Life Insurance: Who Really Needs It...and Who Really Doesn't

A type of marketing mailout I've been getting a lot lately involves pitches for life insurance policies for little children.

The offer is simple. Insure a small child now and you'll "lock in" an incredibly low premium for the child's entire life. This is a seductive idea, especially for grandparents who are struggling to pay ever-increasing life insurance premiums themselves. Little Susie or Billy will still be paying $15 a month for life insurance when they're eighty! What fond grandma or grandpa wouldn't be thrilled with the idea of such a deal for their darling grandkids.

Often such pitches also point out that if your child dies, you'll have money for funeral expenses. Who can object to that?

Well, I can. Let's take a little closer look at these great deals.

The purpose of life insurance is to make sure a death in the family doesn't create a financial disaster for the survivors. When a breadwinner dies, that income disappears. Immediately, the family can be in serious financial trouble, especially if they have little or nothing in savings. Without money to pay the rent or the mortgage, money for utilties and food, such a family can literally be homeless in a matter of a few months. Even a family where both parents work can face a financial crises if one of the parents dies and the household income drastically drops. If it's a stay-at-home parent who dies, the family will still need money for house cleaning, child care and the hundreds of other services that parent provided.

In such cases, a generous life insurance payout can keep a family's financial situation stable for years. Even a relatively modest amount can give the family enough time to adapt: time to move to a smaller home, for example, or time for the surviving parent to learn a skill and obtain a job.

But children do not provide income or services, and when they die, the family isn't faced with a financial crises. I can't imagine anything more emotionally devastating than the death of a child, but in pure financial terms, it's rarely a disaster. And though it might be an effort, most families can find the money to pay for a child's funeral, either by dipping into savings or taking out a short term loan.

So there's little or no actual financial need to buy a life insurance policy for a child.

What about locking in that low, low premium rate? Or the fact (claim the mailouts) that the benefit can never be canceled or reduced due to changes in the child's age or health. Isn't that a good deal?

First of all, let's actually check those low, low rates. I looked at a major company providing such insurance and, using the example of a 3-year old little girl living in Texas, was quoted a rate of $15.25 a month for $25,000 worth of insurance.

What's wrong with that?

First, this hypothetical child won't have a family to protect for at least 15 years. (No underage child brides in this article, thank you very much!) So a parent or grandparent would pay $2,745 in insurance premiums before insurance was even necessary.

Second, $25,000 worth of insurance may sound like a lot, but it's actually a small amount to act as a safety net for a family, especially if you factor in cost-of-living increases for the next 15 years. If Amy (let's give her a name) gets killed in a car accident twenty years from now, $25,000 may only be enough to last her family a few months. So eventually she'll need to buy more life insurance....and I guarantee you she won't get the additional coverage at that highly-touted low, low monthly rate.

Third, how does one even know that an insurance company will be around in fifteen years?Insurance companies, like any other company, can get into financial trouble or even go bankrupt. (Check the recent history of insurance giant AIG.) Although there are usually safeguards in place to make sure policy holders' claims are paid, there are no guarantees that Amy's super special lifetime rate of $15.25 wouldn't change if another company took over the policy.

Fourth, such policies are almost always whole life policies, and premiums for whole life policies are traditionally much, much higher than term life insurance premiums. (For an brief explaination of the difference between whole life and term, check here.)

Example? I decided to get some idea of how much term life insurance $15.25 a month would buy, so I checked Met Life's online sample quotes.Everything will vary, of course, for any specific situtation, but I still got quite a shock.

Assuming both 3 year old Amy and 30 year old Amy are in good health, here's what they can buy for less than $16 per month.

For 3 year old Amy, $15.25 a month will buy $25,000 worth of insurance.
For 30 year old Amy, $12 a month will buy $250,000 worth of insurance.

Ten times as much. Is that pitch for insuring your kids or grandkids sounding quite as good now?

But, Cathy, you say, what if Amy gets sick between the ages of 3 and 18? With the whole life policy, she still gets those low rates. (It says so right in the mailout.) With the term life policy....who knows?

Here's where we get to the crux of the matter.

Most of us have a limited amount of money to spend on insurance of all kinds: life, health, auto, home. The financial well-being of our families depends on how well we allocate what we can afford to spend.

So, if Amy gets seriously ill between the ages of 3 and 18, it's going to do her a lot more good if her family has spend a little more money on health insurance for her, rather than buying a life insurance policy that she doesn't actually need. Even if her parents get basic health insurance through work, the relatively small cost for supplmental health insurance might be a much better buy.

