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I have life insurance through work already and it costs me very little, why should I purchase a plan in addition to that?

Anytime you have coverage through your employer it should be considered a “bonus” and know that in most cases your beneficiary will never receive a payment from it. The coverage is only in effect while you work there; if you retire, there may be a conversion privilege that allows you to continue the coverage but at your retirement age. A critical factor in life insurance premiums is “age when coverage is purchased” – so your retirement age would likely be much higher and premiums more than if you purchased a policy (one YOU own) at a younger age. You can also set up a life insurance plan so once you retire, premiums are paid in full > you will not need to allocate retirement monies to pay for life insurance premiums, giving you more spendable income to enjoy in the golden years.

I hear ads on the radio or TV and see ads in various publications that offer term insurance for pennies a day. Some even state one can buy a 10 year term policy for $300,000 of coverage for less than $25 a month. How is this possible?

Term insurance is typically less in premium (in the early years) than a permanent plan of coverage. Whenever I have placed a call to one of the advertising companies they will give me the rate for my age now, but do not provide me the increased cost amount once the initial term period is up. I have asked on several occasions without success.  An example of a 10 year term policy which I am aware of is: Male age 54 purchases a $350,000 policy (with a minimal rating due to health issues) for $138 per month. Paying that $138 a month for 10 years was affordable; however in the 11th policy year the premium increases from $138 to $700 monthly and goes up each year thereafter. In a couple of years the $700 monthly is now $800+ a month. Very recently (March 2016) while working with a client, their 10 year term policy which insured both husband and wife for $100,000 was experiencing a premium increase from $34 monthly to $103 monthly. It would increase each year then in 5 years be about $200 monthly. You see, while term is “easy to pay for” in the early going, it will significantly increase and may not be affordable to one’s budget. While there is definitely a time and place for term insurance, some term policies offer the option to convert to a permanent plan of coverage.

Is life insurance for a young child really necessary?

If a young child passes away there isn’t a situation where they have dependents who need to be taken care of and life insurance would help. However, the benefit for children’s coverage are many: (1) the benefit of a low premium rate that stays with them for life, (2) Guaranteed insurability > provides the option to increase coverage (generally from ages 25-40) regardless of their health or occupation, (3) cash value build up that can provides funds for later in life to assist with a down payment on their first home, funding a child’s education and supplementing retirement income, (4) providing the funds necessary, in the event of an untimely death, to enable the family to meet necessary expenses during a difficult emotional time.

Is life insurance a viable way to help build my retirement nest egg?

The primary purpose of life insurance is to provide death benefit protection. Using a permanent plan of life insurance may help to supplement retirement income.

I bought a whole life policy in my mid 20’s, now at age 55, is there any benefit to changing that policy to a Universal life type plan?

A big consideration is your health, if you are in good health there may be significant benefits for you. However, never give up, surrender or cancel an existing policy until your new policy has been approved, issued and premiums paid on it.

The whole life policy will likely have cash value built up in it, this cash value can be 1035 Exchanged (IRS Code) into the new Universal life without tax consequences. Every person’s circumstance is different and an evaluation of the facts is required here.

Let me share a case from a couple of years ago:

Male age 64 had 2 whole life policies for a total death benefit of approximately $125,000. Cash value of both policies combined was $42,000. His total annual premiums were about $3,200 per year. This person had no need to use the cash value and planned to keep it in his policies. By utilizing the cash value, he was able to secure $200,000 of life insurance protection; he also gained a “Living Benefit” that gave him access to funds if an unexpected illness occurs. While this payment would come from the $200,000 death benefit and reduce his total coverage, it was a significant improvement over what he had (accessibility of only the $42,000 at a loan interest rate of 8%). Because of this change, he lowered his annual premium outlay from $3,200 to $999!



The examples given are hypothetical and not intended to project or predict results.