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Wednesday, July 02, 2008

Life Insurance and the Kollel Family

Hat Tip: Charlie Hall

Yeshiva World News has an interesting article about a new life insurance program for the yungerleit of the Lakewood Yeshiva. As a group they face a very significant problem obtaining enough life insurance for their large families. They have no employer and therefore are not eligible to join in on a company plan and underwriting a significant plan for a student is not normal procedure. The maximum amount of coverage an average kollel husband is eligible for is $250,000 and under.

Thanks to the tireless work of one particularly dedicated man, a retired insurance agent Mr. Markowitz, a new plan is being implemented which looks to be a fantastic bargain. Beis Medrash Gohova will serve as the guarantor for a life insurance plan of $500,000 per eligible yungerman (full time, below the age of 50). The cost of the plan is $295 a year. If a husband joins up now, he will not have to undergo standard medical testing or financial disclosures. The plan is portable or 2 years after leaving the Yeshiva, albeit with a reduced death benefit of $300,000.

The biggest hurdle at this point will be getting 2/3rds (yes two-thirds) of the students to join by July 30. If 2/3rds don't join, no one can benefit from this plan. And, based on the massive amount of mailings that seem to land in my own mailbox and in the mailbox of other Orthodox Jews throughout the world, I would say that when a member of the klal takes out a sufficient life insurance plan that we ALL become beneficiaries of such. The strain that is placed on the Jewish community from death of a parent is significant.

We have chatted about "help" or "support" on this blog. My last installment on such an item had to do with couples who hate the "strings" that come attached with support. I have countered that of course help comes attached with strings, that is the nature of the relationship. I don't think the Lakewood crowd and those who "help" (parents, grandparents) read my blog. But if they do, I would recommend that parents do attach strings to their help and require their children/grandchildren to maintain sufficient insurance as a condition of support.

Which brings me to my next subject: those supporting the talmidim, both the wives and the grandparents.

The article referenced states "the importance of coverage for mothers, particularly if they are also breadwinners, cannot be overlooked." Let's face it (!) in kollel circles the wives are the primary income earners, although not always the primary financial supporters. I'm not going to dance around this fact even though the article does make a little quickstep over this fact.

In the case of a kollel family the roles are reversed and pretending otherwise is just silly. The wives should be carrying a policy that a "traditional" husband would carry and the husbands-say 1 mil- and the husbands should be carrying a policy your average homemaker would be carrying-say one-quarter mil. In the case of rapidly growing families, much more is needed, hence the need to move the husbands from $250,000 to $500,000. But should a wife, chas v'shalom, die early, it is absolutely imperative that she be covered because the loss of her income and the loss of her services combined with the possibility that the husband cannot enter the job market without training and/or schooling and the very likely possibility that many of their children will need a lot of outside care and support during this major transition will leave the family in terrible, terrible bind and, yes, possibly a worse (financial) bind than if the father were to pass untimely, G-d have mercy.

And now for the last life insurance topic. . . . what about grandparents and life insurance? My rule of thumb for insurance is that if someone is counting on your monthly income, you should be maintaining proper insurance coverage. In the Orthodox world, so many children and grandchildren are dependent to some degree or another on their own parents and even grandparents. I have no idea if those parents are still carrying their life insurance policies, but it seems to me that it is probably a good idea to maintain that coverage although it it is prohibitively expensive in your 50's and 60's. But I could easily see the fiscal ruin that could ensue if parents supporting a couple and their children (or perhaps many couples and their children) were to pass. Parents whose children are independent may not need to worry about life insurance for the sake of their children. But I'd say that parents whose children/grandchildren are dependent might be wise to find that money for the premiums.

I'm ready to hear all of your thoughts, especially since life insurance isn't my area of expertise. And I'm hoping to hear that 2/3's of the students signed up. To jump through as many hoops as Mr. Markowitz jumped through only to experience failure would be quite discouraging. Should the plan succeed, I hope those with the expertise in insurance will work to bring such a plan to other communities.


DAG said...

IF 2/3's sign up? There is an easy way to ensure that basically EVERY student signs up...have the Rosh Yeshiva demand it. PERIOD. Then it is Daas Torah and they have no choice.

Mike S. said...

In the 1950's, one had life insurance on the husband to replace his income, and on the wife to be able to afford to hire someone to take care of the kids and the house. In the typical kollel family, as I have seen it, the wife provides the income, the childcare (unless the oldest girls are old enough to do this) and the housework. What the Yungerman contributes is educational and spiritual; it cannot be replaced with insurance proceeds. Why then does he need to be insured?

Lion of Zion said...

how about a dose of orthonomics למעשה :) in the form of a primer on buying life insurance. e.g., some posts on how to select an appropriate life insurance product, evaluate the different companies, etc.

G said...
This comment has been removed by the author.
G said...

