'Normal person' life insurance for a pilot?

CJones

CJones

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I recently called to have an auto insurance policy added to our account. When I did so, my agent started hitting me up about life insurance. Blah blah blah.. BUT, she said they (State Farm) has a new term life insurance policy wherein at the end of the 20 years, you receive all of the money you have paid into it. (~$8,000 IIRC for a policy for me - don't quote me on that).

It sounded like a good deal, so I told her to send me some info. My wife ended up stopping in their office for something, and the agent explained everything to her. Still sounds like a good deal, so I said "Let's do it." One question I needed to be cleared up was regarding me being a pilot. My wife went in to file an application for the policy and asked our agent if me being a pilot was a problem. She punched it up and it had some pretty detailed questions regarding pilots - TT hours?, Total PIC time?, TT within the past 12 months?, TT within the 12 months before that?, How many hours expected for the next 12 months?, Do you fly experimental a/c?, IR?, Commercial?, CFI?, Professional?, Leisure?

The one area that seems like it could be an immediate hangup is the 'Flying experimental a/c' issue - probably the majority of my TT is in a RV-7A.

So, has any pilot here ever successfully applied for and received life insurance coverage from a 'normal person' insurance agency? Is there any chance I could get approved for this policy? We did file the application, so we'll know for sure relatively soon, but I was a bit surprised at how detailed their questions were.
 
The ones that I've quoted have not allowed flight in experimental aircraft. Certified aircraft were fine. I haven't yet found reasonably priced disability that covers you if you become disabled in an airplane accident. The only numbers that either of them cared about (it seemed) were that they wanted to make sure that you weren't flying for a living.

FWIW, this all sounds fishy to me. I've never known State Farm agents (even my own) to push life insurance that was in the best interest of their clients. Mine sold my wife Universal Life before we were married. Quote out a couple of other providers before committing. Try Zander Insurance if you're lacking other options.
 
Try Minnesota Life but, make sure your agent takes detailed notes on every aspect of the safety of your years of accident free PIC, your recurrent training (especially Wings SAFETY AWARDS and others like state safety awards such as Idaho's) your IR training and skill, etc.

Belabor the points and make sure the agent does as well, and you'll probably get a good rate.
 
Chris before you go the whole life insurance route think some things over. One, you are relatively healthy and young. When you become employed you will be eligible for term life insurance and very likely a 401k retirement program. The 401l money is taken from your pre-tax whereas this life insurance plan you are looking at is taken from post tax money. It is a far better thing to do to start building your 401k first, reducing your tax burden and likely getting some matching (free money) from your employer. Use the term insurance from your employment as Rachel's back up in case something were to happen to you. Even if you go the life insurance route to save, life insurance has a very low return rate and there are some great deals out there now that are likely to bring a far better return in 20 years. Talk to a real financial planner, not someone who sell you investments and very likely is getting a commission on the sale. Those types of "planners" DO NOT have your long term interests at heart, they have their own short term gains at the forefront of the sales pitch.
 
smigaldi said:
Chris before you go the whole life insurance route think some things over. One, you are relatively healthy and young. When you become employed you will be eligible for term life insurance and very likely a 401k retirement program. The 401l money is taken from your pre-tax whereas this life insurance plan you are looking at is taken from post tax money. It is a far better thing to do to start building your 401k first, reducing your tax burden and likely getting some matching (free money) from your employer. Use the term insurance from your employment as Rachel's back up in case something were to happen to you. Even if you go the life insurance route to save, life insurance has a very low return rate and there are some great deals out there now that are likely to bring a far better return in 20 years. Talk to a real financial planner, not someone who sell you investments and very likely is getting a commission on the sale. Those types of "planners" DO NOT have your long term interests at heart, they have their own short term gains at the forefront of the sales pitch.
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It sounded like whole life to me as well, but he specifically said term. Something doesn't add up, though. Term insurance is dirt cheap. Anything more than simple term is getting too complicated (and probably means you're overpaying).
 
FlyNE said:
It sounded like whole life to me as well, but he specifically said term. Something doesn't add up, though. Term insurance is dirt cheap. Anything more than simple term is getting too complicated (and probably means you're overpaying).
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Whole life may not be exactly what it is. Since that term had come to mean a poor investment a lot of insurance companies are doing a modified whole plan with term insurance and a savings account. This is probably closer to what he is being offered. But at his age and health it should not be his first option. until he starts getting maxed out in a 401k pre-tax contribution plan investing in life insurance really should not be considered. Maybe when he is closer to 50 and wanting to move some things into safer investments, but not as a recent college grad. That is my $.02 anyways.
 
I'd not bother with the insurance. Not that I don't want your dear wife to have something should you follow the magenta line of death into a mountain in the RV (gotta watch out for those big mountains in Iowa ;)), but chances are when you start your "real" job you'll get a good rate on life insurance through them, and all those questions become moot points then. My job includes a certain amount of life insurance for free and additional life insurance is cheap if I want it. In my case, I don't want it since I don't have any dependents or other folks who will be hard up should I die.

When you get mini-Chris and/or mini-Rachel running around then it would make sense to rethink, but by then you'll also likely have your real job and that will give you some additional options. For now, I'd not bother.
 
