Look Before You Leap

letter-447577_1280

The dedicated askanim who devote themselves day and night to solving some of our most pressing communal problems are one of the crowning glories of the Israeli chareidi community. Recently two groups of askanim – one in Jerusalem and one in Bnei Brak — addressed themselves to the plague of tragedies involving the loss of parents of young children, often after long and agonizing illnesses.

Many of the stricken families are left without even the money for basic necessities, not to mention resources to cover all the extra help required in the wake of such tragedies. About money to help the orphans marry, we need not even speak.

In virtually every case, the deceased parent had no life or health insurance. So the family is left without any recourse other than to turn to the already overburdened community, and to ask strangers to open their hearts and purses.

The askanim in question refused to accept the current system of ad hoc appeals as the best possible solution. And they came up with the idea of creating large groups of ten thousand or more families, whose members would in effect self-insure one another. The initial plan promised approximately $50,000 to every unmarried child, upon the death of a parent in one of the participating families. Those costs would be covered by contributions from the other families in the plan, in an amount not to exceed $18 per month. For their efforts, these oskim b’tzarchei tzibur deservedly received the gratitude of gedolei Yisrael and blessings that their efforts be crowned with success.

On its face, this plan is far better than any comparable insurance scheme. I have a friend who bought at age 45 a term life insurance policy of $500,000 until the age of 65. His annual premium is around $1,900. If his wife too were covered, his annual premium would be about $2,600.

By contrast, the proposed plan in effect insures the life of both parents, and at a maximum annual payment of $216. If there are ten children in the family, the plan provides $500,000 of life insurance for each parent for about 8% of what comparable term insurance policies would cost.

Sound too good to be true? It is.

Troubled by my comparison of the plan to term insurance rates, I decided to consult a number of actuaries to get their take. Every insurance company employs numerous actuaries to make sure that their policies make sense. Actuaries employ highly sophisticated mathematical models to make these determinations, and it is one of the hardest professions to enter.

As it happens, my neighborhood includes some of Israel’s leading actuaries. They too had been very concerned by the proposed plan when it was first publicized in the chareidi press, and had even contacted some of the askanim responsible for overseeing the plan to express their grave reservations.

They pointed out, inter alia, that plans similar to those being proposed had once been popular in the United States, under the rubric of mutual benefit associations, but have not been licensed to do business since the 1930s, in the wake of the widespread failure of such plans.

The actuaries also expressed their view that the numbers did not make sense. Indeed the developers of the plan did not even have the information available upon which to make informed actuarial decisions – such as the age of those covered by the program and the number of children who would be eligible for payments. Finally, they noted a number of ways in which the plan might be in violation of Israeli insurance law.

The askanim involved – who are highly respected figures working purely leshem Shomayim – listened. In response to the actuaries’ comments, at least the Jerusalem plan was altered to specify that if contributions of participating families are insufficient to cover the commitments, they will be apportioned by a committee of rabbonim, and that participation in the plan confers no guarantee to receive a certain amount of money or any right to sue the fund. In short, this is a sophisticated tzedakah plan, not insurance.

That still leaves questions about what the criteria for apportioning funds will be. And it is far from clear that the public is aware of the changes in the plan (or that the Bnei Brak plan followed the lead of Jerusalem in hiring experienced insurance lawyers redraft the by-laws of the association.)

NEVERTHELESS, I BELIEVE these plans represent a substantial improvement over the present situation. I would recommend participation as an excellent tzedakah, even for those whose private insurance or resources are such that their children would never receive any benefit from the fund in the case, chas ve’shalom, of their premature death.

If 15,000 families (the Jerusalem group has more than that number) sign up, and each pays the maximum payment of $18 per month, that comes to well over $3,000,000 that will be available annually to unmarried boys and girls who have lost their parents. Even if the family of the deceased parent receives less than $50,000 per child, they are likely to receive more than they can raise today through their own efforts, and in a far more efficient fashion and with a great deal less humiliation.