And if Mom and Dad are struggling to buy enough life insurance for themselves, it might make much more sense to spend that $15.25 a month to help them afford more. Remember, buying a life insurance policy for Amy benefits her dependents, not her. Doesn't it make more sense to spend your money to protect Amy herself while she's growing up?

Don't just accept the word of an insurance company marketing mailout that whole life insurance for a child is a great idea. And don't believe every promise you read in such pitches, including the claim that there are no conditions whatever that could cause that premium to increase. (Always, always, always check the fine print of the actual policy before you agree to buy.)

Also, keep in mind that when Amy is 80, she won't need much life insurance. Her kids won't be dependent on her any more, her house will likely be paid off, and she and her spouse may have savings or investments to supplement any retirement income. (Besides, in 2086 when she's eighty, how much will $25,000 actually be worth?)

Check and compare premiums, and know the pros and cons of different types of insurance before you buy. And remember.... spend your money to protect your kids and grandkids when they're children. Let them make their own insurance decisions when they're grown.

Don't Try To Turn Your Home Into An Operating Room

According to those who push antibacterial and "sanitizing" products, the world is full of vicious germs that must be hunted down and slaughtered via a whole host of sprays, wipes and and gels.....or you and your home, your family and yourself will end up stinking, sick or dead.

Uh-huh.

You've seen the commercials, I'm sure. Bacteria. Vile, nasty bacteria. Too small to see with the naked eye, but still...just the thought of those tiny creepy-crawlies anywhere in your home is too horrible to contemplate.

Right. If you've bought into this idea, I suggest you quit reading now.

Why? Because unless you plan to float for the rest of your life in a swmming pool filled with alcohol or bleach, you will come in contact with microorganisms. In fact--brace yourself-- you, like almost every other living thing on earth, are a jungle teeming with such life. Your entire skin surface, mouth and innards are full of microscopic life, and if you managed to kill off all or even most of these critters, you yourself would soon die.

For example, without hundreds of different kinds of bacteria in your intestines, you couldn't digest what you eat. In fact, such microorganisms are so important that some of the hottest new food products around are various types of yogurt that contain probotics, the kind of bacteria that breaks down food.

So the "kill all bacteria!" tactics used by those who sell sanitizers are a bit exaggerated, no? Actually, most bacteria is either neutral--it doesn't help you or hurt you--or benign, like your friendly intestinal critters. There are some nasties out there, especially salmonella and e-coli, that can give you a very bad time, but you don't need to nuke your home with "sanitizing" chemicals to get rid of them. You just have to use good sense--handling raw meat with care, for example, and scrubbing food prep and other germ-gathering surfaces thoroughly with soap and hot water. Also, since letting your kitchen sponges or dishwashing cloths sit in a wet heap invites damp-loving fungi and mold to move in, rinse them thoroughly and let them dry between uses.

As for keeeping your kids healthy, the smartest thing to do is teach them to wash their hands frequently, especially every time they use the bathroom and before they eat--and we're talking about a honest whole-hand washing with hot water and soap, not a quick flick of their fingers under the tap.

Meanwhile, take a look at the labels of some of those "sanitizing" and "antibacterial" products. You'll see a lot of phrases like "hazardous to humans and domestic animals" and "avoid contact with food and utensils" or "wash throroughly with soap and water after handling."

Do you really want your family aborbing, ingesting or breathing in all those chemicals? Or does it make more sense to just clean thoroughly, or when it comes to bad smells, open a nearby window? (Actually, since interior air pollution is endemic in this country, opening windows and letting your house air out occassionally is a good idea even when you're not trying to get rid of a specific stink.)

So...how much can you save by not trying to kill every microorganism in your house?

Well, here are a few of the most heavily advertised "sanitizing" products. If we assume you'd use the amount listed, it would cost you, per month:

• Clorox Disinfecting Wipes 35 count, one container per week, $10.27
• Oust Surface Disinfectant and Air Sanitizer, one container per month $7.90
• Purell Hand Santizer, one container per week $13.54
  

That's a total of $31.71 per month or more than $380 per year, a lot more than you'd pay for ordinary soap and water.

If you're in a situation where something stronger than soap and water is needed--like disinfecting surfaces that have been touched or coughed on by someone who has the flu--use alcohol, or bleach if the item is colorfast. And if you're in a situation where soap and water aren't available, there's no problem with carrying a small container of hand-cleaner or a few cleaning wipes. But don't load your pantry with these products because you've being told you have to kill every bacteria in your home. You can't do that, you don't need to do that, and you shouldn't pay extra in an attempt to do that.

Spend your time and money instead on regular cleaning with soap and water, thorough handwashing and sensible food handling.....the best ways to keep your family healthy.