I will place here the comment that did make it past the moderators over at The Yeshiva World:

BMG assumed full responsibility in guaranteeing payment. The talmidim will make their checks out to BMG, and BMG will make one payment to The Standard. Ultimately, BMG will be held financially accountable for the entire package.
The costs of coverage are $295 per year...Beth Medrash Govoha has put together a fund that will subsidize $100 of the cost for any yungerman who request this assistance.

...and where exactly is BMG going to come up with the money to cover this new cost? BMG is not a company that can simply divert earnings toward this new initiative.
They will need to collect additional funds from the public in order to fund this insurance package. So, in reality, it is just the community at large once again footing the bill.

Forgive me if I do not applaud.

aml said...

I guess I don't understand why these men need insurance. Except perhaps to cover their stipends? Do the get any benefits through the yeshiva? Medical care for their kids? Then to cover that too.

The rule of thumb, as I understand it, is that your life insurance should cover your lost wages. If you have no wages you need no insurance. This is particularly true if you aren't contributing anything (tangible) to the household. What I mean by this is that a work-at-home mommy with young children is contributing to her family's finances by not having her children in day care or before/after care (for younger school-age children). This is a financial gain realized by the family even if mom isn't actually bringing home a check. So if I were (only) a work-at-home mommy( instead of a work-at-work and work-at-home mommy), I would have an insurance policy that is significantly smaller.

Another measure I heard once (I don't know how realistic this is once you have four or five kids) is for both parents (total) to have at least one million dollars in coverage for each child.

As for they best type of insurance, I've been told over and over again that term life is the best (particularly if its bought at a young age). My husband and I both have private term policies and policies through our respective employers.

Ariella said...

I just ran an article by an insurance agent on life insurance in the summer issue. (You can read the issue online in PDF format) Anyway, insurance is not only for primary breadwinners. In any case, you could easily have the scenario here in which the wife is currently working but will scale back after having few children, at which point her husband will do something to get their income up. So even if the need is not apparent at present, it is advantageous to lock in the low rate for life insurance at a younger age and have the safety net in place before it is needed. This way the wife does not have to be put into the position of becoming the subject of one of those letter asking for funds for a poor widow with young children who just lost her talmid chacham husband and is now in danger of losing her home.

Child Ish Behavior said...

Who needs insurance when you have bitochin? Only those working people without trust in Hashem need to be insured against bad happening. A truly good Yid would have trust that everything that happens is for the best and then go collecting for money to support their families after something bad happens.

Charlie Hall said...

A truly good Yid sets things up so that his family will not have to rely upon charity, no matter what. Hence, life insurance. It has little to do with income and a lot to do with the cost of raising kids -- which is a lot higher in the O world than in the general population.

Ariella said...

Charlie Hall, you hit it right on the head.

Mike S. said...

I agree with Charlie about making sure your family doesn't need tzedoka, but that is about replacing income (or work in the home that will have to be paid for if the parent providing it passes away.) The idea is not to have the family better off upon a death than they were before; it is to make sure that, at least financially, they aren't worse off. If you aren't talking about needing insurance above replacing income or unpaid work, then you can't aford to raise your children without tzedokah even when you are alive. In that case, it seems to me, your responsibility is to get a better paying job, acquiring the additional skills or credentials needed, if that is necessary.

the apple said...

YWN has moderators? Really? Who would have known.

ProfK said...

I'm just a bit perplexed about why this push for insurance is coming now. If you look at mortality tables the smallest numbers fall in the 20-35 part of the tables. At the point where it would be expected that more people will be dying, the 60+ range, it seems to me that life insurance is serving as "yerusha" rather than replacing lost wages.

I'm also in agreement with G. BMG is not a business and if their portion of the premium, the $100, is going to be coming from donations then don't come looking at me to pay it.

Anonymous said...

Ouch! The great Baaley Tzedokah, ProfK and G. have such pricipled opposition to BMG subsidizing a life insurance policy for those who can't afford it (as if the money is going to private pocket),that they won't support it.

So teach me wise ones.Where should I direct my Tzedokah dollars if I want the zchus of Limud H'Torah after 120 years?How much (%) of your money do YOU give to those causes?Why did you decide on that amount?

ProfK said...

Anonymous, I'll ignore the sarcasm and assume it comes from ignorance rather than malice. You want to know precisely how much I give to tzedaka? I'll tell you what, I'll show you mine when you show me yours.

As to who/what to give to and how much, that's where daas Torah can be helpful. As can seforim such as "Priorities in Tzedaka" by Rabbi Moshe Goldberger, published by Judaica Press, and others. Read and study first and then we may have what to talk about.

Anonymous said...

the best part is if the wife dies, chas ve shalom, the kollel guy can have enough money to sucker another nice girl to marry him, work and take care of his kids and let him continue to be a welfare father

Chaim B. said...