In addition, apportionment of the monies by a responsible group of highly responsible rabbis is preferable to a situation where everything depends on who puts out the more heart-wrenching brochure. The funds available to help cover marriage costs of orphans will not only help the orphans, but make it much more likely for widows to remarry by lessening the financial burden on a new husband.

The sociology of our community is such that most families would not individually purchase relatively low-cost term life-insurance if they did not participate in this program. A group program sponsored by highly respected tzedakah organizations has a much better chance of providing some degree of protection to a large number of families.

Still the way in which the plan was originally presented to the public reflects some disturbing tendencies within our community. The first is the suspicion of experts. When the idea of a self-insuring group was first raised, the need to consult trained actuaries and lawyers with a background in insurance law should have been obvious. The actuaries should not have had to seek out the heads of the plan on their own initiative.

The second is the tendency to believe that we have found a way to outsmart the odds – the financial equivalent of Ponce de Leon’s fountain of youth. Every year or so, we hear of avreichim who have lost all their chasanah money in some new Ponzi scheme that promised 30% returns, with no risk.

As one of Eretz Yisrael‘s major young poskim puts it, one must always know whether a shayla is one for a rav or a doctor (which itself is a shayla for a rav). But knowing Gemara does not by itself make us a doctor or an actuary or a financial wizard. Nor in this unperfected world should we assume that all the laws of probability have been suspended for our benefit.

Published in Mishpacha.

You may also like...

40 Responses

  1. Joel Rich says:

    Iggrot Moshe Orach Chaim 2:11 “In the matter of Insurance”
    KT

  2. Zev says:

    There’s more than one way to do chesed.

  3. Jewish Observer says:

    ” I don’t think it’s strange at all for a tzedakah organization to involve itself in a chesed project.”

    it’s a chesed to find someone a job but that means you link them to employers; not become a corporation

  4. Zev says:

    “obviously, i am not going to blasphem and suggest forgoing life insurance, but transforming tzedakah institutions into insurance companies seems another level altogether”

    Hello, R’ Moshe wrote a teshuvah encouraging men to buy life insurance. He was responding directly to the question of whether it indicates a lack of bitachon. I haven’t seen the teshuvah in many years, but if I remember correctly, he calls it a great chesed. I don’t think it’s strange at all for a tzedakah organization to involve itself in a chesed project.

  5. Jewish Observer says:

    “maybe we should question our system of spending that goes beyond those basic needs.”

    – the Torah recommends – even menial – work over coming on to tzedaka. So not sure what the spending habits of the givers has to do with the priorities of the receivers

  6. David says:

    ‘One other point, which may be far off base. While we in America may not understand and criticize the economic system in Israel, I wonder how much we question our own priorities. Are these brethren in Israel taking thousands to tens of thousands of dollars a year and spending it on vacations, summer camps, Pesach hotels and luxury cars? Do they spend upwards of three hundred thousand dollars on home additions and remodeling. While we question their system of securing a roof over their heads, maybe we should question our system of spending that goes beyond those basic needs.

    Comment by Aharon Hakohen — February 19, 2007 @ 11:08 am ‘

    OK, I don’t do any of those things. Can we now discuss this system?

  7. DMZ says:

    “Ahhh, youll say dont learn in kollel is you cant afford it—not happening! The system is here to stay.”

    If the American Jewish community stopped handing out money to organizations which supported this kind of thing, and the Israeli government quit being so socialist, it’d end. That’s the point I’m trying to make: the system is being propped up by external actors. When those supports are gone, the system will fail, eventually.

  8. Aharon Hakohen says:

    The respected rabbonim obviously thought this whole system through, so who am I to question the spiritual basis of this whole plan. Nonetheless, I feel the point of “Mi Yodea” in my bones.

    This plan is suggesting to discard the system of tzedakah and chesed for a purely tevah (natural order of things) plan. People will not have to rely at all on bitachon in the Ribbono Shel Olam to provide to all those in need, rather we will pay upfront for all possible scenarios.

