life insurance is to replace income that someone depends on is absolutely right if we are talking about the basic term life insurance. It makes no sense to have it for other purposes unless the insurer grossly overestimated your life expectancy and they have no way to adjust your premiums before you die. But most likely they charge you a fair price for the risk and a markup on top of it and they will keep bumping premiums up.

[Anonymous]

It depends on the nature of the policy and how much paying the premium bills hurts.

The policy might provide long-term care benefits, or it might be easy to borrow against the policy value to pay for care. Then, it’s a good deal.

If it’s a term life policy with no permanent life conversion options, the question would be when the term ends, where the money would go and whether the amount would be meaningful to the recipient. Would making the premium payments likey lead to a nice check for someone who needs the check?

If the policy is a permanent life policy, or a convertible policy, and the mom needs cash now, the mom could go to a life settlement company and sell the policy.

[Anonymous]

If there is cash value in the policy, then those dollars could be used to pay future premiums.