Insurance

QUESTION: Tommy is thinking about buying a return of premium life insurance policy, and he asks Dave if they’re too good to be true.

ANSWER: It’s not too good to be true, Tommy. It’s a rip off. Never do return of premium policies.

If you were to take that extra money you’d be paying and put it into a good mutual fund, you’d get all the cost of your policy back after 30 years 100 percent of the time. Return of premium policies are completely an insurance gimmick. They’re crap.

When it comes to life insurance, always go with a good, 15- to 20-year level term policy. And always avoid return of premium. That’s the deal.

QUESTION: Brenda asks if she should keep buying dental insurance for her kids. Dave suggests a better option.

ANSWER: Dental insurance is one of those things where it’s easy to see that they’re charging you for more than you’re getting in return. We’ve had dental insurance proposed to us at my company several times as an employee benefit. When you add up what you pay for it in a year, you’ll rarely spend that much on dentistry.

There’s a dental discount company I highly recommend called 1Dental.com. That’s worth it. As a member, you get discounted rates on dental work. I’ve gotten to know the folks behind this organization, too, and they’re great people.

QUESTION: Craig asks if it’s a good idea to get mortgage disability insurance during Baby Step 2. Dave advises against it and offers a better alternative.

ANSWER: No. Mortgage disability insurance is a gimmick. I would have long-term disability insurance — period. I wouldn’t buy insurance just on a mortgage, or just on loans.

Long-term disability insurance is fairly inexpensive in most cases, especially if you get it through work.

QUESTION: Nate began looking at life insurance policies after he and his wife had their daughter. During the medical screening, he learned he had cancer. After treatment the doctors declared him to be in remission, but he can’t find a life insurance company that will work with him on coverage beyond what his employer provides. Dave gives Nate some suggestions.

ANSWER: I would advise conducting a search of every “guaranteed issue” company and policy out there. The term, guaranteed issue, means they don’t do a medical check. The problem is these policies generally run 10 to 20 times more per thousand than those where you qualify medically. So, you’re not going to get a lot during this time.

Check at work, and see if you can buy more and add it to the coverage they already provide. Some employers provide a double-up option if you’re willing to pay for the additional coverage. If you can, and the price is reasonable, do it. If you have a mortgage, call the mortgage company and get mortgage life insurance. It’s gimmick insurance — and something I don’t normally recommend — but many times you can get it without medical clearance.

Once you get past that three- to five-year window where many insurance companies will work with you again, try to find a good, level term life insurance policy with coverage that’s 10 to 12 times your income, and drop all this other stuff. In the meantime, pick up anything else you can find – even if it’s those little $10,000 policies banks sometimes attach to your checking account for $20.