Areivim USA - Coronavirus

[ExGingi]

Income replacement - If someone is earning income of $500k/year and plans retire at 65, if executed, a policy to replace income will pay $500k/year until they turn 65. Disability insurance is used for this because if someone is disabled and can't work, they lost their entire income. It doesn't matter how much you need to live or if you have millions in the bank, you are insuring against your ability to work.

Economic loss replacement - If someone has a wife and 7 kids that they feed, school, marry, etc., if they drop one day, they want the family to still be able to eat, go to school, marry, etc. Depending on each persons family makeup and long term needs, you can insure that there will be a large enough payout to cover all those expenses down the road. Eg. How much money will be needed until the last child is married off? And then for how much will the wife need...

-0.5

You got the second part wrong.

[yuneeq]

-0.5

You got the second part wrong.

That's why you're here...correct me

ETA: I don't know about the underwriting aspect, but is it correct - it's what I want to have covered as a purchaser?

[ExGingi]

That's why you're here...correct me

ETA: I don't know about the underwriting aspect, but is it correct - it's what I want to have covered as a purchaser?

With due respect to @yfr bachur I will respond to you first, even though that might violate the rule of על ראשון ראשון ועל אחרון אחרון, as I think it will also answer some of @yfr bachur's questions.

Insurance is a financial tool of risk transfer.

When a person owns property there are various risks, and insuring against those risks will make sure that if a loss actually does happen, that loss is mitigated to the loss of the object, not to a financial loss. (for example, if I own $30,000 worth of Seforim, and there was a fire that burned them all down, the insurance will make sure that the loss is limited to the actual loss of seforim - which results in not having them available to learn the next day, and not a financial loss of wanting to replace them and having to figure out how to pay for them).

Most productive members of society have a Human Life Value. The easiest measure of that is their potential future income (which can only be guessed based on inputs, hence the rules of thumb). But there are also "soft facts" that come into play. If I am the sole breadwinner for my family, and something were to happen to my wife, how would that affect my (household) financial life? Would I be able to dedicate as much to my work/breadwinning endeavors, or will I need to dedicate more time and brain space to my family? Will there be extra expenses that I might incur?

There are no hard answers to many of these questions, which is why I suggested actually painting a mental picture (the job of a good Life Insurance agent is to help a person realize various factors that could come into play, so that the person can draw their own picture, and then decide how much coverage they want).

At NO POINT does the number of beneficiaries or future needs come into play (except if that future need is a direct result of the person's death). I might decide that I need a fully loaded Chevy Suburban for my family, but all I have and can afford now is a 10 year old Mitsubishi Mirage. No insurance company will agree to insure my current car so that if something happens to it there will be funds to buy the car that I think we need.

So I'm sorry to disappoint, one cannot buy insurance to "cover what I want to have covered as a purchaser" if that is more than what you would qualify by virtue of the current economic value of whatever or whoever is being insured.

[ExGingi]

Thank you for your (really really condensed i'm sure) explanations. I have a few follow up questions
I'm not really sure what the difference is, other than thing you might have to pay for to "make up" for the loss of one of the parents (Tutors, cleaning help etc)?

I hope my post above responding to @yuneeq's attempt clarifies that for you.

Do these "rules of thumb" change based on the number of beneficiaries? The average secular family has far fewer children than the average orthodox one My wife works, and I draw a small stipend from the kollel and side jobs that equal the kollel stipend. Its not like we have huge expenses with just two children under two.

Hopefully after understanding my post above, you realize that it has nothing to do with expenses, and everything to do with what your economic contribution to your survivors is (ability to go to work, peace of mind not requiring additional help or c"v therapy, etc.).

Maybe I'm some sort of naive person but, I'm not really sure what money would do. If it was me to go, my wife would have to continue working and find someone to help her raise two children (i.e. some father figure for the children). and if was her, I'd have to go to work, and find a new wife to help raise my kids. Maybe you could help me with what I'm missing.

You said it right. No money in the world will replace YOU. All a policy can attempt at doing is replace your economic contribution to the family. And that contribution is there (beyond the stipend and whatever side gigs you might have) in various ways, as pointed out above. You would probably look to insure the breadwinner for a multiple of her income, and then insure yourself for at least 50% of that amount.

And here is why I emphasize the to "find.." expressions you used. Insurance is about taking away risk and uncertainty (which is why this entire discussion about Areivim not being Life Insurance is even a discussion). "Need to find" "will find" are all hopefull wishes (in a bad scenario). No one knows for certain how things might play out. An Insurance policy provides financial CERTAINTY second to none (which is part of why it is so heavily regulated, to make sure that the promises are indeed kept).