    Besides the issues of bitachon, it sacrifices the endless opportunities for individuals to do chesed to help out those in difficut situations. Who is to say that these scarifices are worthy of any plan, even if it is financially sound?

    [obviously, i am not going to blasphem and suggest forgoing life insurance, but transforming tzedakah institutions into insurance companies seems another level altogether]

    I am reminded of a story brought down in a sefer. Who knows if it is truly applicable to our day and situation, but here it is. In the days of the Maharil Diskin there was a mutual aid society formed by torah scholars, that had made a pact to help each other out in extreme need, such as ensuring funds for surgeries in case of life threatening illness. Some of the leaders of Yerushalaim at the time thought it was a beautiful thing. When the Maharil Diskin, the uncontested leader of Yerushalaim – if not the world, heard about it he called it an evil plan because it was based on each member ensuring that he would be there for the other members. It was a you rub my back I’ll rub yours deal, not chesed. He said we already have a system of ensuring each other’s needs are cared for, called tzedakah, which doesn’t exclude any Jew from benefiting from it.

    One other point, which may be far off base. While we in America may not understand and criticize the economic system in Israel, I wonder how much we question our own priorities. Are these brethren in Israel taking thousands to tens of thousands of dollars a year and spending it on vacations, summer camps, Pesach hotels and luxury cars? Do they spend upwards of three hundred thousand dollars on home additions and remodeling. While we question their system of securing a roof over their heads, maybe we should question our system of spending that goes beyond those basic needs.

  9. Jewish Observer says:

    “Is there Chiyuv to not study what you need for Parnasah, or to stay in Kollel when your wife and children could really use the money if you worked?”

    – people use the terutz of parnassa to live in chutz la’aretz. why is not it good enought to justify the aveirah of not learning in kollel?

  10. Rivka W. says:

    As to why the planners thought this is a self-sufficient plan – I am not an actuary, but it seems to me that the plan would be stable if it could rely on all chareidi families to continue joining. The problem only arises if not enough people will join, or if it does not become an accepted thing to do.I am not an actuary either, but I did try to become one.

    A larger pool helps a little (spreading risk), but unless all the additional people who join then have the good fortune to not die before all their children are married off (statistically pretty unlikely, yes?) it doesn’t help very much. The problem isn’t that not enough people are joining; it is that the members are not paying in close to enough to support the eventual payouts.

  11. Ori Pomerantz says:

    Shimon: The problem is that the guys kollel pays probably around $500 per month, which is not enough to cover that amount in a mortgage. Ahhh, youll say dont learn in kollel is you cant afford it—not happening! The system is here to stay.

    Ori: It is possible to survive on $500/month. However, people who want to live on a third-world income should realize it will mean a third world standard of living (no electricity or running water, cloth diapers with no mechanised laundry, etc.). The only other choice is to force somebody to pay the difference – to be a beggar or a listim.

    Is there Chiyuv to not study what you need for Parnasah, or to stay in Kollel when your wife and children could really use the money if you worked?

  12. Mi Yodea says:

    Rabboisay! There is a hidden problem which because of ramifications of emuna and halacha cannot be discussed openly.

    It is too delicate a subject to spell out but there may be others who have the courage and who can find the language to look at the problem of the growing families without sufficient provisions to marry off their children when the time comes.

    And, perhaps, within the perimeters of all considerations, there is no “rational” solution, there will be hundreds of families facing a constant struggle and we will have to continue with the age old approach of Tzedaka. Perhpas it is meant to be like that.

    Me Yode’a?

  13. Marty Bluke says:

    Jonathan Rosenblum made the following observation:

    The sociology of our community is such that most families would not individually purchase relatively low-cost term life-insurance if they did not participate in this program. A group program sponsored by highly respected tzedakah organizations has a much better chance of providing some degree of protection to a large number of families.

    Why can’t we change the sociology? Why shouldn’t the askanim go to the Gedolim, explain the problem, and offer a better solution, low cost life insurance? If the gedolim would encourage everyone to buy life insurance wouldn’t people listen? Why should we agree to a solution that is a poor second to real life insurance when the better solution is achievable?

