Radio Advisor Shooting from the Hip

[Newby]

I was watching Fox and Friends on TV this morning and they had Dave Ramsey on taking questions.

A caller called in and said she took out a $50,000 whole-life insurance policy 20-years ago on her mother who is now 87 years old. The policy premium has raised to $305 per month. Should she dump the policy?

Good ol' Dave asks no further questions and says she should keep the policy because that's a great deal on an 87 year old.

Hmmmmmmm?

So without knowing the cash value, the health of the 87 year old, whether the policy is really a whole-life or a UL, whether the premium is going to increase further, how easily the daughter can afford the premium, whether the policy is subject to a Medicaid assignment, how many years the "whole-life" policy will stay in force at the $305 monthly premium, or ANYTHING else...Dave can just assume what this family should do?

He is amazing! This guy is an entertainer and nothing more.

 

[scagnt83]

I was watching Fox and Friends on TV this morning and they had Dave Ramsey on taking questions.

A caller called in and said she took out a $50,000 whole-life insurance policy 20-years ago on her mother who is now 87 years old. The policy premium has raised to $305 per month. Should she dump the policy?

Good ol' Dave asks no further questions and says she should keep the policy because that's a great deal on an 87 year old.

Hmmmmmmm?

So without knowing the cash value, the health of the 87 year old, whether the policy is really a whole-life or a UL, whether the premium is going to increase further, how easily the daughter can afford the premium, whether the policy is subject to a Medicaid assignment, how many years the "whole-life" policy will stay in force at the $305 monthly premium, or ANYTHING else...Dave can just assume what this family should do?

He is amazing! This guy is an entertainer and nothing more.

If it is a WL then the premium wouldnt increase unless they had used dividends to reduce the premium.

It was most likely a UL.
But at 87 for $50K, $305 is still a good deal.
She should consult an advisor to review the policy and make sure that the $305 will be enough to keep it in force without too many future increases, it might be in her best interest to go ahead and pony up a bit more, even $30 more a month can make a difference in a policy thats falling apart.

 

[Norwayguy]

Should we be surprised that this "advisor" didn't go into more depth? He was a guest on someone elses show and going into a long term discussion about insurance is not very entertaining for many people...The only surprising part for me is that he didn't tell her she shouldn't have insurance at all particulary WL which he never talks good about.

 

[Newby]

If it is a WL then the premium wouldnt increase unless they had used dividends to reduce the premium.

It was most likely a UL.
But at 87 for $50K, $305 is still a good deal.
She should consult an advisor to review the policy and make sure that the $305 will be enough to keep it in force without too many future increases, it might be in her best interest to go ahead and pony up a bit more, even $30 more a month can make a difference in a policy thats falling apart.

There are MANY factors that need to be looked at. He was negligent to make specific blanket statements like that.

It likely IS UL although I do run into whole-life policies that have schedualed rate increases. Prudential sold a lot of policies that the rate was low until your 67th birthday and then it goes way up. It's written right into the policy though.

In her case the first thing I do is get the insurance company on the speaker phone and have a conference with them. I ask them how much premium do they need to GUARANTEE the policy will not lapse prior to age 100. This is a figure that UL companies do not like to talk about. And the clients need to hear. In a case where the premium increased to $305 at age 87 it would not be uncommon for the company to require $700 to $800 monthly to give such a guarantee.

Then with that knowledge, I would tell the daughter to make her decision to keep the policy or not based on her knowledge of mom's health, how well they can afford the payment now and IF they can contue to keep it when it goes up further.

Another big factor is how much cash value the policy has. Would they rather settle for the cash available now rather than pay higher payments and wait for the higher death benefit?

Also, I run into families that are on Medicaid that have assigned the policy to a funeral home and are in situations like this. They usually don't understand that the insurance amount over the funeral and cemetery costs will have to run through their estate which goes directly to Medicaid. That is a huge factor in these decisions also.

There is much more to decisions like this than a sound bite from a radio advisor.

 

[briko3]

If Dave Ramsey thinks it's a good deal to have insurance on an 87 y/o then why does he recommend only term to everyone else?