Am I eligible for the US market? I lived 2/3 of my life in the states, most of my family still lives there...

Let's just say that if you are upfront and discolse that you live in Israel you are not likely to be able to purchase a US policy. Even if there was a company that would agree to underwrite you based on that, the entire application and policy delivery process would have to occur in the US. Unless you purchase a policy with significant annual premiums, I don't think you're getting a US policy while fully disclosing your situation. That being said, if you think the rest of your family that lives in the US could benefit from talking to me, you're more than welcome to make the introduction.

[AsherO]

@ExGingi, asking out of curiosity. How does a life insurance company evaluate how much coverage to offer a stay-at-home spouse that has no income? Is it based on the income of the other spouse (who isn’t applying for this policy), the cost of childcare and looking after the home, or something else?

[ExGingi]

@ExGingi, asking out of curiosity. How does a life insurance company evaluate how much coverage to offer a stay-at-home spouse that has no income? Is it based on the income of the other spouse (who isn’t applying for this policy), the cost of childcare and looking after the home, or something else?

Answering from the end of your question to the beginning: as I said earlier, it's never about perceived need, it's about (perceived) living value.

Most companies will have a rule whereby a non-working spouse can be insured for somewhere between 50% to 100% of the working spouse coverage. This is all a general rule, if there are other circumstances that merit different amounts, then a good agent will properly explain that to an underwriter, and if the explanation is plausible and acceptable, the underwriter will consider it (if not with one company, then with another. This is human underwriting and is a subjective decision).

[yesitsme]

@mods Could we have a split, areivim is not LI, someone that will look for info on LI will not think to look here

[ExGingi]

@mods Could we have a split, areivim is not LI, someone that will look for info on LI will not think to look here

I second that motion, though I think the Areivim discussion should be part of it, because it will often be brought up. But the current discussion definitely has nothing to do with COVID-19. So maybe split to a thread titled "Areivim vs Life Insurance. Tzedokah, Protection, and Financial Responsibility"

[YitzyS]

I second that motion, though I think the Areivim discussion should be part of it, because it will often be brought up. But the current discussion definitely has nothing to do with COVID-19. So maybe split to a thread titled "Areivim vs Life Insurance. Tzedokah, Protection, and Financial Responsibility"

"Areivim Is Not Life Insurance. Tzedokah, Protection, and Financial Responsibility"

You don't want someone browsing the forums to get the idea that it is LI.

[yesitsme]

"Areivim Is Not Life Insurance. Tzedokah, Protection, and Financial Responsibility"

You don't want someone browsing the forums to get the idea that it is LI.

And then you'll have ***** ban ddf

[yuneeq]

"Areivim Is Not Life Insurance. Tzedokah, Protection, and Financial Responsibility"

You don't want someone browsing the forums to get the idea that it is LI.

Well said

[AsherO]

@mods Could we have a split, areivim is not LI, someone that will look for info on LI will not think to look here

I edited the question in the poll to clarify that.

If you’d like I can put it in a bold red post in the OP as well.

[ExGingi]

I edited the question in the poll to clarify that.

If you’d like I can put it in a bold red post in the OP as well.

With all due respect, I think editing the question while leaving the misnomer "do you have Areivim" is no good. Please make it accurate: "Are you a member of Areivim and if yes, do you also have Life Insurance?"

And Answer options (based on above phrasing, which I assume wouldn't require resetting the poll) should be:
1. Areivim Member with Life Insurance.
2. Areivim member without Life Insurance.

[yos9694]

. If it was me to go, my wife would have to continue working and find someone to help her raise two children (i.e. some father figure for the children). and if was her, I'd have to go to work, and find a new wife to help raise my kids.

Its more than likely that a wife wouldn't be able to continue working after losing her husband. Thats a financial need to cover as well.

[ExGingi]

When the life insurance agent and the actuary try to convey the same information this is how it looks:

You can close your eyes and draw a picture of what life would be like today if you (or your wife) had died a month ago. That would help you get a picture of what you need as far as life insurance. Remember, it is there to maintain your current lifestyle without economic disruption, not to enrich anyone. Once you have your own picture, you can apply for insurance. A good insurance agent will draw a similar picture to the underwriter in order to get the amount of insurance approved.

Its more than likely that a wife wouldn't be able to continue working after losing her husband. Thats a financial need to cover as well.

[aygart]

When the life insurance agent and the actuary try to convey the same information this is how it looks:

איידזטס דברניות הן?