The Best Cold Medicine in The World...And It's Free

It's cold time. I just had my once-yearly cold. I could feel it coming on--the signs are familiar--a little scratchiness in the throat, a little ache in the ears--and 24 hours later, the temperature goes up, the coughing starts, the sinuses start dripping...well, you know the rest.

I did not go to a doctor. A doctor can't help you with a cold, because a cold is caused by a very specific virus and though doctors can slaughter bacteria right and left with antibiotics, there is no shot, pill or nasal rinse that will wipe out a cold virus. The only thing that will do this is our own immune systems, helped by time and the best cold medicine in the world...

...rest.

Honest. The best thing you can do to fight a cold is rest, and by rest I mean crawl into bed, pull the covers over your head and sleep as much as you possibly can.

It's may be a cliche, but it's true. When we do go to our doctors, most of them will say, "Go home, get plenty of rest, drink plenty of liquids." Unfortunately, in our "sleep is at the bottom of my priority list" world, we tend to ignore or completely reject this advice. We insist that our doctors give us something to get us up and running at full speed again, to the point that many doctors now give their patients medicines that don't actually help them get well.

"Oh, come on," you say. "There are plenty of over-the-counter cold remedies that work. I know. I've tried them. I feel better."

You're right. You will feel better, but only because these concoctions mask your symptoms. They bring down your temperature, they ease your cough, they dry up your sinuses. But the cold virus is still rampaging through your body, and the danger is that, feeling better, you'll fail to do what you really need to do and that's rest.

You think not? How many of us have colds that drag on for weeks? We guzzle the cough syrup or the "nighttime cold relief" for a few days, feel better, think we're cured, ease off on the medication and up goes the temperature, back come the aches, and it's time to reach for another tissue...and another dose.

Medicines don't cure colds. They only make us feel well enough to ignore our doctor's advice and get back to the type of frantic rushing around that weakened our immune systems in the first place.

I'm sure you've seen this commercial. Mom is in bed, sneezing, sniffling, suffering. Meanwhile, the kids are trashing the house and Dad's scorching the clothes he's trying to iron. But not to worry...Mom chugs a little of that famous "cold relief" medicine and she's up and back to work, cleaning, cooking and ironing, with a smile on her face and a song in her heart. Ain't modern medicine grand?

Except that, in the real world, what could have been a few days of being sick will turn into a few weeks, and maybe even a bad case of bronchitis, because Mom didn't rest.

When you have a cold, go to bed. Yes, I realize that some of you may have bosses who demand you come in sick, and if you have a choice between going to work and losing your job, take the OTC stuff and go to work. (But first, try reminding your boss that colds are very contagious...does he really want you to come to work and spread it around?)

But the second you come home, go to bed.

Single parents with small children may have to spend time looking after the kids. But you do not have to make cookies for the back sale. You do not have to clean the bathrooms. You do not have to vaccum the floors. If you have a spouse, figure out a way to have your spouse handle as much of the necessary work--taking the kids to school is necessary, scrubbing out the bathtubs or mowing the lawn is not-- as possible.

Go to bed and stay there. Don't sprawl in front of the TV. Don't sit at a computer. Every possible second that you do not have to be doing something, sleep. Get up a few times a day to gulp down as much chicken soup and water and apple juice as you can, because colds will indeed dehydrate you. (Don't drink coffee or, soda or anything else caffeinated.)

Crash. Give your marvelously competent immune system a chance to do its job. Save money on doctor's bills. You can use the OTC stuff to make you comfortable enough so that you can sleep. Stay in bed. Ignore the idiotic idea that you're being "lazy."

You're not lazy. You're smart.

Get some rest. It's the best cold medicine there is...and it doesn't cost you a dime.

Libraries! One of the Best Deals Around

If you want to save money on books, videos, CDs, magazines, internet access, newspapers, entertainment for your kids,.....

...oh, heck, just get yourself down to your local library!

I live right between two small towns, Azle and Springtown. Both have excellent libraries. Thanks to them, I have been able to, in the last few months

• Read Thomas Friedman's The World is Flat for free.


• Read David McCullough's The Path Between the Seas for free.


• Read the entire Dean Koontz Odd Thomas series for free.


• Read the entire Shopaholic series for free. (Yes, I do enjoy Bex's adventures, though in the real world, someone with her attitude would soon be both broke and divorced. Seriously.)


• Watch the entire Masterpiece Theatre series, I, Claudius, for free. Also Bleak House. Also the extended version of The Return of The King.


• Read Newsweek, Time, National Geographic, Consumer Report and half-a-dozen other magazines for free. (Okay, so I don't read all of them every visit.)


