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(Life insurance provides a financial safety net for your benefactor if you die, especially unexpectedly or prematurely. It should be called death insurance but that name doesn't sound as pretty. Since what I am proposing should be called life insurance but is the antithesis of what we commonly call life
insurance today and thus is death insurance)
With impovements in healthcare and medicine, people are living a lot longer than they were years ago. What if when the work force of today retires, they didn't save enough money to live the extra years they are now able to enjoy? I suggest an insurance that if you live past thirty (or any pre-determined number) of years beyond your retirement then you should get a pension. To make up for cost of living increases it would be set to be, say, 50% above the poverty level, and would countinue until you die. So should someone be extraordinarily healthy then they would be able to enjoy their health and good fortune.
Premiums would have to be paid prior to retirement. The rate would depend on a bunch of factors, such as: expected healthcare improvements, increased cost of living, overall health of the insured, etc. I am not an underwriter but I am sure that the insurance companies could find a way to make it profitable. There would likely be very many diferent options like there are with life insurance.
Pension
http://www.pensionc...g.uk/pages/home.php
[zen_tom, Jun 29 2005]
Pension
http://en.wikipedia.org/wiki/Pension
[zen_tom, Jun 29 2005]
Life Assurance
http://en.wikipedia...wiki/Life_assurance
A broader definition of what we're talking about [zen_tom, Jun 29 2005]
Personal Pension Plans
http://www.opas.org...rsonalPensionPlans/
This is a link from the Pensions Advisory Service that describes Private Pensions in the UK - perhaps this is a UK/US thing? [zen_tom, Jun 29 2005]
Companies that offer Private Pensions in the UK
http://www.financelink.co.uk/pension/
[zen_tom, Jun 29 2005]
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Annotation:
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This actually sound like a logical venture. I was going to give you a bone for it, because I despise logic, but what the hell.+ |
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A nicer word for this might be "longevity insurance". Payout annuities already offer this though, and are available from any bank or insurance company. |
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At retirement, you pay the bank/ins co. your life savings, say $500,000, and the bank exchanges that for a contract which will pay you $1000.00 per month for as long as you live, even if you live for 170 more years. A fixed $1000.00 per month would lose purchasing power over time, due to inflation, but there are stock market options that keep pace with inflation or even beat it. |
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Not exactly the same, but look into "whole life" insurance policies. |
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Whole life insurance is paid off to you
when you reach 100 years of age. + |
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Whole life insurance is not a particularly great idea. It only pays to 100 years at max and the amount you invested in the "retirement package" would have been better invested seperately (since it caps out at your benefit at 100 years of age). Buying term life insurance and looking for outside investments is probably the best way to go. |
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I guess this is basically retirement insurance. It is just another monthly fee during life to assure a sufficient enough income after you retire. It would differ from a payout annuity in that it is not a set amount at time of contract but rather, a flexible amount based on living conditions. What if, in 50 years, $1000 (or whatever) isn't enough anymore? The death insurance would adjust based on poverty level (or median income, or any economic factor). It is a different approach and would cater to a retirement security concept. It would be a different type of annuity. |
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If everyone over 70 y.o. was bringing in enough to be grossing 50% over the poverty level, there would be only another 25% of that group at that level. I guess what I want to know is ... how does that group afford to pay another "fee"? Assuming as I am these are not early adopters of conservative financial plans. |
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Isn't this just Social Security? Also, there is a bit of a moral hazard here. There's a big incentive for the insurance company for you to die before you should. If you die before you turn 70 they make a bunch of money. Basically, they WANT you to die early. This is a bad thing, and creates a bad conflict of interest. It's a neat idea, but I think it would be best implemented as some sort of Social Security reform rather than a big private corporation hoping people die quicker. |
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You don't want term life. Term costs
less because you are only renting a
policy. Many times the death benefit
doesn't even pay out until 1-2 years of
paying into it, you have to read the fine
print on these things. The price goes
up every year (or 5 years) and in the end
when you stop paying you have
nothing. Whole, you stop paying and
have what you put into the policy. Term
also goes up tremendously if you have
some sort of accident or illness and
they can even decide not to insure you
when the year is up. With inflation, life
insurance isn't worth the time. Just
save up for your funeral costs. |
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Yeah, Greenspan is right. They would
want you to die earlier. Advertisements
for sky diving, potato chips and
depleated uranium tooth fillings would
be in your mailbox. |
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Erm, this is already heavily and very thoroughly baked in the form of the Pension. I'll add a link. [Added] See the wikipedia stub on the financial term 'Life Assurance'. |