  14. Marty Bluke says:

    Jonathan Rosenblum asked 2 questions:

    Question 1:
    The first is the suspicion of experts. When the idea of a self-insuring group was first raised, the need to consult trained actuaries and lawyers with a background in insurance law should have been obvious.

    There are a number of reasons for this.
    a. Charedi society denigrates all knowledge except for Torah. Secular education is kept to a bare minimum. Expert opinions on various subjects (such as the age of the world, evolution, and other areas that seem to contradict Torah) are made fun of. Given that atmosphere why would you think an expert opinion on this subject would be sought?
    b. The average Charedi has no idea that there is such a thing as an actuary or that math can actually help here. When the extent of your mathematical education is arithmetic it is hard to relate to an actuary

    Question 2:
    The second is the tendency to believe that we have found a way to outsmart the odds – the financial equivalent of Ponce de Leon’s fountain of youth. Every year or so, we hear of avreichim who have lost all their chasanah money in some new Ponzi scheme that promised 30% returns, with no risk.

    The premise of the question is mistaken. The question assumes that the average avreich understands the odds. While everyone reading this understands this I don’t believe that is true for the average Charedi avreich in Israel. Someone who has grown up completely sheltered from secular society, doesn’t read newspapers, etc., has no secular education, has absolutely no idea how the economy works, has no reason to think that a 30% return is out of the ordinary. Based on what should they judge an investment? They have been give no tools to make such a judgment.

  15. Shimon says:

    David – you mentioned that a mortgage can be had for $664 per month. The problem is that the guys kollel pays probably around $500 per month, which is not enough to cover that amount in a mortgage. Ahhh, youll say dont learn in kollel is you cant afford it — not happening! The system is here to stay. Many people would love to have a solution. Actually all of them would. But you have to realize that “not learning” is not an option. Call them stubborn, parasites, etc – it doesnt matter. Thats a fact.

    I have spoken to Israelis about this and how the system doesnt make sense. They told me it only doesnt make sense if “not learning” is an option. Since the “hanacha” (opening premise) is that the couple will be in kollel, and they will not be able to hold a normal mortgage, the parents need to come up with the extra money.

    Just note, a small mortgage of $200 a month is considered normal these days.. so maybe, just maybe… :) well see

  16. DMZ says:

    Seems to me that the real problem is that the Haredi community is unwilling to accept the true costs of their lifestyle. If huge dowries are becoming an issue, it’s time for the rabbonim to step up and talk about it, and try to fix the issue. Rationalize all you want – as long as this continues, you’ll see more of these schemes coming into play.

    Personally, we don’t own a home or a condo; why should we pay for someone else’s? That’s a controversial thing to say, I admit, but I give my tzedakah the way I want to – it’s my right. (Granted, this is for survivor benefits, but the issue plays into it just the same.)

  17. David says:

    Toby,
    Like I said I don’t live there, so I have nothing brilliant to say about what could be done practically to change the rental situation that you mentioned. However, I did mention the 30 year mortgage. A 100,000 dollar mortgage at 7% over 30 years comes out to $664 a month. Now compare that cost to one young couple over 30 years with the cost of providing apartments to their 10 kids in the current situation.

  18. Binyamin says:

    This project raises many interesting considerations.

    This insurance is only life insurance. What will happen for disability? We will still be seeing the brochures for people who are sick, or have other needs.

    A more interesting point is that this tzedaka sets its targets according to what is needed to marry off the children – $50,000 for each one. This is more than most of them would have received if their parents would still be alive. It is also more than a lot of financially stable families can afford to give for all of their children.
    We also wonder about someone who would come to the committee and say, “look, thank God I am still alive, but I have no money for my kids wedding. Can I cash in?” Of course they tell him no. He has a heart attack, and his kids get the money. There seems to be a confusion if this is life insurance or chasuna insurance.

    Could this be extended (even if the plan was viable) to insure people before they die? Obviously not. That would essentially mean creating a socialist community. I think that this program is looking it that direction, though.

