Wage earners of age ≥ 60 with dependents: What Life Insurance, if any, should they buy?
"The problem above is actually a pretty good list of the concerns around life insurance.  While there is no correct answer to the question as posed, this will vary among different WSCs, there is a simpler way to think about insurance in general that may make finding what is right answer for you easier. Buying life insurance, like almost all insurance, is on average a money losing purchase.  This is simply because the companies selling wouldn't offer it if they couldn't expect to make money on it.  Think about buying insurance (a warranty) on a new cell phone, maybe if you are particularly prone to damaging cell phones it can be in your favor, but for most of the people that buy it will lose money on average. People, of course, still buy insurance anyway to protect themselves from unlikely but very bad consequences.  The big reason to make this trade off is if the loss will have big lasting consequences.  To stay with our cell phone example having to replace a cell phone, at least for me, would be annoying but not a catastrophic event.  For myself, the protection is not worth the warranty cost, but that is not true for everyone. Life insurance is a pretty extreme case of this, but I find the best question to ask is ""if you (you and your spouse) were to die will your dependents lives become so much worse that you really dislike the idea of not being insured?"" For some working seniors, they already have enough saved to bridge their kids/spouse to adulthood/old-age that insurance makes no sense.  For some, their children/husband/wife would be destitute and insurance is an obvious choice and an easy price to pay even if it is very high.  The example you suggest seems on the border and good questions to ask are: Thinking about those questions may help you understand if the protection offers is worth the cost." Without knowing the WSC's objectives, priorities of those objectives and affordability we cannot determine which type of insurance is best. Life insurance for seniors is very expensive if you examine the per unit cost (e.g. cost per $1000 of death benefit). Therefore affordability is a critical deciding factor for WSC.  Let's assume that we know the WSC's affordability and therefore the monthly premium is a fixed determined number, then there is a inverse relationship between the length of coverage and the amount of coverage. We have to achieve a balance between these two factors to best meet the WSC's objective. If the proposed plan is not affordable then the WSC must leave out his/her objectives with lesser priorities out of the total coverage amount.
"Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life (""Cash value"") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that ""magical"" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift).  You can have these ""feel-good"" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed." &gt; You can't find anyone else who would pay you more, or you would have left. That's a reflection of what you have to offer the world.  Your comment was thoughtful, and this last bit in particular I feel is like something that I've been wrestling with for a while.   It's a very libertarian view as you probably know. It makes a lot of sense to me, but I can't help to think of some possible flaws and wonder what you think:  1. Availability of work: If somebody has a choice between no job and being grossly underpaid, wouldn't the choice be between having no money and a little money at that point? Doesn't that run the risk of exploitation? Wouldn't exploitation be working for less than what you're worth?  2. Value: Unskilled pretty much means replaceable. They don't give a shit if you come or go, and vice versa. That's not a reflection of a job's worth to the company, nor is a real reflection of how difficult it is. There's no competition for wages. Eventually workers get sick of it and leave, not expecting improved wages elsewhere but a job they can deal with for 40 hours per week. But there are always more people in need to take their place, so the company has no incentive to raise wages.    Like you said, it *is* a reflection of what you have to offer to the world, in a sense that your skills are not uncommon. However, is this everything? The world *needs* unskilled labor to run. Is there something wrong with being a cashier? A doorman? A guy who unpacks the trucks that carry the things we all use? No, the world *needs* these people...should people who are needed have jobs that don't allow for them to meet basic living standards?    3. Expectation: The only reason why most people won't work for less than 8 or 9 dollars/hr, expect reasonable flexibility to balance work and personal life, don't expect to be forced to work more than 8-9 hours per day, have weekends off, and those working 40 hrs/week demand holiday pay/sick days/access to insurance/vacation time, is because that's what people expect out of a job in this day and age. None of these things are law (i think). People used to be treated considerably worse by their employers, and likely there will be a time when people will think that the people of our day were stupid for settling for less. The labor movement has done much in this regard.  &gt; Maybe, instead of bitching that you are paid shit wages, you should ask why you ever expected to earn more after failing to acquire any skill a teenager couldn't master in a week.   4. Everyone's solution?: Let's say everyone learns to do a skilled job, who will be left to do the unskilled jobs? Someone will have to do them. Some countries have hordes of college educated workers working unskilled jobs, because of the high % that go to college. Ok, so then leave it to merit. Does merit always work though? What about nepotism? Personality, when it doesn't matter for the job? Age, Race, Sex, Ethnicity...think these play any part in the hiring process?   