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Has nobody else heard of this before? Hasn't the subject of pensions been (almost constantly) in the news for the last 10 years? |
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Anyway, it pains me to do this, but [snipped-for-deletion] *widely* known to exist, unless this is a cleverly crafted piece of HB silliness (coffee anyone?) and I've totally missed the point. |
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[zen tom], while you have a point that Pensions are widely known, they also tend to be restricted to the company/ies you work for. It is my understanding that if you work for Company A for ten years, and then switch to Company B, then any pension you might have accumulated at Company A is lost. Meanwhile, this Idea involves insurance outfits such that it doesn't matter what company/ies you work for (as long as premiums are paid). |
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Another bad thing about pensions is that a number of them in recent years have been robbed into emptiness by the managers of the companies, who got off with slaps on the wrist. NOT a sign that when you need it, it will be there! |
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So, perhaps these things will help distinguish this Ides sufficiently that an MFD is not entirely appropriate. |
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A pension is not something that is necessarily provided by one's employer - a private pension is a financial instrument into which one makes regular contributions up to retirement age, on the understanding that on retirement, you are guaranteed a certain income for life. |
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They are often incorporated as trust-funds in order to protect them from taxation and other graspy things. However, the pattern of paying premiums up to a certain even and then receiving income after an event is such that it can be classed as insurance. |
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Some states offer government pensions as a part of their social security arrangements. For example, in the UK, one pays one's National Insurance contributions in return for healthcare, job-seeker's allowance and a pension in the event one becomes ill, unemployed or old. |
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Each of these things is also available to the private individual as a part of an insurance/assurance package. Talk to your local insurance broker for more details. |
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Greenspan- The conflict of interest exists in any pension or annuity. Its a gamble that the insurance company or bank takes. They already have your money. The idea isn't to keep it but rather make investments withit, keep the profits, and return it. They are basically borrowing it from you to make money from themselves. If they are nice they will give you a tiny bit of their profit (ie. interest) and hopefully not charge you too much for the experiance. If you die, its like a bonus, for them. |
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sartep- Term insurance can be bought so that the premiums don't increase (although this is not pure term anymore). The point of life insurance isn't to give your heirs a huge sum of money but rather to cover all your debts and make sure your family can survive without your income should you die too early. The point of most loans is to have them payed off before you die, so there should be no expenses, other than a funeral, and thus no need for insurance anymore if you live to a natural death. |
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zen_tom- This is intended to be a serious idea. It is an insurance on insurance basically. You would be paying premiums in case you didn't plan enough ahead to have enough money saved up. With life insurance, not very many have enough money saved up to pay off all their debts and take care of their survivors if they die earlier than expected. You buy insurance to cover you for your family if you died too early and didn't plan on it. This is NOT another pension. It is insurance that, should you not die early enough, you have enough money to pay for bills and food. It is NOT another retirement package. It is insurance so that, in case you didn't save enough up for a long retirement (which could be a pension, an annuity, social security, etc.) then your retirement could be extended and countinue. This is for, like, after your planned retirement. (Forgive me if I sound redundant). It may be payed out like a pension but it is not one. It is based on a different idea. That is why it is different. |
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//It is an insurance on insurance basically. You would be paying premiums in case you didn't plan enough ahead to have enough money saved up.// |
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//It is insurance so that, in case you didn't save enough up for a long retirement (which could be a pension, an annuity, social security, etc.) then your retirement could be extended and countinue.// |
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These are the two parts I don't understand. So we are planning for something we didn't plan? (Kind of a Donald Rumsfeld notion) If you're planning not to have planned, why not simply plan for it in the first place? |
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If you didn't save up enough for your retirement, then how are you going to afford to insure for having not saved up enough? |
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And what if you die before it pays off, could we create some insurance thing that will pay in that instance as well? And some insurance against that too? |
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It almost sounds like a kind of financial perpetual motion machine - that's not a bad thing - people make huge amounts of cash by employing similar methods in option and derivative markets. |
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I've snipped my mfd tag because it would seem from annotations that it's not widely known to exist, and I think it's a good idea. |