Heh I test software for AmFam here in Madison, and one of the products I work on is the life sales tool. The questionnaire for pilots that is part of the underwriting is pretty extensive. It doesn't have an immediate affect on the quoted rate, but I do believe that those policies are given extra attention during the underwriting process. Beyond that I have no real experience with oter companies, and their life insurance policies.
 
Good points by all. Thanks for the insight. Now that I think about it, my previous job (before I started back to school) had fairly hefty 'free' life insurance included.

I'll admit - I'm completely new to the entire 'Life Insurance Policy' world. Maybe I'll do some reading-up before signing on the dotted line. You make a good point, though, Scott - ?$40/mo? for life insurance could go into a (hopefully) profit-yielding 401k.
 
CJones said:
Scott - ?$40/mo? for life insurance could go into a (hopefully) profit-yielding 401k.
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By using your pretax money to go into your 401ks you are NOT reducing your take home pay by an equal amount. Because the pre-tax money reduced the, or could reduce, the amount of tax withheld you may see your take home only go down by a fraction. One strategy that worked for me was that whenever I got a pay raise I also raised my amount contributed to my 401k. Within a few short years I was maxing out the 401k contribution each year and never noticed that I was saving that much.
 
Ted DuPuis said:
I'd not bother with the insurance. Not that I don't want your dear wife to have something should you follow the magenta line of death into a mountain in the RV (gotta watch out for those big mountains in Iowa ;)), but chances are when you start your "real" job you'll get a good rate on life insurance through them, and all those questions become moot points then. My job includes a certain amount of life insurance for free and additional life insurance is cheap if I want it. In my case, I don't want it since I don't have any dependents or other folks who will be hard up should I die.

When you get mini-Chris and/or mini-Rachel running around then it would make sense to rethink, but by then you'll also likely have your real job and that will give you some additional options. For now, I'd not bother.
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Ted, I humbly disagree. Term life insurance is cheap cheap cheap already, regardless of what he gets through his employer. What you get through your job doesn't equate to what he'd get working for a company with < 50-100 employees. At the prices that he can get there is no reason that he can't take care of Rachel right now. It doesn't need to be much, but there isn't any reason to wait. Besides, who knows when he'll be with a company that he's planning on staying with for a while. Something like this I'd rather not have tied to my employment situation.
 
CJones said:
Good points by all. Thanks for the insight. Now that I think about it, my previous job (before I started back to school) had fairly hefty 'free' life insurance included.

I'll admit - I'm completely new to the entire 'Life Insurance Policy' world. Maybe I'll do some reading-up before signing on the dotted line. You make a good point, though, Scott - ?$40/mo? for life insurance could go into a (hopefully) profit-yielding 401k.
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See, then we're not talking about traditional term insurance. I just ran a quote for a 30 year old male in IA. Non-tobacco. 20 year term for $250,000 and it can be had for $12-13/month.
 
Jason, you're also talking from the perspective of a man with a family, whereas I'm the single guy with no dependents. Were I married I might think a little differently, but then again I suppose there are reasons why I'm single. :)
 
Ted DuPuis said:
Jason, you're also talking from the perspective of a man with a family, whereas I'm the single guy with no dependents. Were I married I might think a little differently, but then again I suppose there are reasons why I'm single. :)
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Understood. But you were giving single guy advice to a married guy (even though you did point that out). :yes: :)
 
term works for me

call me a cynic, but "whole life" means you pay a whole lot of money that could have been better put to use in ira savings or mutual funds (despite the media inspired "dire economy"). you just have to have the fiscal discipline to not touch it when things get a little rough. mary puts me in a choke hold when i talk about spending money so that's probably a pretty effective technique for rachel, too.
 
Steve said:
term works for me

call me a cynic, but "whole life" means you pay a whole lot of money that could have been better put to use in ira savings or mutual funds (despite the media inspired "dire economy"). you just have to have the fiscal discipline to not touch it when things get a little rough. mary puts me in a choke hold when i talk about spending money so that's probably a pretty effective technique for rachel, too.
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This.

The insurance company is putting some small part of your premium in the market. Why don't you do that and cut them out?

NPV for "You get all of the premiums back" is in the same vein as "Tell ya what. Give me $20,000 today and I'll give THE WHOLE $20,000 back to you in 20 years! Straight up!" Whatta deal!
 
mikea said:
This.



NPV for "You get all of the premiums back" is in the same vein as "Tell ya what. Give me $20,000 today and I'll give THE WHOLE $20,000 back to you in 20 years! Straight up!" Whatta deal!
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Well, not exactly, you still get interest. Really crappy interest. So crappy that if you take the same monthly amount of money that you would pay for that premium, deduct the amount you would have to pay for a much cheaper term policy, invest the rest in any reasonable medium-risk investment vehicle (preferably on a pre-tax basis as Scott says), you will beat it by a mile. Which is just another way to restate what almost everyone else says above :D
 
FlyNE said:
Understood. But you were giving single guy advice to a married guy (even though you did point that out). :yes: :)
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True, but a married guy without kids. For me personally, the defining line is the kids. But I might feel differently were I married. :)
 
Ted DuPuis said:
True, but a married guy without kids. For me personally, the defining line is the kids. But I might feel differently were I married. :)
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You would and you will. When you walk down the aisle you're making a promise to her and her family. Shake her father's hand and promise him you'll take care of his little girl and I promise you'll feel differently. Being dead doesn't make that promise go away. :no:
 
Chris,

A couple of points:

- I also have life insurance through state farm. I don't fly an experimental, so I'm not sure how that would affect things. I was in their highest tier (super preferred); being a pilot knocked me down one tier. It wasn't significantly more.