    On the other hand, I think that this might be a positive step. The askanim are moving towards a more structured and formal approach to dealing with community issues, which is a big improvement over the current informality.

    (It might also have side effects. If we have now set up a degree of social insurance, but it is very limited, then it will lead to greater demands, which the community cannot afford. The old individual funds have failed as a long-term solution. This plan is not viable. Both are sending the message of a minimum basic entitlement which is beyond the very basic level. (That in itself is not a bad thing). The logical conclusion is for people to take care of themselves, and not to rely on the community.
    (The brochures which regularly appear promote an attitude that it is fine to rely on such assistance, as long as you were learning/doing chesed/otherwise not earning enough. If enough people try that, then there will not be a community to rely on.)

    As to why the planners thought this is a self-sufficient plan – I am not an actuary, but it seems to me that the plan would be stable if it could rely on all chareidi families to continue joining. The problem only arises if not enough people will join, or if it does not become an accepted thing to do. We do not have any reason to count on these conditions, but the organisers seem to have an attitude that “if the gedolim are behind it, everyone will do it!” (Some of the brochures from about 2 months ago seemed to express great disappointment that many people were not listening to this call of the gedolim).

    This plan also raises the issue of how tzedaka should be distributed. The gemara tells us that each community should first help its own memebers, and if they are a rich community they can give to others (aniyei ircha kodmim). We seem to have tried to avoid this by pretending that the chareidi community is all a single unit. One effect of this is that there is no identity between the givers and the receivers. People do not feel a sense of social responsibility to give, or to avoid taking (Obviously many people try not to, but to many rely on collecting.)

    The manner in which this project was promoted was also an example of how these projects talk down to the community. The pamphlets were aglow with the genius of the plan, and how even the Gedolim were amazed, and what’s left to say? Nothing looked like it was written for an intelligent audience.

    If this is maaser – it is worth noting that each pamphlet prominently quoted R’ Chaim Kanievsky that “Every person has a responsibility towards his family to sign up for this plan”. Definately sounds like they are selling insurance. One pamphlet was put out specially to clarify that R’ Elyashiv and R’ Kanievsky say you cannot pay from maaser. I believe that another said that other Rabbis said it can come from maaser. They all say that it is clerly not insurance, and Tzedaka of the best kind.

    Since you brought up this project, it is worth pointing out another which seems to be a classic Ponzi setup. A freind just told me that they were starting to plan their savings to marry off their children, and they were considering the Gemach Hamercazi, which offers this plan: (if I recall correctly – anyone who knows better should let us know) You pay $10 a month for each child (from maaser). When you make a Chasuna they will give you in return the sum which you have contributed, plus a $30,000 loan. (I advised them to find a better investment.)

  19. ani ba'aretz says:

    From Toby Katz: “And BTW I wonder in what city you could find an apartment to rent for $1000 a month?? That might get you a one-bedroom apartment in J-m, and then what would you do after the fifth kid?”

    I live in Bet Shemesh, which is a suburb of Jerusalem with my husband and baby. We live in a beautiful, new 4 bedroom, 3 bathroom apartment on the first floor, and we pay $500 a month. If someone can’t afford to live in the city of Jerusalem (where, btw, I have many friends who rent 2 or 3 bedroom apt for around $800 a month) then there are other options!

  20. Binyamin says:

    The reason for buying apartments is because very few people could or would stay in Kollel if they did not getsubstantial help. (I do not know if this is the most efficient sort of help, but whatever form it takes would be similarly expensive.) The tradeoff of not buying apartments is to end the Kollel system.

    Personally, I think that its a win-win deal, and it seems that many of the other posters here also think that we would gain on all counts by having alot fewer people learning in Kollel. However, most of the Chareidi community feels otherwise. The cost of ending support is more than they are prepared to accept, because it means ending the current system.

    It is wrong to address the issue of buying apartments on its own, without addressing the basic ramifications of such a step.