Leaving aside the sarcasm, why would you be opposed to BMG setting aside $100 per student to help fund this? Are you opposed as a matter of principle to any institution helping to subsidize expenses - e.g. would you oppose a graduate school program that offers fellowships and grants to students, including discounted student insurance, funded by donations by benefactors and /or taxpayer dollars?

Chaim B. said...

>>>I'm just a bit perplexed about why this push for insurance is coming now. If you look at mortality tables the smallest numbers fall in the 20-35 part of the tables.

Reminds me of what I once told an annoying insurance agent to get him to stop bothering me - I said his company was obviously betting that I would live and they won't have to pay benefits, so I might as well keep my money and bet on the same side as them.

This may work to get rid of an annoying agent, but it doesn't make economic sense. The odds of needing insurance benefits are small, but the cost is also relatively small in comparison to the potential benefits and the enormous downside should you c"v need those benefits and not have them.
Just to simplify things, if there are 500 kollelniks and each stands a 1/500 chance of passing away c"v, would you rather each one pay $100 to buy 500k of insurance, or would you rather each one say, 'hey the odds are 499/500 in my favor that I won't need this', and then when one of them dies c"v, read another letter in a newspaper trying to raise funds for an almanah and yesomim?

SephardiLady said...

I was told by a friend that a local kollel would like to increase its stipends and will be asking for donations to do such.

Supporting kollel is not my priority at this time when high school tuitions are threatening to pass 20K. But, if the Yeshiva were looking to grant some type of match to kollel men (or wives) looking to buy a life insurance policy who have never taken one out themselves, I'd write a check because as a community I don't think we can afford to float a family financially if there is a tragedy. . . .and at least judging by the mail in my mailbox, it seems tragedy is not unknown.

Neil Harris said...

great post.

G said...

You know, you try and you try and you try to get a point across and no matter what you do some people just don't seem to get it.

One more time for those who who seem to not be paying's G not G.---NO PERIOD!!

Now then, what were we talking about...?

ProfK said...

I'll amend my comments a bit. Would I donate $100 so that a young couple could have insurance and would not become a potentially bigger drain on community resources? Possibly. If the fund for that insurance money was separate from the general funds for the yeshiva. If the yeshiva would publicly state that the money collected for insurance would not be used for any other purpose. If the yeshiva would publicly state that any excess funds collected for insurance in any given year would be kept in the insurance fund to go towards the next year's insurance payment. If the yeshiva would publicly promise transparency in administering this program and would follow through on that promise.

I believe I'll get that public statement and transparency when pigs fly.

Chaim B. said...

>>>If the yeshiva would publicly state that the money collected for insurance would not be used for any other purpose.

You mean like supporting people who want to sit and learn torah?

ProfK said...

Chaim B.,
If what I wanted to do was to support a particular yeshiva then I would write a check to that yeshiva and let them use the money as they decided they needed to. We write plenty of checks to yeshivot, yeshivot that we have chosen to support. That is inherently different from deciding to support a tzedaka initiative to provide insurance for a couple that can't afford it. I can decide to support the insurance initiative and not care to support other aspects of the particular yeshiva.

Look at it this way; if you gave a check to a tzedaka that provides medical care for seriously ill children would you care if that tzedaka organization passed along its "extra" funds to an organization that supports Kiruv work in Argentina? You might. That kiruv organization might not have been one to which you would have donated straight.

In English we might refer to it as "bait and switch." Send me your money for project A but I'll put it to use for project B.

G said...

Just to simplify things, if there are 500 kollelniks and each stands a 1/500 chance of passing away c"v, would you rather each one pay $100 to buy 500k of insurance, or would you rather each one say, 'hey the odds are 499/500 in my favor that I won't need this', and then when one of them dies c"v, read another letter in a newspaper trying to raise funds for an almanah and yesomim?

I hear what you're saying but the question is a non-starter bec it assumes, what to me is, a false premise. WHY is it that it is okay for one to knowingly set themselves up in a situation with those kinds of outcomes?!

Chaim B. said...

It's only bait and switch if BMG solicits donations for a specific cause and then diverts the money elsewhere. They have not done so, so the analogy is irrelevant.

>>>WHY is it that it is okay for one to knowingly set themselves up in a situation with those kinds of outcomes?!

I'm not sure I understand your question. For most of the population, whether employed in a regular job or learning in kollel, the death of a primary breadwinner is economically devastating. The whole point of this endeavor is to insure that the kollel system avoids these outcomes.

Pragmatically speaking, you are not going to change the Orthodox world as we know it, which for better or worse has accepted the institution of kollel as valuable and necessary. So you have 2 choices: refuse to support any kollel because you disagree with the system as a whole, or try to make whatever tikun you can so a bad system is at least a little better.

G said...

...or try to educate people as to the full consequences of their life's decisions.

Saying "this is just the way it is" does not sit well with me. More so, if it does arise that there are issues with certain life decisions why does it not fall to the people who made them in the first place to rectify them?