Mother in Law's life insurance

[omro]

Hi,

I was wondering if anyone had heard of something like this before.

My mother-in-law is 63 and she has a line of credit against her house, not a mortgage, for about $300,000 and the house is worth maybe $750,000. She is adamant that she has life insurance that will pay off this debt, even if she lives to be 92 and dies in her sleep.

We have been telling her that this is not likely, otherwise everyone would be doing this, but she won't listen. She also refuses to let anyone look at the policy to read the small print.

Has anyone heard of such a thing?

Is there an age where someone becomes uninsurable?

Thanks!

[tng]

300000 of life insurance is not unusual at all. If it is a whole life policy then there is a good chance at her age it has grown to the point where she no longer needs to make payments on it so it would indeed last until she was 92 or 902. Term life would be costly at her age, but a 300,000 of term life insurance isn't really an unreasonable amount, as people tend to have higher payouts on term then whole life. With that she would have to continue paying premiums for the entire term, and they would only get more pricey as she got older. So in my opinion she probably has a whole life policy fully funded. People are generally insurable at any age but as you get older and health problems rack up the policy just becomes more and more expensive to the point it isn't worth the cost of the policy anymore.

[omro]

But I had read that a lot of insurance policies expire at a certain age, like 70, 75, 80 etc. Is this only term insurance?

So, if she got whole life insurance, it's a given that the premiums will be going up every year that she's still alive?

And if it's term insurance, assuming she's not paying down the LOC, they may not pay out the full amount when she does die.

[tng]

Whole life insurance actually pays you dividends based on how much money you have already paid into them. After a while the dividends become greater then the amount of the premium so the policy pays for iteself and you make money off of it. Whole life never expires until you die or you volentarily cash it out.

Term insurance is only good for a set amount of time, 5 -10 years usually. You pay a premium and if you don't die before the term is up you get nothing back. At this point you would start a new term policy and they would give you new rates based on how old you are and your health.

So with whole at 63 if she got the policy when she was a younger woman it is most likely at the point where dividends are higher then the premium and she will never have to put another cent in it.

If its term it will expire at some point and the renewal will be at a higher rate since your mother in law will be older and most likely in poorer health..

[omro]

As I understand it, this is insurance she set up after her husband died 5 years ago. So, it's unlike that it would be whole life insurance that she's had for years.

I will have to ask further questions and see if she'll give up some more information. My husband is extremely worried that if his mother lives to be 92, like her father, she'll not be insured and still be spending at her present rate and that his parent's house will be lost due to her debt. She says her insurance will make that not happen, but won't let anyone see the policy to back it up.

[JaneDil]

Someone needs to gently explain to MIL that life insurance policies can be incredibly difficult to fully understand.
It's quite possible that the guy selling her the insurance promised her one thing verbally, but that the written policy
says something else entirely.

She should really have her lawyer examine the policy and explain it to her (hopefully with you and your husband present
so that there are no surprises).

Sounds like MIL should try to reign in her spending as well. Assuming she's no longer working, if she continues to spend at her current rate, she may end up homeless (considering the fact that she could live another 20 or 30 years...possibly more).

We have one set of parents that take numerous lavish vacations each year and don't seem to care if there's a penny left after they die. The other set of parents haven't been on a single vacation in years because they want to pass on as much money as possible to their kids and grandkids and they feel guilty spending their money on anything that isn't necessary.

[omro]

I am certain that her level of understanding is the issue here. Thanks for all the advice everyone.

[Conquistador]

We have one set of parents that take numerous lavish vacations each year and don't seem to care if there's a penny left after they die. The other set of parents haven't been on a single vacation in years because they want to pass on as much money as possible to their kids and grandkids and they feel guilty spending their money on anything that isn't necessary.

To each their own, right?. It's their money so why shouldn't they decide how to spend, or not spend, it?

Sounds to me like the first couple has entirely the right idea. That's how my wife and I hope to go out....penniless.

[JaneDil]

Fair enough. To each his own.

Personally, I couldn't enjoy myself on multiple lavish vacations each year if I knew my children could use help
with their mortgage or repairing a roof, etc.

I would be happier giving my kids a vacation than taking one myself (especially after the third or fourth trip).
But hey, that's me.

There's also a reason that the grandkids hardly know one set of grandparents (they're always traveling and
the kids barely remember them). But the grandkids adore the other set and light up each and every time they
see them.

[dutchca]

To each their own, right?. It's their money so why shouldn't they decide how to spend, or not spend, it?

Sounds to me like the first couple has entirely the right idea. That's how my wife and I hope to go out....penniless.

+1.

As long as there is enough money to bury us, my wife and I will be more than happy.