  21. Toby Katz says:

    David wrote:
    “I don’t live in Israel, but this custom of buying apartments for newly married couples is just absolutely ludicrous”

    I agree that it’s ludicrous but the root of the problem is Israel’s socialist economy and punitive taxation, which have almost eliminated the possibility of a real rental market.

    In America a landlord can build and own an entire apartment building and take in rent for his parnassa. Or a consortium can own a whole slew of apartment buildings and make lots of money. A person can rent one of those apartments and live in it for years, with the landlord taking care of things like repairs and maintenance, plumbing and heating — all of which he willingly does, because running the building is his full time job, and the cost of maintenance is built into the rent.

    In Israel the only rental apartments available are on a case-by-case basis, where a friend of a friend bought an apartment but isn’t living in it this year, but might be coming back to live in it next year. So every year or two you have to move, and scrounge around to hear of another apartment for rent.

    And there is no one person who owns your building — each apartment is owned by a different person — and when something in your apartment needs repairs, you have to run down your personal landlord, who is some young shnook living in New York who knows nothing at all about repairs but might be coming for a visit next year, and he is too far away to take of the problem, but maybe he is paying an agent in Israel to take care of things, but that agent is robbing him blind, taking a cut off the rent you pay but not actually making the repairs he is supposed to be making. (I heard recently of just such a case.)

    It’s not a /purely/ socialist economy of course (Baruch Hashem) — if it were, no one would be allowed to own an apartment at all, all housing would be owned by the government and the government would dole out housing like they did in the USSR — and two or three families would be living in one apartment and sharing the kitchen. So things could be worse.

    But right now the Israeli economic system pratically forces people to buy apartments.

    And BTW I wonder in what city you could find an apartment to rent for $1000 a month?? That might get you a one-bedroom apartment in J-m, and then what would you do after the fifth kid?

  22. Jewish Observer says:

    “insurance premiums include a charge for the large salaries of insurance professionals”

    in theory these professionals are adding their fair share of value (through ha combo of instilling efficiency, facilitating risk reduction, maintaining the ratings, etc. etc.) to justify their salaries. and if you think that the fat is going to shareholders, so hedge your bets and become a shareholder.

    I wouldn’t assume you can beat the system, until strongly proven otherwise

  23. joel rich says:

    R’ Gil,

    Et tu, Brute? ( a Torah Umada reference :-)), from a former actuarial “Student” no less????

    I could write a long post on why this likely wouldn’t work on the basis you outlined but let me ask a simple question – if we reduced life insurance rates by 25% do you think the people needing this would flock in large droves to sign up?

    KT

  24. Gil Student says:

    I was also critical of this plan when I first learned about it. However, this is truth in that insurance premiums include a charge for the large salaries of insurance professionals. If the plan could get insurance professionals (actuaries, claims handlers) to volunteer their time then there would be significant savings.

  25. David says:

    Of course, one of the main things driving this plan is the pressure of the accepted custom of buying apartments for newly married couples in Israel, so I’m going to ask your indulgence for a little tirade.

    I don’t live in Israel, but this custom of buying apartments for newly married couples is just absolutely ludicrous. If ever there was a crying need for an across the board takanah (ala Rabbi Yochanon’s takanah in the Gemorah about burying the dead in simple coffins), it is over here. I hear people defend this custom by saying that the couple should be undisturbed by money pressures in the first years of married life, but really now, how is that being accomplished? Let’s say renting an apartment cost $1,000 a month. That would come to $12,000 a year times let’s say 18 years equals a little over $200,000 before inflation. Compare that cost with the half a million to a million dollars required when the average family starts marrying off their kids. Where in Heaven’s name is this money supposed to come from? I know, gemachs. Or, they could even take out a 30-year mortgage, a wonderful invention, to finance the purchase of an apartment by themselves for another low cost alternative. The situation now, as evidenced by the multiple appeals by fathers having to go abroad to finance these costs is simply intolerable.

  26. David in Israel says:

    I signed up for the plan but I didn’t cancel my term life insurance. Since my monthly preminums are over 5% of my monthly income (!) for only $200,000 of insurance (less for my wife), and we have ten unmarried children, I can’t afford more insurance (fact is, I’ll have to cut back as the premium rises drastically with my age, but the children will then be older, too). So this plan may be some histadlus to fill in the large gap, Hashem yaazor!

