Money Coach: Planning For The Unthinkable Despite a once-lucrative television career, child star Gary Coleman had fallen on rough financial times before his death last month. Now, reports say that his ex-wife, Shannon Price, is struggling find the money to bury him amid revelations that Coleman may not have had life insurance. Money Coach Alvin Hall says there is a lesson to be learned from Coleman’s story. He offers tips for planning for life’s unforeseen events

Money Coach: Planning For The Unthinkable

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And now to matters of personal finance, and we have to tell you that this was a conversation sparked in part by the death of former child star Gary Coleman last month. Coleman's ex-wife Shannon Price reportedly does not have the money to bury him. She says he didn't have life insurance.

So we decided to talk about life insurance for a few minutes with our money coach Alvin Hall who regularly advises us in matters of personal finance and the economy. Welcome back. It's nice to have you here in for be with us today.

ALVIN HALL: I know. I'm glad to be in D.C.

MARTIN: I know. You're chilling with us down in D.C.

HALL: Exactly.

MARTIN: So, first of all, it's been reported that Coleman didn't have life insurance. How common is that? Do most adults have life insurance or do most not don't?

HALL: Most adults do. However, poor people and people who have gone through hard times tend not to have life insurance because they've dropped it. I can speak from horrible personal experience in the past month. My youngest brother, age 42, died suddenly and there was no life insurance.

MARTIN: I'm sorry.

HALL: It was typical story. He had lost his job. He decided he couldn't afford to have life insurance, so he dropped it. And my sister called me up and said, can you afford to pay for his burial? So, one of the things that people need to think about when they give up life insurance or lose their job is how important is this?

And especially if you have a family, you're caring for somebody, it is very important to have life insurance because those people need to be able to go on without you.

MARTIN: So, life insurance, let's say there are many people who are struggling with unemployment or underemployment right now.

HALL: Yes.

MARTIN: Is your advice here that life insurance should be probably the last bill you try to cut?

HALL: I would make sure it's the last bill, especially if I have dependents. Typically, your employer will provide you with term insurance, which is renewable, typically a multiple of your salary or up to $50,000. Some employers will allow you to be able to buy more or you can add additional life insurance to that.

MARTIN: And term insurance is what? And how does that differ from whole life, which is the other kind of insurance that often we hear about?

HALL: The two big types are term and permanent insurance. Term insurance is like renting. You rent for a year and then a subject to renewal. You can have a five-year fixed rate, a 20-year fixed rate and you at the end of that period of time, you have to renew it.

When you buy term insurance, you need to make sure that there are two things that are there: One, that you can automatically renew it without having to go through the process of getting a health evaluation, because that puts all the power in the hands of the insurance company. And the second characteristic is that it need to be convertible. Convertible into a permanent life insurance, of which whole life is the most prominent kind.

MARTIN: And the difference with permanent is like you're saying it's the difference between buying and renting. Whole life is like an investment vehicle, or permanent is an investment vehicle.

HALL: Exactly.

MARTIN: It's yours no matter what. This whole question of a medical exam or something like that, is it possible, I mean, some have speculated that Coleman didn't have life insurance in part because he had serious health issues throughout his life. Is that true, is that a factor? Can that bar you from getting life insurance?

HALL: Absolutely. Because he had those health insurance those health problems when he was very, very young, it's probably likely that if he could have bought life insurance, it would have been astronomically expensive. And no one would have insured him. Even if he had been able to get it through the Screen Actors Guild or one of the unions associated with television and that industry, still, when he fell on hard times and didn't have the money to pay for it, they wouldn't have done it. They would have said, we will only renew this if you will show that you're in good health, and he was never in good health.

MARTIN: Well, what about people who people who were in that situation, who have had childhood illnesses or something of that sort who do have chronic health conditions, what should they do?

HALL: This is one of the cornerstones of the Obama plan and one of the things that makes it so important because it helps people who have these problems get insurance so they are not financially devastated when the illness reaches a certain level.

MARTIN: How often should you evaluate your insurance needs?

HALL: As your income goes up, as your financial situation changes, I would say about once every three or four years you should sit down with a financial adviser and say how much life insurance do I need now, especially if you get married, have children or there's a significant change in your income.

MARTIN: And, well, that's good advice. Thank you for that, Alvin. Finally, before we let you go, we have one more question for you. Turns out that billionaire investor Warren Buffet regularly or sometimes auctions off his time to people who will pay huge amounts of cash to get close to him for advice or words of wisdom. He gives the money to charity, as you would imagine, since he doesn't need it.

But if you had the money, would you I'm told the opening bid is $25,000 to have lunch with him. So would you if you had it like that, would you want to spend $25,000 to have lunch with Warren Buffet?

HALL: No. I wouldn't. No, because Warren Buffet is to me a character that we all know. And so why would I have lunch with somebody who is just going to play the role that he's very well cultivated in all the media? I can't imagine that he's going to be not handled well during those situations.

If I were going to pay that kind of money...

MARTIN: Yeah, exactly. That was going to be my next question. Who would you pay to have lunch with? Who doesn't make...

HALL: I'd probably, of course, you always I might probably pay to have lunch with Tim Geithner. I'm really curious to find out how he's thinking about the economy and what is his real reaction to it, because I don't think he is that managed.

You know, many years ago I cooked dinner for Maya Angelou and Jessica Mitford at my house. And that was one of the most amazing evenings of my life. And all that evening cost me was $50 in food that I bought and cooked. Well, I'm not sure I'd ever pay $25,000 for anybody. They'd come to my house and I'd cook for them.

MARTIN: (unintelligible) charity. So you just, what, you ran into them at a book fair and you were just, like...

HALL: No, she was having a new show on PBS and we were having a sort of launch party and so I called her up and said, Ms. Angelou, would you come to my house? And she said, yes, my friend Jessica Mitford and her husband are visiting me in Wake Forest, at Wake Forest University. And I said, well, could you come over and she did. And it was one of the best evenings of my life.

But recently I was with a friend in New York and I met this famous record producer who worked with Lena Horne, Aretha Franklin, everybody, it was fantastic. Free.

MARTIN: So you have been living so large. I really should not have wasted that question on you because you were not paying that much anyway. Thank you. You can invite me sometime because I don't think you've ever invited me.

HALL: After the show today?

MARTIN: All right. Our financial guru Alvin Hall joined us from Washington. Thank you, Alvin.

HALL: You're welcome.

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