[peelhic]

OP.... my question to you is this. What business is it yours? Obviously your mother in law does not want to disclose that information to you. In the end its her money and she can do with it how she pleases. If she wants to leverage the hell out of the house and burn the money in the fireplace she can... its hers!! In the end the only reason you should be sticking your nose in to her business is if you are cosigned on any of her loans. Other wise butt out and let her spend her money they way she wants. Its sad to see kids get greedy when parents get old rather than just doing their thing and leaving their parents money alone.

[lurker99]

What happens when she spend all the money and has no place to live. My question to Peelhic, can she live at your place.

OP.... my question to you is this. What business is it yours? Obviously your mother in law does not want to disclose that information to you. In the end its her money and she can do with it how she pleases. If she wants to leverage the hell out of the house and burn the money in the fireplace she can... its hers!! In the end the only reason you should be sticking your nose in to her business is if you are cosigned on any of her loans. Other wise butt out and let her spend her money they way she wants. Its sad to see kids get greedy when parents get old rather than just doing their thing and leaving their parents money alone.

[omro]

OP.... my question to you is this. What business is it yours? Obviously your mother in law does not want to disclose that information to you. In the end its her money and she can do with it how she pleases. If she wants to leverage the hell out of the house and burn the money in the fireplace she can... its hers!! In the end the only reason you should be sticking your nose in to her business is if you are cosigned on any of her loans. Other wise butt out and let her spend her money they way she wants. Its sad to see kids get greedy when parents get old rather than just doing their thing and leaving their parents money alone.

There was a discussion this weekend in which she brought up this debt, all by herself, just casually in passing and it dropped like a bomb in the room. Her children were all of the opinion that the house had been paid off long ago and that she was living well on her pension and investments. Her children want to keep the family home, even after she's gone and they voiced their concerns that this may not be the case, with all this debt. She assured her children, that she had the life insurance to cover it, but refused to let them see the policy when they expressed skepticism that it would cover her in the manner in which she described. It was she that made it very clear that she intended to leave the house, fully paid off by this policy, to her children and grandchildren and that they would have nothing to fear.

She can do exactly what she pleases with her money, no question about that.

However, she shouldn't promise her children one thing and then potentially saddle them with a ton of debt and broken promises in the event of her death, simply because she has taken out an insurance policy that she may potentially not fully understand. They don't want her money. They want to keep the house in which they all spent their entire lives in and grew up in. I don't see that as greedy.

Better that she say to them now, don't expect to inherit the house, and give them the decades that she has left to get used to that idea or, as was my suggestion, save up, buy her out, but let her stay in the house, with the money from the sale, without any fear that she might lose the place or end up homeless.

[peelhic]

Fair enough, that was a little different than was made out in the first post but either way in the end its her decision.
Just an FYI... it is possible to have life insurance that stays for life. I have permanent life insurance that I pay for today that will be paid up by age 55 and will then be in force for the rest of my life. That way I don't have to worry about additional premiums when I retire but have the security of leaving my kids/family with a nice nest egg when I pass away. This may be what she has already, although you did indicate that she just took it out 5 years ago but it doesn't stop someone from buy this type of product.

There was a discussion this weekend in which she brought up this debt, all by herself, just casually in passing and it dropped like a bomb in the room. Her children were all of the opinion that the house had been paid off long ago and that she was living well on her pension and investments. Her children want to keep the family home, even after she's gone and they voiced their concerns that this may not be the case, with all this debt. She assured her children, that she had the life insurance to cover it, but refused to let them see the policy when they expressed skepticism that it would cover her in the manner in which she described. It was she that made it very clear that she intended to leave the house, fully paid off by this policy, to her children and grandchildren and that they would have nothing to fear.

She can do exactly what she pleases with her money, no question about that.

However, she shouldn't promise her children one thing and then potentially saddle them with a ton of debt and broken promises in the event of her death, simply because she has taken out an insurance policy that she may potentially not fully understand. They don't want her money. They want to keep the house in which they all spent their entire lives in and grew up in. I don't see that as greedy.

Better that she say to them now, don't expect to inherit the house, and give them the decades that she has left to get used to that idea or, as was my suggestion, save up, buy her out, but let her stay in the house, with the money from the sale, without any fear that she might lose the place or end up homeless.

[omro]

Fair enough, that was a little different than was made out in the first post but either way in the end its her decision.
Just an FYI... it is possible to have life insurance that stays for life. I have permanent life insurance that I pay for today that will be paid up by age 55 and will then be in force for the rest of my life. That way I don't have to worry about additional premiums when I retire but have the security of leaving my kids/family with a nice nest egg when I pass away. This may be what she has already, although you did indicate that she just took it out 5 years ago but it doesn't stop someone from buy this type of product.

No, it doesn't, but I would imagine that if she bought it five years ago, at 58, it would be incredibly expensive. What's the point in paying that kind of money for insurance, when there are other options. It's good to know it exists though.