If all else fails, not everyone can be expected to be a successful entrepreneur.  5. Life: Life can throw you some curveballs, and people make mistakes. Some tend to pay for them more than others. Some have talent, others don't. Some are born with money, some not. Some have a large and caring family, others have no family at all.    Again, I'm not saying these things necessarily invalidate your original point, but it's something to consider. Your thoughts? &gt;Better for you and for me, yes, but not for the disadvantaged without benefactors. That's the situation I was in.   That wasn't exactly my point. I'm all for helping people, and social security does help people, and I am very happy it helped you - I'm not disputing that.   What I'm saying is that what you got from social security is not as good as what you would have got from a $500,000 - $1,000,000 term life insurance policy. For people in there 20s, in good health, that kind of policy should be $20-$40/month, which could easily be bought with the money we otherwise spend on social security. (Now... whether parents would actually be responsible enough to buy term life insurance and put money towards retirement if we didn't have social security is a WHOOOOOOOOOLE nother discussion.)  That's all I'm saying - I'd rather buy term life and invest for my own retirement because me and my family will come out ahead of where social security will put us. I'm really not a financial wizard, and I have to believe that this type of plan would work well for everyone else, too. "All life insurance is pretty much the same when it comes to cost. You can run the numbers over certain time period and the actual cost of insurance is about the same. A simplified way to explain life insurance and the differences between them below: The 3 characteristics of life insurance: There are 5 popular types of life insurance and they are: Term Whole Life Universal Life Variable Universal Life Indexed Universal Life But first, one must understand the most basic life insurance which is called Annual Renewable Term:  This is a policy that covers 1 year and is renewable every year after. The cost of insurance typically increases each year as the insured ages. So for every year of coverage, your premium increases like in the simplified illustration above. This is the building block of all life insurance, term or permanent. There is no cash value; all premium goes to the cost of insurance.  This is an ART that spans over a longer time period than 1 year (say 5, 10, 15, 20 or 30 years). All the cost is added together then divided by the number of years of coverage to give a level premium payment for the duration of the policy. The longest coverage offered these days is 30 years. There is no cash value; all premium goes to the cost of insurance. The premium is fixed (level) for the term specified. If the policy comes to an end and the owner wishes to renew it, it will be at higher premium. This can be seen in the simplified illustration above for a 15-year term policy.  Because life insurance gets very expensive as you reach old age, life insurance companies came up with a way to make it affordable for the consumer wishing to have coverage for their entire lifespan. They allow you to have interest rate crediting on the cash value account inside the policy.  To have cash value in the first place, you must pay premiums that are more than the cost of insurance. The idea is: your cash value grows over time to help pay for the cost of insurance in the later stages of the policy, where the cost of insurance is typically higher. This is illustrated above in an overly simplified way. This is a permanent life insurance policy that is designed to cover the lifespan of the insured. There is cash value that is credited on a fixed interest rate specified by the insurance company (typically 3-5%). The premium is fixed for the life of the policy. It was designed for insuring the entire lifespan of the insured. This is variation of Whole Life. There is cash value; it is credited on a fixed interest rate specified by the insurance company, but it does fluctuate year to year depending on the economy (typically 3-6%). The premium is flexible; you can increase/decrease the premium.  This is basically a universal life policy, but the cash value sits in an account that is invested in the market, normally mutual funds. Your interest that is being credited (to your account with your cash value from investments) is subjected to risk in the market, rise/fall with the market depending on the portfolio of your choosing, hence the word ""Variable"". You take on the risk instead of the insurance company. It can be a very good product if the owner knows how to manage it (just like any other investment products). This is a hybrid of the UL and the VUL. The interest rate depends on the performance of a market index or a set of market indices. The insurance company states a maximum interest rate (or cap) you can earn up to and a guaranteed minimum floor on your cash value interest that will be credited (typically 0% floor and 12% cap). It is purely a method to credit you interest rate. It takes the market risk out of the equation but still retains some of the growth potential of the market. Term policy is designed for temporary coverage. There is no cash value accumulation. Permanent policies such as whole life, universal life, variable universal life and indexed universal life have a cash value accumulation component that was originally designed to help pay for the cost of insurance in the later stages of the policy when the insured is at an advanced age, so it can cover the entire lifespan of the insured. People do take advantage of that cash value component and its tax advantages for retirement income supplement and maximize the premium contribution. Always remember that life insurance is a life insurance product, and not an investment vehicle. There is a cost of insurance that you are paying for. But if you have life insurance needs, you might as well take advantage of the cash value accumulation, deferred tax growth, and tax-free access that these permanent policies offer." Here's the issue with LTC and, really, underwritten insurance in general; no one has a crystal ball.   