Life insurance for adult child -- is this common?

[Anonymous]

My spouse's parents had him get a life insurance policy when he was 22, with them as the beneficiaries. He paid the premiums. When we got married we were sorting finances and I asked about that expense (it was about $20/mo) and he explained what it was. He was 35 when we got married and I asked if it was necessary to keep it. I didn't understand what it was for -- he doesn't support his parents financially, and then have government pensions and a paid off house and are perfectly comfortable in retirement. He pushed back and said he didn't feel comfortable giving it up, so I left it alone.

Then it came to the end of term (it was a 20 year policy) and he was prompted to renew, and he decided not to renew on his own, I didn't weigh in.

But I've always found this odd. Is this something others have done? Why would someone in their 20s need life insurance at all, unless they had dependents or a spouse with whom they shared finances? I've just never understood why DH's parents encouraged him to do this or what it was for. The policy was much larger than would be necessary just to cover stuff like funeral costs (and they are well enough off that something like that wouldn't have been overly burdensome either).

I'm not judging, I just don't understand and my DH doesn't know either, he just knows his dad kind of hounded him to do it when he graduated college and their relationship was such that he felt he had to. It wound up being thousands of dollars in premiums over 20 years.

[Anonymous]

Did the parents co-sign for school or house loan? Suzy Orman advises life insurance when parent’s co-sign because they would be on the hook to pay if their adult child died.

[Anonymous]

Anonymous wrote:My spouse's parents had him get a life insurance policy when he was 22, with them as the beneficiaries. He paid the premiums. When we got married we were sorting finances and I asked about that expense (it was about $20/mo) and he explained what it was. He was 35 when we got married and I asked if it was necessary to keep it. I didn't understand what it was for -- he doesn't support his parents financially, and then have government pensions and a paid off house and are perfectly comfortable in retirement. He pushed back and said he didn't feel comfortable giving it up, so I left it alone.

Then it came to the end of term (it was a 20 year policy) and he was prompted to renew, and he decided not to renew on his own, I didn't weigh in.

But I've always found this odd. Is this something others have done? Why would someone in their 20s need life insurance at all, unless they had dependents or a spouse with whom they shared finances? I've just never understood why DH's parents encouraged him to do this or what it was for. The policy was much larger than would be necessary just to cover stuff like funeral costs (and they are well enough off that something like that wouldn't have been overly burdensome either).

I'm not judging, I just don't understand and my DH doesn't know either, he just knows his dad kind of hounded him to do it when he graduated college and their relationship was such that he felt he had to. It wound up being thousands of dollars in premiums over 20 years.

These policies are sold to unwitting adults who buy the line that the policy (usually capped at $30K) will cover the child's funeral expenses should that happen. My aunt bought one on my cousin decades ago. It's still floating out there but only worth the $30K. Most financial advisers will suggest that should such a sad thing happen that it be covered by regular savings. A policy isn't needed.

[Anonymous]

Anonymous wrote:Did the parents co-sign for school or house loan? Suzy Orman advises life insurance when parent’s co-sign because they would be on the hook to pay if their adult child died.

No. DH mostly covered school with scholarships and had a small amount of debt when he graduated (about 15k) which he paid off pretty quickly. He didn't own a home until we bought one together.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My spouse's parents had him get a life insurance policy when he was 22, with them as the beneficiaries. He paid the premiums. When we got married we were sorting finances and I asked about that expense (it was about $20/mo) and he explained what it was. He was 35 when we got married and I asked if it was necessary to keep it. I didn't understand what it was for -- he doesn't support his parents financially, and then have government pensions and a paid off house and are perfectly comfortable in retirement. He pushed back and said he didn't feel comfortable giving it up, so I left it alone.

Then it came to the end of term (it was a 20 year policy) and he was prompted to renew, and he decided not to renew on his own, I didn't weigh in.

But I've always found this odd. Is this something others have done? Why would someone in their 20s need life insurance at all, unless they had dependents or a spouse with whom they shared finances? I've just never understood why DH's parents encouraged him to do this or what it was for. The policy was much larger than would be necessary just to cover stuff like funeral costs (and they are well enough off that something like that wouldn't have been overly burdensome either).

I'm not judging, I just don't understand and my DH doesn't know either, he just knows his dad kind of hounded him to do it when he graduated college and their relationship was such that he felt he had to. It wound up being thousands of dollars in premiums over 20 years.

These policies are sold to unwitting adults who buy the line that the policy (usually capped at $30K) will cover the child's funeral expenses should that happen. My aunt bought one on my cousin decades ago. It's still floating out there but only worth the $30K. Most financial advisers will suggest that should such a sad thing happen that it be covered by regular savings. A policy isn't needed.

OP here and this is what I was wondering. But I find it weird his parents made him pay for it himself! And it was a term policy so now that the term is over, it's gone. Just a waste of money. If he'd stuck the $240/yr in a savings or investment vehicle over 20 years, it wouldn't be a ton of money but it would be a lot more than nothing.

In the end not a big deal but it's been bugging me as I just could not figure out why anyone would do this.

[Anonymous]

Its like only $240 per year. I guess if something happens to him and they lose one person who could've helped him deal with elderly life issues, some pay out would be helpful for them. I don't see any harm in keeping it even if doesn't make lot of sense.

[Anonymous]

Why not ask them what was the rationale? There must be some or they must he told by someone that there is.

[Anonymous]

I feel like some people just think that's a thing you should have when you become an adult and it's no deeper than that.

[Anonymous]

They probably aren't that financially savvy and someone sold it to them. But I agree $240 a year isn't that much, and they likely would need more hired help as elderly people if they lost their adult son. So it isn't crazy.

[Anonymous]

Agree, they probably aren't very financially savvy.

But they may have thought: to get him insured at a young age, this guards against pre-existing conditions that might keep him (or anyone) from qualifying for life insurance in the future. A beneficiary can easily be changed - I'm sure they knew that. They probably knew no one else, logically, to make as a beneficiary when the policy was written. They probably wouldn't have minded in the least for the beneficiary to be you now that you are married.

[Anonymous]

Anonymous wrote:Agree, they probably aren't very financially savvy.

But they may have thought: to get him insured at a young age, this guards against pre-existing conditions that might keep him (or anyone) from qualifying for life insurance in the future. A beneficiary can easily be changed - I'm sure they knew that. They probably knew no one else, logically, to make as a beneficiary when the policy was written. They probably wouldn't have minded in the least for the beneficiary to be you now that you are married.

No, it was term and it already expired, OP said.

[Anonymous]

OP here. Yes, it was term insurance. I might have understood more if it was whole life insurance or an annuity or something, even if it's unusual for a 20-something to get those things.

It wasn't a lot of money which is why I didn't argue over it, I just thought it was odd. Not my place to ask his parents about it -- I think they'd feel judged. And to be fair, I do think it's weird, but I was also open to the idea that I am the one who is weird and it turns out everyone does this. My family has it's own weird stuff.

[Anonymous]

It's not any weirder or stupider than 99% of the things my in-laws spend their money on. I'd let it go. It's expired now, so it doesn't really matter.

[Anonymous]

I would assume they wanted it to cover any funeral expenses for him. I would not keep it at this point unless that is something you would not be able to cover if something terrible happens. If you have children, you probably should consider it again.

[Anonymous]

It was term, but it was marketed (right or wrong) as a reliable way to secure access to life insurance.