[ExGingi]

איידזטס דברניות הן?

I misquoted myself. Should have only quoted my first sentence, not the explanation that came thereafter.

[yfr bachur]

With due respect to @yfr bachur I will respond to you first, even though that might violate the rule of על ראשון ראשון ועל אחרון אחרון, as I think it will also answer some of @yfr bachur's questions.

Insurance is a financial tool of risk transfer.

When a person owns property there are various risks, and insuring against those risks will make sure that if a loss actually does happen, that loss is mitigated to the loss of the object, not to a financial loss. (for example, if I own $30,000 worth of Seforim, and there was a fire that burned them all down, the insurance will make sure that the loss is limited to the actual loss of seforim - which results in not having them available to learn the next day, and not a financial loss of wanting to replace them and having to figure out how to pay for them).

Most productive members of society have a Human Life Value. The easiest measure of that is their potential future income (which can only be guessed based on inputs, hence the rules of thumb). But there are also "soft facts" that come into play. If I am the sole breadwinner for my family, and something were to happen to my wife, how would that affect my (household) financial life? Would I be able to dedicate as much to my work/breadwinning endeavors, or will I need to dedicate more time and brain space to my family? Will there be extra expenses that I might incur?

There are no hard answers to many of these questions, which is why I suggested actually painting a mental picture (the job of a good Life Insurance agent is to help a person realize various factors that could come into play, so that the person can draw their own picture, and then decide how much coverage they want).

At NO POINT does the number of beneficiaries or future needs come into play (except if that future need is a direct result of the person's death). I might decide that I need a fully loaded Chevy Suburban for my family, but all I have and can afford now is a 10 year old Mitsubishi Mirage. No insurance company will agree to insure my current car so that if something happens to it there will be funds to buy the car that I think we need.

So I'm sorry to disappoint, one cannot buy insurance to "cover what I want to have covered as a purchaser" if that is more than what you would qualify by virtue of the current economic value of whatever or whoever is being insured.

Thanks again for your explanations.
Though it may explain why Areivim was created in EY. Right or wrong, many parents are expected to provide a down payment for the children when they get married. How most of them do it, I have no idea. But there's probably no way an insurance co will provide sufficient coverage for an avreich (geting Datot and his wife making 6000 shekel a month) to make down payments for 6+ kids. Arievim is marketed in Israel as a way to make sure that there will be money to marry off your kids, not for other expenses. (Recently, they started an a supplemental level to provide twice the amount per kid - because housing prices have gone up since the program was started). Its regarded as "insurance" against the need to have a tzedaka campaign to marry off the orphans, not against the income of the parents.

Let's just say that if you are upfront and discolse that you live in Israel you are not likely to be able to purchase a US policy. Even if there was a company that would agree to underwrite you based on that, the entire application and policy delivery process would have to occur in the US. Unless you purchase a policy with significant annual premiums, I don't think you're getting a US policy while fully disclosing your situation. That being said, if you think the rest of your family that lives in the US could benefit from talking to me, you're more than welcome to make the introduction.

Not that it will help me at this point, but would you recommend that couples buy LI in the US before they go live in Israel?

[ExGingi]

Thanks again for your explanations.
Though it may explain why Areivim was created in EY. Right or wrong, many parents are expected to provide a down payment for the children when they get married. How most of them do it, I have no idea. But there's probably no way an insurance co will provide sufficient coverage for an avreich (geting Datot and his wife making 6000 shekel a month) to make down payments for 6+ kids. Arievim is marketed in Israel as a way to make sure that there will be money to marry off your kids, not for other expenses. (Recently, they started an a supplemental level to provide twice the amount per kid - because housing prices have gone up since the program was started). Its regarded as "insurance" against the need to have a tzedaka campaign to marry off the orphans, not against the income of the parents.

How are said parents going to make down payments for 6+ kids if (like most people) they don't die?

Not that it will help me at this point, but would you recommend that couples buy LI in the US before they go live in Israel?

1. If eligible for US Life Insurance, it should be purchased as soon as possible.
2. If there's a possibility of not being able to go through underwriting to purchase coverage in the future get a rider that allows for Guaranteed future purchases/increases to coverage (anyone has that possibility, but someone who thinks they might live in a place that would pose a problem, should definitely consider it).
3. To the last part of your question, most life insurance applications I have seen inquire about future foreign travel or residency plans. What defines a plan for a future move might be arguable.

[Yosel]

there is 1company that I know of  that will issue a policy in the USA up to $1,000,000 if you are a "Kolel" student with no income