- Life insurance from work will likely not cover that much. Often it's 1x your annual salary. Depending on your situation, that may not be nearly enough.

- If you're going to have children or other dependents in the future, you will probably want life insurance from somewhere other than work. First, if you become unemployed for some reason or if you switch employers, you might not be covered anymore. Second, if you get term life insurance now rather than much later, it will be significantly cheaper over 20-30 years. I'm paying very little now; I looked at the amount I would be paying if I were in perfect health in 20 years (your health might not be perfect then...high blood pressure, etc.) and it was almost 3.5x as high.

-Felix
 
CJones said:
So, has any pilot here ever successfully applied for and received life insurance coverage from a 'normal person' insurance agency? Is there any chance I could get approved for this policy? We did file the application, so we'll know for sure relatively soon, but I was a bit surprised at how detailed their questions were.
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When I went to work for Cal Dive, there was a pilot exclusion on the life insurance they bought everyone. The benefits gal called around and found cheaper premium coverage for me (same benefit) because I was a pilot. Go figure, she changed the whole company over to them. Sorry, I forget who it was. They didn't ask for any details, just that I was a pilot.
 
Mine is thru Zurich Kemper. They had similar questions but no private pilot exclusions. I suppose I ought to go back and review the fine print for experimentals, altho at the time I had no thoughts in that direction.

30 year fixed rate term insurance will take me out through all "raising family" financial events, I believe.
 
gkainz said:
30 year fixed rate term insurance will take me out through all "raising family" financial events, I believe.
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That's one reason we started thinking about life insurance now - a 20 year term will give us a 'payback' just as potential kids are heading off to college. AND, I will turn 30 in November. :yikes: I don't know where the 'price break' falls for life insurance, but 30 y/o seems like a NRN to put a break in place.

Is anyone here using PIC Life? www.piclife.com
 
Well, I finally got some details back from our insurance agent about this 'return of premium' policy. We went ahead and had them do the phyiscal and blood work (free results for us). Out of the three tiers of rates, my health would put me in the top 'Super Preferred' rate class, BUT the fact that I fly (experimentals nonetheless) I got knocked down one notch to the 'Preferred' category.

So, for $250,000 'Preferred' category 20yr term return of premium policy, it would run $710/yr. I also did a quick quote from PIClife, and their standard (not return of premium) $250,000 20yr term would be $270/yr.

So, if I have this correct in my head, I could (theoretically): Take the $440 difference per year between the ROP policy and 'Standard' policy ($710-$270 = $440), put that into a 3.75%APR savings account and break even at the end of 20yrs. Not to mention the fact that the 'extra' $440 I put in today will be worth less than the extra $440 I put in on year 19.

Am I reading the numbers correctly?
 
CJones said:
Well, I finally got some details back from our insurance agent about this 'return of premium' policy. We went ahead and had them do the phyiscal and blood work (free results for us). Out of the three tiers of rates, my health would put me in the top 'Super Preferred' rate class, BUT the fact that I fly (experimentals nonetheless) I got knocked down one notch to the 'Preferred' category.

So, for $250,000 'Preferred' category 20yr term return of premium policy, it would run $710/yr. I also did a quick quote from PIClife, and their standard (not return of premium) $250,000 20yr term would be $270/yr.

So, if I have this correct in my head, I could (theoretically): Take the $440 difference per year between the ROP policy and 'Standard' policy ($710-$270 = $440), put that into a 3.75%APR savings account and break even at the end of 20yrs. Not to mention the fact that the 'extra' $440 I put in today will be worth less than the extra $440 I put in on year 19.

Am I reading the numbers correctly?
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Don't you think that investing in something other than a savings account over twenty years you can beat 3.75%?
 
alaskaflyer said:
Don't you think that investing in something other than a savings account over twenty years you can beat 3.75%?
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Definitely. But that's the point I'm making - all it takes is 3.75% APR to break even in the long run, with MORE than breaking even definitely possible.
 
You're all missing something. Term Life paid for pretax yields a death benfit that is taxable. Term Life paid post tax, yields a death benefit that is nontaxable.

Many law firms pay reimburse their partners for after tax premiums on the 31st of December for just this reason.
 
bbchien said:
You're all missing something. Term Life paid for pretax yields a death benfit that is taxable. Term Life paid post tax, yields a death benefit that is nontaxable.

Many law firms pay reimburse their partners for after tax premiums on the 31st of December for just this reason.
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I'm confused :idea: Life insurance death benefits aren't taxable at all, except for accumulated interest paid out on top of the defined benefit...right?
 
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