Based on today's available rates where's the sweet spot to buy LTC? Probably right around the mid-60s, because you probably won't pay much in before you start gutting the carrier (assuming you can make it through underwriting in your mid-60s). The issue is, what happens when some life event changes your underwriting status?  Would you rather buy prematurely or be excluded entirely?  Those are generally your two options when it comes to individual LTC.  The underwriting eligibility window on LTC is very  narrow.  There's a very very small space between the best possible underwriting and being flatly declined.   Look for an LTC agent in your area.  Likely someone in your circle of friends and family will know a reputable/knowledgeable insurance agent who can run up some quotes at various underwriting classes.  Try to avoid looking at quotes for your age + 10 years to see what the quote will look like 10 years from now.  10 years from now the rate tables will be significantly different. Whether or not you should buy LTC now rather than waiting will depend on a whole host of other criteria.  Personally, if I was 50 and my biggest health concern was improving my run time and LTC is on my mind, I'd just pick up a policy now while I will likely be in a preferred underwriting class rather than waiting and hoping my health doesn't betray me. Obviously I'm a stranger on the internet and none of this is actual advice.  You should find an agent local to you and talk about your options and situation. "This is going to vary from insurer to insurer, and likely year to year.  Typically an insurer will set what it calls the guaranteed rate of return for whole life policies and will allow you to take loans against the cash value of your policy at some adjustment to that rate.  Also typically you pay the interest back to yourself less some small administrative fee. Some insurers have whole life policies called something along the lines of an ""accelerated cash value"" policy or a ""high early cash value"" policy, stick to these ones.  The commission structure is less favorable to the agent/broker but much more of your premium is recognized as cash value earlier. The benefit (for lack of a better word) to taking a loan against your own cash value over taking a loan from a bank is the severely reduced process.  There's no underwriting for your loan like there would be from a bank.  If you're laid off maybe you can't get a loan from a bank but you can scoop some money out of your policy on a loan basis or alternatively you can just surrender the policy and take the accrued cash value. Many people will poo-poo the value of whole life, but fact of the matter is your underwriting status can change in the course of your life and it's possible that in the future you won't be able to buy any life insurance.  There's nothing wrong with having something permanent to supplement your larger term policies. Personally, I view diversification as having money in a lot of different places.  This strategy is probably not as efficient as it could, but I don't like the idea of having all my eggs in one basket.  I have cash in a lock box at home, cash savings, CDs, a personal loan portfolio, bitcoins, index funds, individual stocks, commodity etfs, and bond funds spread in traditional 401(k), ROTH IRA and regular taxable accounts spread out to 6 different institutions.  I don't personally own any whole life, but I'll probably buy a small policy before my next 6-month birthday; I might as well put some money there too.  All of this is to say, do not put all of your money in a whole life policy, and do not buy all of your life insurance needs via whole life." We asked the same question earlier this year as my wife is a SAHM with 2 young boys (5 and under). If something happened to her I'd have to quit work or change careers to stay home to raise them or something. We ended up getting a decent 20 year level TERM policy that will cover the care of both boys for many of their younger years. The cost is negligible but the piece of mind is priceless. re life insurance Multi-purpose vehicles generally don't work as well as just going with single purpose, well except for the person/company selling them.  'whole life' plans are a great deal for the insurance company and agent, not so much for you. The easiest way to prove this to yourself is to get the difference in price between a simple 'term life' product that would be appropriate to provide for your family in the event you die.  Then get the price for a 'whole life' product with the same benefits, and what it would be worth after say 20 or 30 years. Take the difference you would have to pay, figure what it would be worth if invested conservatively over the same period, figuring in some conservative figure for compound growth such as 6 percent (what you could get from a good long term savings bond or index based mutual fund).   The last time I did this, the pure value of the money alone, without ANY interest was within something like 80 % of the value of the whole life policy.. adding in even a conservative amount of interest turned it into a no brainer. the whole life plan was terrible as in investment vehicle.  I was far far better off using term life and investing the difference.