Life Insurance

[acutegirl]

I did an online focus group on life insurance the other day. It's my first time doing an online focus group and it was a good experience. I especially note that I think a focus group is a lousy method to get at lots of kinds of information. The 90 minute focus group with 6 people would have yielded much more valuable information if it consisted

Comments

[zimzat]

I agree with your sentiment that life insurance companies may be tricking us to think of life insurance as a gift. For the short-sighted that is likely the best way to sell something intangible within our own existence yet still costs now.

I think that the line item for caregiver has more monetary value than you may be giving it credence for. Even though you yourself are not personally contributing a financial aspect you're still contributing time, which is an even more finite resource. You've committed yourself to an endeavor for the foreseeable future of your life. This leaves your spouse more time to bring in monetary value without the additional emotional or physical stress of trying to do it alone within the same amount of time. You've pooled your resources, so to speak. That isn't a direct monetary contribution but it is an indirect one that could be supplemented by monetary resources.

Another point about the caregiver is that you've said your extended family could replace you if you were unable to perform the function. Are they willing to commit as much time and effort as you are? On a consistent basis such that they give up aspects of their life to do so? Is your partner willing to essentially let them live in the home to do so? With a monetary resource backup your partner could switch some (doesn't have to be all) of their time from breadwinner to caregiver should something happen to you.

If, given the above [which you may have already considered but not articulated the same way I perceived them], you still feel like your current backup plans are sufficient then it sounds like you've gotten your bases covered and could do without even a small life insurance plan.

The last thing I want to talk about is getting life insurance to cover the student loans. If the person who takes out a loan dies without paying it off then someone still has to cover that. Money doesn't just magically repay itself and loans that are written off are a bottom line expense to the loaner. It's possible that the loans have insurance of their own to cover these situations, but I can imagine a scenario where people who have life insurance that covers these expenses can also get more or better loan terms while the loaning entity lowers their cost and the ratio of repaid to written off (thus allowing them to give out more loans to more people). From a personal aspect of while we're alive then yes it doesn't make any sense. Any life insurance doesn't make any sense in that frame, because once we're gone we won't care about the things we left behind. But going back to the first thing I said in this comment, why do we care anything at all about anyone beyond our own life? Does a business suddenly lack reason for our empathy just because they're a business and not an individual? Are we forgetting that every business has a person behind it and people in it?

[acutegirl]

I agree that it can cost quite a bit to replace the services of a full-time caregiver. But in our case, my spouse would move to his parents. His mother and father would, frankly, provide more consistent and high-quality care than my daughter is getting from me. But, even if he didn't, then childcare in our area costs about $25/day. With roughly 260 work days a year, that works out to about $6500/year. For the first 15 years of my child's life, that works out to about $100,000. Many full-time caregivers also contribute financially to their family by saving money (ie. clipping coupons, cooking meals so the family eats more at home, doing home repairs rather than paying for them, mending clothes, cleaning, bargain shopping, etc.) but I don't do any of those things. If I were to die, my spouse's costs would also decrease by about 15%-20% because I wouldn't be using his money to travel, eat, buy clothing, etc. He would probably save at least $6500/year if I wasn't using up his money.

If someone dies, students loans do not have to be paid back, with a few exceptions. Obviously, if there is a co-signer, then the co-signer still has to pay back the loan. And in certain community property states, where a student loan was accrued after the marriage, the spouse may have liability. The student loan company would certainly require all assets from the estate of the deceased (car, home, money, etc.), but after those are exhausted, the family members are NOT obligated to pay back a student loan. Or any loan. Debts disappear at death--which is one of the risks of loaning people money. Yes, it certainly does increase the costs to everyone. But the alternative is to make family member responsible for someone else's debt, which seems really unfair since they did not accrue it and since they did not cosign for it.

I just read this interesting book about how one of the new tricks in the loan industry is tricking people into thinking that they are personally responsible for the debt of family members after their deaths: “Dead people are the newest frontier in debt collecting, and one of the healthiest parts of the industry,” the New York Times reported in 2009. Collection agencies like DCM Services are taking advantage of improved database technology to track down the kin of deceased debtors and pressure them to pay, even though they are not legally obligated to assume the debt of a spouse, sibling, or parent."
http://strikedebt.org/drom/chapter-nine/

I really appreciate your insight about thinking about the people behind a business and how they probably feel about paying off debt.