Asked by waltcallahan2015  |  Submitted November 14, 2017

Does my 85 year old mother need Whole Life insurance?

My 85 year old widowed mother purchased a $10,000 Whole Life policy in 2016. Her premiums are $140 per month. She has been paying her premiums for 11 months. I was unaware of this policy and don't know why she felt the need to purchase it. She has no answer as to why she needs the policy except to say it will help pay for her funeral when she dies. I'm not sure if this policy is a good idea or a waste of money. She is in good health and may be paying these premiums for another 5-10 years. She has only $55k in savings and basically lives off of her Social Security benefits. Should she cancel her policy or keep paying on her policy and save the $140 per month? Obviously, I'm leaning towards canceling the policy or I wouldn't be asking the question. Thank you!

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  Answers  |  4

November 14, 2017

Hi Walt! If your mother doesn't already have life insurance, it may be cost prohibitive at her age. But to truly answer the question of need, simply ask yourself if anyone will be hurt financially upon her passing. If the answer is "Yes," then a small policy to cover final expenses may be all she needs. If she has other assets that will more than her final expenses, then you should be fine - as long as those assets don't get tied up in probate.

The idea behind whole life is that it lasts for as long as the policyholder lives, no matter how long they live. Neither the price nor the coverage fluctuates, and because of those guarantees, it's the most expensive form of life insurance. I would have much rather seen her purchase it when she was 30+ years younger. Now if she's had a whole life policy for many years already, it may not make sense to get rid of it.

If she needs a life insurance policy and she's in good health, another option would be a Guaranteed Universal Life (GUL) policy; it's cheaper than whole life and has a no lapse guarantee so that as long as premiums are met, it will last her lifetime. If you need some guidance with finding a suitable policy, don't hesitate to reach out.

$commenter.renderDisplayableName() | 07.20.18 @ 12:43

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November 21, 2017

I guess the question would be "do you have the money?" If yes, and you don't mind spending it, then yes, cancel the policy. You shouldn't assume because she currently has 55k in savings that she is "set". What if the last few months of her life require care? That 55k will get eaten up pretty quickly.

She purchases a burial policy, to make sure you weren't financially strapped for her service. They pretty much only come in whole life because most states and companies don't allow term sales after age 70. The older you get the choice of products go down as risk gets higher.

So if you have the money and don't mind spending it, then yes, cancel. If you don't have the money or would have a hard time coming up with it, then keep the policy going. Your mom was/is looking out for you.

$commenter.renderDisplayableName() | 07.20.18 @ 12:43

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November 21, 2017

Walt,
In my opinion it comes down to her pre-planning, If the policy is already in force $140/month for an 85 year old female is actually cheap, but if she ha not planned for the inevitability of passing it will eat heavy into her savings, which unless you have set up correctly will be inaccessible for 60 days or so upon her passing because of bank rules. Also keep in mind that to make the claim on the policy you will need a Death Certificate so unless you have the ability to come out of pocket I suggest you have that conversation with her. Personally I hope she lives 15+ more years as the loss of a parent is tough, but if you are set its one more thing off your plate.

Adam Moskowitz
Investment Advisor Representative
Transamerica Financial Advisors

$commenter.renderDisplayableName() | 07.20.18 @ 12:43

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November 28, 2017

If she has no other way to pay for her final expenses, then the insurance may be very useful to all concerned. There may be ways to get it a little cheaper through her local credit union or bank. If she is a member of AARP, AAA, or other organization You could check for coverage there. Her age is the factor that affects the rate most, but it doesn't hurt to shop. If, on the other hand, you have her final expenses taken care of you could let it lapse or call the insurance company about converting it to a paid-up policy, which could end her premiums. One last option is that you and any siblings could pay the premiums knowing that it will take care of her final expenses so that she doesn't have too.

$commenter.renderDisplayableName() | 07.20.18 @ 12:43

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