    But I don’t have much faith in this plan (actually, I have even less faith in the Israeli insurance companies–but what else can I do? According to newspaper articles, American companies won’t grant life insurance to someone who plans to visit Israel in the next five years, never mind living here! Besides, you have to buy the policy in America and have a medical check-up there. And then, someone may have to fight to get the benefit, as they could claim being in Israel is a war zone.)

  27. SephardiLady says:

    I don’t want to be critical of an entire group of well meaning people, but you could walk right through the holes in this plan. I wrote a post on my blog (Orthonomics) about life insurance and we need to continue to educate people about its importance and ensure they get a policy while they are still young through various means. On that note, we also need a serious anti-smoking campaign. A little hishtadlut never hurt anyone.

    The sociology of our community is such that most families would not individually purchase relatively low-cost term life-insurance if they did not participate in this program.

    I know changes don’t happen overnight, but the sociology MUST be changed before the financial black hole gets any deeper. You are predicting a 3 million dollar pot (assuming no fraud and no terrible investments-don’t count on it (!)). Three million is nothing. How many apartments is that (I assume marrying off includes an apartment. At 100K an apartment you are looking at 30 orphans. At ten children a family that is three families.

    Excuse my outrage (I like to have a gentler touch, believe me), but we can do better. This is no sophisticated at all! I concur with the other posters.

  28. jacob says:

    What about the potential for fraud? The askanim are only human and people have been known to fall for such large sums of money that seems to be batted around.

    jacob

    jacobdajew.blogspot.com

  29. Avigdor says:

    Insurance markets are pretty competitive. And there are all sorts of complications (moral hazard problems; self-delection problems; suboptimal risk pollings) that commercial insurance solves, or at least mitigates, that this plan would not.

    It would make much more sense to set up a tzedakah plan that would help subsidize commericial life insurance for those who are unable to afford it. Those families who could afford life insurance would simply purchase it through regular channels. Those families who could not would have their assistance set at an appropriate level.

  30. Shimon says:

    In eretz yisroel the life insurance policies are much higher, and, atleast according to the people i consulted with, someone who lives in israel can not sign up for a US insurance policy. Sure you can sign up and pay them monthly, but chas v’shalom when they need to pay you, they will find a loophole into not paying you since you live in a foreign country. If I am mistaken, please let me know. I would love to update my life insurance. Thanks a lot

  31. Naftali says:

    It sounds like bad insurance but a good tzedaka. I would be willing to give. Contact information, anyone?

  32. Zev says:

    Your term life figures are way off, at least going by what’s available here in the States. I know that a man in his early 40’s (non-smoker) can get $1 million of term insurance, guaranteed for 15 years, from an A-rated company, for about $65 a month, far less than your friend’s example. Perhaps your friend has some risk factors, or perhaps he locked in for a much, much longer term, but if not, he’s paying far too much.

  33. Kar says:

    “Second, inAmerica, we could really use someone like you. Here you can make a difference. You can provide guidance , be the voice of reason and moderation, and keep us on the road as we slowly are veering to the right.”

    I second this wholeheartedly. You could really make a difference here.

  34. Elie Aharon says:

    Look… why reinvent life insurance? Form a group of like members. Take contributions. Use them to buy as much group life insurance as is affordable. That’s it.

    The company handles the risks, the money and the administration. This scheming for something more is human nature, but crazy.

  35. Shimon says:

    Yes its maaser money.

    Some facts that seem to be overlooked in this article and the comments is that its not geared as an insurance policy. Its being geared as tzeddakah to yesomim. Therefore, even people without children at home – meaning marrried and out of the house, or no choldren at all – who would not get any money are still signed up and will be contributing to the fund. Also, people who have financial stability (whatever that means) will also not be getting any money, even though they contribute. Also, the money is collected now, but not paid until the child gets married (or engaged, but its around that time).

