Hi, my mom who is 42 years old told me she recently got life insurance from a friend of hers. She’s paying about $500/mo saying it’s term insurance until she’s 65 (suspicious??). She also got life insurance for me (20 yo) and my sister (16 yo) for $200 extra a month. This is obviously a scam right? I’m very skeptical and I’ve warned my mom about it but she thinks that this is normal.
Is this life insurance overpriced?
byu/Vdubs281919 inpersonalfinance
Posted by Vdubs281919
6 Comments
It seems priced more like a permanent policy
First, never buy insurance (or investments) from a “friend.” That is red flag #1-1,000. The saying used to be friends don’t let friends drive drunk. The saying should be, friends don’t sell friends insurance.
Second, I call BS on term life insurance costing $500/month unless she has a policy for many millions of dollars (like at least $10M or more) and/or has really bad health.
Third, why does she need life insurance on her children? What a waste of money.
Fourth, does your mom even need life insurance? If she died tomorrow are the kids unable to take care of themselves and have housing/food? I guess maybe the 16 year old. That could be solved with a simple $1M, 10-year term life insurance policy which shouldn’t cost more than ~$100/month and probably a lot less than that. I have a $1M 30-year term policy and pay less than $65/month for it at not that much younger an age than your mom.
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This doesn’t sound like term insurance.
>This is obviously a scam right?
There is a difference between a scam and someone not taking the time to research and understand what they are purchasing.
>She also got life insurance for me (20 yo) and my sister (16 yo) for $200 extra a month.
Why does your mother think that you or your sister need your own lives insured?
From a friend? This sounds like a pyramid scheme. The product isn’t necessarily a scam. But is it likely overpriced and unneeded.
The premise of the whole life insurance plans is that you pay a lot in, can get some money out of them, and the insurance companies are investing the hell out of them in the meantime.
Term life insurance is MUCH cheaper, and really covers what you want— your family members are covered in the case of your untimely demise. If you want to invest your money or get something out of it just put it in the market, thats exactly what the insurance company is doing with your money they sure as hell aren’t buying whole life insurance policies with it.
What’s her term life insurance policy amount, $1Mil? I bought term life via my work when my son was a kid, for 500K, I think I paid a couple of bucks a pay period ( just realized it is an auto deduction from my paycheck by pay period). At the end, nothing happens to me and the premium was wasted.
Tell your mom , put that $500 a month into an ETF via vanguard or Robinhood. Do auto recurring buy $500 per month, 20 years later, you get a fortune for your mom’s retirement fund.