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I don't understand this idea at all. It's NOT a pension? (BTW, if you work for an employer for over 5 years and then quit, chances are your pension IS portable; you don't lose all the money your company has contributed. Usually you become "vested" and retain the account value for use later). |
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Is this a government-funded program? Can't be; governments can barely take care of their 65-year-olds, let alone everyone who makes it to 90. |
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But as [zen-tom] said, if you're paying premiums to insure your negligence in paying contributions to your retirement fund, then why not just make contributions to your retirement fund? |
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So, the idea here is that you pay into a
scheme while you have an income, and
it pays out from the time you retire until
the time you stop being warm. But it's
not a pension. Wow. |
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My thoughts behind the subject were based on future improvements in healthcare that would allow the human life span to lengthen unprecedentedly and inflation rates to rise faster than expected. What if a new type of organ transplant or heart surgury were to allow humans to live to 150 years of age? If you were fifteen years into your retirement (say, 75 or 80 years old), then you didn't likely plan on needing money to live for an extra 75 or 70 years. Then you might need some sort of income to survive financially. -or- What if a dollar becomes worth about 10 cents because of global markets and growth? The originally sufficient retirement money would be depleted to fast for one to be finacially viable for very long. My idea was to offer some insurance for this. |
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You'd have to take out a mortgage on that new heart. I.e. We'll give you a new heart, but you have to get a job and pay us $3,000 every month for the rest of your life, and if you miss a payment then we'll kill you and give the heart to someone else. |
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Term life is great if you have some dependents you want to protect for a short term. IE you have a couple of kids, and a stay-at-home wife raising them. You'd want them to have enough money to pay the mortgage and bills while mom finds work. Once the kids can take care of themselves for the two hours or so between school-out and parents coming home, term life is a waste. |
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Whole life, if you can get it, is basically a forced savings plan that pays out a bonus if you die. If you happen to live a nice long life, you can even start to draw cash value from the policy, instead of paying into it. However, as UnaBubba said, they're hard to get these days, especially if you don't lead a straight-razor sheltered existance. I got my policy when I was very young (started paying in at 14) and I got the best possible rates available, since I didn't drink or smoke, didn't fly small planes, didn't skydive or ski or white-water raft, or do whatever other high-risk activity they asked about. My grandparents were still alive, and none had shown any heart trouble. Now that I'm older, I do all of those things (except smoke), two grandparents have died of heart attacks, one parent has survived a heart attack, and one sibling, one parent and one grandparent have been treated for minor cancers. Given my activity and genetic history, if I were to try to get a whole-life policy today, I'd likely be paying more for it than I do for rent. |
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That being said, it exists. |
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Freefall- If your whole life policy is like most others, then your death benefits will be equal to the cash value you are trying to accumulate in the forced savings account. Most are set to be equal at age 100. When you die however, you don't get both. You will get the death benefit and not the cash value saved up. At age 100 you will be given your cash value and your death benefits are canceled. If you borrow against your cash value you have to pay it back, with interest, which is a bad deal since it is YOUR money in your "savings" account. Should you borrow $20,000 to remodel your house or whatever and your total death benefit was $100,000 then, should you die before you payed it all back with the interest, the death benefit would be $80,000 (or the remainder). You are basically saving up for your own death benefit and paying an insurance company for the convenience of doing it for you. If you want life insurance and to save money, buy cheaper term insurance and invest the difference in something else. You will likely make much more money if you do it right or even if you hire an investor to do it for you. |
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Some people like whole life. I would personally rather make my own investments instead of buying into a plan. Generally though, I advise people I know to not buy whole life. The insurance companies make a lot of money on it and the consumer is often decieved or at least not informed of the available alternatives which can be better. If you ask an insurance saleman or an investor they will usually "buy term and invest the rest" themselves. There is a reason why the tallest buildings in the city tend to belong to the banks and insurance companies. They know how to get everyone's money. |
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//Basically, they WANT you to die early. This is a bad thing, and creates a bad conflict of interest. It's a neat idea, but I think it would be best implemented as some sort of Social Security reform rather than a big private corporation hoping people die quicker.// |
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I would rather have a private corporation hoping I die quicker than the government hoping I die quicker. |
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