    Did these actuaries take this in to account when they asked to shelf this plan?

  36. Mike S says:

    This seems like a terrible idea. If the plan is actuarily unsound it will collapse leaving families unprepared. Some of them might have bought real insurance if they weren’t fooled into thinking they were getting a better deal here. This seems to me to violate the issur of gneivat daat, if not to constitue outright theft.

    If the communities involved want to set up a life insurance plans in the expectation that they can beat the price of the insurance companies (very unlikely in my view, or it would be in the US) they need to hire actuaries to determine the pricing and investment managers to invest the premiums. I suspect that the cost of these professionals, spread over a relatively modest number of policies would more than eat up any savings coming from not giving any profit to the insurance company.

    If the askonim really want to help, they can push all the young families to sign up for 30 (or 40 if possible) year level term before the birth of a first child, while the couple are young and the policy still cheap.

    This seems another example of community leaders making decisions without consulting the knowledgeable technical experts. Thius is a lousy idea; Torah scholars do not know everything. The one time someone I know well asked a medical shaila of R. Moshe Feinstein, zt”l he did not offer a p’sak without consulting with the physician. Others should follow this example. No one should be foolish enough to set up an insurance plan without an actuary.

  37. Charles B. Hall says:

    I find this very distressing. The high cost of health insurance in the United States has led to similar attempts in some Christian communities in the United States, without consultation from qualified actuaries. Many have failed to pay claims because they were actuarily unsound. Thus the people who contributed were victimized twice — once when they paid the premium, and once when their claims were not paid.

    Families with children need life insurance. Families with many children need a shockingly large amount of life insurance. It is as great a need as rent money and should be treated as such. Such a pool as described, which does not contain a guarantee of payments, is not life insurance. I don’t think it is an improvement over the current situation because people think that they are getting insurance when they are not.

  38. Jewish Observer says:

    shkoyach for this. I would add one nuance – aside from the question of why we think we CAN beat the system is the question why are we so bent on WANTING to beat the system. in this regard we score way lower on the wholesomeness test than the average good guy.

  39. joel rich says:

    ” In short, this is a sophisticated tzedakah plan, not insurance.”

    WADR I have to disagree, it is an unsophisticated tzedaka plan which will require tremendous communication to insure that people who participate in it understand exactly what they are getting. Given the history of such schemes (they go way back), unless our community defies the laws of human nature (which it may), there will be a lot of very disappointed people.

    Would contributions to this fund be allowed to be made from maaser funds? What other charities will suffer if so? Why not just set up a fund for supporting widows and children?(oh they exist – so why not contribute to them?) Is there an issue of gambling in the arrangement since the payoff is not set?

    WADR I can’t understand how this idea got off the ground without someone (lay or rabbinic) asking some very simple questions. When this idea was first floated I got a few inquiries (yes, I’ve been a fellow of the society of actuaries for decades) and I urged those that asked to try to find someone with connections to squelch this asap.

    I’d suggest those that would participate to get whatever term insurance they can afford (these markets are generally, at least in the US, very competetive) and realize that if they can’t afford sufficient insurance that their beneficiaries will have to rely on the state or the goodwill of others. I don’t mean to be harsh but it is the truth bderech hateva and to the extent people make decisions based on the truth rather than on misconceptions, they, and all of us, will be better off.

    May we soon be in a time period where these will no longer be our concerns.

    KT

  40. Chaim says:

    Rabbi Rosenblum I always look forward to your writings. You articulate the frustrations many of us feel in the charedi world about the chareidi world. I suggest you move back to America for two reasons. Firstly, most of what you say about Chareidi Israel falls on deaf ears. We, your therapists, who read your about frustrations are the converted who you are preaching to. Second, in America, we could really use someone like you. Here you can make a difference. You can provide guidance , be the voice of reason and moderation, and keep us on the road as we slowly are veering to the right.

    If you don’t heed my suggestion, we will continue to look forward to your articles. Just do us all a favor and make sure to regularly check your blood pressure.