Most of my days are pretty good, knock wood. I am a lucky man. But imagine what a good day it was recently when I got not one but two “Pre-Approved” offers from Mutual of Omaha.

The first was described as “good news!” and concerned an accidental death policy for which I had been preapproved. (Anyone who does not subscribe to Modern Motorcycle or Skydiving!, I suspect, is pre-approved.) I’ll tell you about it tomorrow.

The second, for which I had also been approved, was described as “great news!” To wit:

“Here’s great news! If you’re a woman age 50 to 75 [I am not] or a man age 50 to 72 [nope] you can choose from four valuable life insurance plans.”

What makes this such good news is that no matter how ill you are, you qualify for this insurance — up to $5,000.

Granted, like most life insurance policies, it doesn’t cover suicide for the first two years (lest, realizing how little $5,000 is really going to mean to your heirs, you become depressed and shoot yourself). And granted, there are no benefits if you should die of natural causes during the first two years (lest this offer be a magnet to the terminally ill). Your heirs would simply get a refund of the premiums you paid (plus 25% the first year, 100% the second).

But beyond that, if you keel, they pay.

And all it costs you is $336 a year if you’re a 62-year-old male (to take one example) or $186 if you’re a 52-year-old woman (to take another).

Not to be patronizing about this. There clearly are people for whom $5,000 (or even the $2,000 minimum policy, which costs a 75-year-old woman $232.80 a year) really matters. It could be the difference between a “proper” burial and something less.

But according to the Life Expectancy module in Managing Your Money (DOS V12), a 62-year-old male who smokes and never exercises and is in “fair” health with “worrisome” finances (or else why would he even be considering this offer?), with “mixed” family longevity, who never wears seat belts when driving, is still likely to live another 15 years.

So if he pays $336 a year that could otherwise earn him, say, 6% in some long-term CD, he would after 15 years have forfeited what could otherwise have grown to be $7,820.

In truth, it’s not a bad deal for such a pint-size policy. But it’s not bad for Mutual of Omaha, either. While YOU might be able to earn only 6%, Mutual of Omaha might expect to earn 9% or more — meaning that to them, after 15 years (but before marketing costs and overhead), your premiums would have swelled not just to $7,820 but to $9,865.

And yes, some of the people who sign up for this stuff will NOT be smokers, and WILL wear their seat belts and take daily walks. Managing Your Money puts the life expectancy of a 62-year-old male like that at 24 years, which means $25,800 for Mutual of Omaha (less marketing costs and overhead), of which they’d pay your heirs $5,000.

Bottom line: if you feel you need life insurance and can’t afford to buy in larger, more economical amounts, this life policy is actually not too bad for someone in poor health or with a family history of dying young.

Otherwise, you should be able to get more coverage for the same money. Or you might simply want to take your chances and just set aside the same money every month in a savings account. Odds are, your heirs will wind up with a lot more when you’re gone . . . and you retain the flexibility of being able to spend that money on yourself, if they should predecease you or wear out their welcome.

Tomorrow: More Good News

 

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