• When I was wrestling with both a new computer operating system and a cranky dialup connection (now replaced with broadband, thank God) I was able to use my library's internet-connected computers, broadband fast, to find information I needed...for free.

And those are only a few examples of what a good library can provide.

If I had kids I could also have taken them to the library's Saturday afternoon puppet show, or checked out and let them watch The Land Before Time I, II, III, IV (how many of these sequels are there?) the requisite twenty times straight without buying or renting tape after tape. They could have browsed through a dozen shelves of children's books, or gone to the library's Childrens Reading Hour. Or they could have used the library's "kids only" computers, hooked to highly filtered connections, to explore the internet or play games.

If I was a job seeker, I could have searched through a list of companies, then gone on the internet to browse job listings or even apply for jobs. If I was a student, I could have used those internet-connected computers to do research.

Or I could have checked for everything from recipes to home repair information, in the book stacks, in the magazine room or on the internet.

A library is a terrific grab bag of free information and entertainment, and all you need to gain access is a library card. And a library card is almost always free to anyone who lives in that town.

Stop by your local library. It's a treasure chest just waiting to be opened.

Diapers: The Real Poop

I don't have kids, and my total experience with diapers was having to change my little sister's back in the days when you fastened the darn things with safety pins. (I wasn't really good at that and got chewed out repeatedly for sticking the little stinker. Hey, she kept wriggling! Maybe that's part of the reason I don't have kids.)

Still, I know that disposable diapers are a huge expense for families with infants, plus one of the biggest contributors to landfills. So when I saw this article in my local paper, I thought it was worth sharing.

All I can say is, we've come a long way from safety pins and plain cotton. (Bamboo diapers?)

Money 101?

Do kids need to learn about handling money in school? Indications are that the answer is a resounding "Yes!."

In a recent article in my local paper, the Fort Worth Star-Telegram, consumer affairs writer Teresa McUsic cites a test by the Foundation for Financial Literacy in Houston that paints a scary picture of how much the typical high school student knows about handling money.
700 kids were given a test to gauge their financial literacy, with questions such as whether property and sales taxes are deducted from paychecks. The average grade was a dismal 48 percent correct.

Based on such information, the Texas Legislature is taking steps to add courses in money management to the Texas high school curriculum. Topics to be covered would include avoiding and eliminating credit card debt, the responsibilities of home ownership and renting, stock market investment and savings plans.

According to the article, seven states already have such courses: Alabama, Georgia, Idaho, Illinois, Kentucky, New York and Utah.

With consumer debt and bankruptcy at all time highs, it's clear that people need to learn more about how to manage their money, and they need to learn it early, before they get into financial trouble.

If you think classes in personal finance in high school are a good idea, contact your state legislature or school board.

Or start teaching your kids about finances yourself.

Once they get old enough to handle the necessary math, have them pay the bills now and then, filling out the checks (you'll look each check over and sign it before mailing) and subtracting each check amount from the total in the account. Go over a credit card statement with them, showing them the interest rate you pay, and how that translates into a monthly finance charge. And I strongly recommend that you do what my father did....make your kids pay for at least half of any major purchase they want to make, such as their first car.

Too grim? Not at all. If you help them learn financial responsibility in a calm, matter-of-fact way, as part of their becoming an adult, your kids will benefit for the rest of their lives.

Children need to know that handling money is more complex and more important than just expecting a never-ending supply from Mom and Dad. You teach your kids to look both ways before crossing a road; as they grow, also teach them the money-handling skills they'll need to keep from being financially blind-sided when they become adults.

Check With Your Insurance Company Before You Let Your Teen Get Behind the Wheel

A lot of people find it hard to resist the combined pressure of convenience and teen nagging when it comes to letting teens drive. In our busy lives, it's helpful to have kids who can ferry themselve around....and who doesn't get weary of hearing them bug you for their own car?

But costs are a big part of this situation....and one of the the biggest costs, and possibly your biggest financial surprise, may be the huge jump in your insurance bill. This is largely because teens, both inexperienced and often easily distracted, are involved in a proportionally higher number of accidents than other drivers.

Insurance costs can jump 100% to 300%+ when you add a teenager to your list of family drivers. So you definitely need to check with your insurer before handing over the keys. You can get discounts for a number of reasons: putting your teen's car insurance on your policy for a multi-car discount, buying your teen a car with certain safety equipment, your teen being a good student, or restricting how much your teen can drive the family car. Ask your insurer about such discounts, then do some comparison shopping with other insurers.

Otherwise, you may get a different sort of "sticker shock" when you open your next insurance bill.

A good brochure to explain insurance to your teenager is available at the Insurance Information Institute's website at http://www.iii.org/media/publications/brochures/oops/