Category: Age 68

Term life insurance and conversion

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September 11, 2013

3:18 PM

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20 year term, 30 year term life insurance, 68 years old, 71 year old, 71 years old, Age 68, Age 70, Age 71, Conversion, exchange, term

Carpe Diem

In follow ups with clients and talking to life insurance term policy holders shopping for coverage,  I am struck again and again how important conversion is to term life insurance.  The lowest term price is the easy part to figure out. Conversion is the quality feature.  If you have a health problem during the term period, conversion may be the only game in town for new coverage. For example:

Timely conversion:
John, 42 years old and in excellent health, starts a $500k 30 year term policy at the preferred best rate.  At 61 years old he has a heart attack. At 62 years old with the term coverage ending, he converts $250k of his term coverage into a universal life policy at the preferred best rate, no underwriting,  by just signing a couple of forms.

Past the conversion deadline:
Jill, 51 years old and in good heath, starts a 20 year term policy with the preferred non tobacco rate.  At 68 years old she develops stage I breast cancer.  At age 71 with the term policy ending, she discovers her conversion period ended at age 70.  Instead of converting her policy at preferred a year before, the most favorable offer she finds for new coverage available has a flat extra charge of $7 per thousand for 5 years at the standard rate.

Pay close attention to which carriers has the best conversion options when shopping for term. Policy holders note term conversion or exchange rules and the deadline for conversion as a vital record.

Universal Life vs guaranteed UL what works best depends on age

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October 12, 2011

2:53 PM

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Age 68, Cash Value, Estate Planning, guaranteed universal life, In your 40's, In your 50's, In your 60's, In your 70's, In your 80's, Universal Life

Universal Life, UL, has many different life insurance product designations. One of the most basic distinctions is whether it is a UL or a Guaranteed UL.

Guaranteed Universal Life  (Guaranteed UL)
With guaranteed UL there is a lapse protection guarantee: as long as you pay your premium on time, coverage is guaranteed.  Lifetime guaranteed UL is guaranteed to age 121.  Great coverage: inexpensive, straightforward, easy to understand.  Put premium payments on bank draft and forget about it.  Is there a catch?  No.  Well, perhaps in a few ways: guaranteed UL’s lack flexibility on the adjusting the premium amount, the lapse protection is lost if the premium is not paid on time, and guaranteed UL’s do not build much cash value.

Universal Life (UL)
UL’s are called flexible adjustable life insurance for a reason. Premiums are flexible.  There is a target premium.  The real target is to make the life insurance coverage last for the rest of the policy holder’s life. Premium can be raised, lowered or kept the same to meet that target.  It’s sort of like gas in the car.  The idea is to have enough gas (cash value) to reach one’s destination, i.e.  go beyond the person’s lifespan. At the policy’s beginning, target premium is typically set to age 100.  The car’s (i.e. carrier) performance helps determine how much gas (premium) is needed.  With a UL the holder is obliged to take a much more active role in management of the policy.

Does my age affect which type I choose?
Yes, generally select a UL in 40’s and 50’s, and a guaranteed UL in 60’s, 70’s and 80’s

Universal Life: 40’s and 50’s
When younger, in your 40’s or 50’s, you want the flexibility of regular universal life to lower or raise premium payments depending on your financial situation, to build higher cash value and to possibly replace your coverage for a better product later on.

For example:

Mrs. Wright, age 46, takes out a $250,000 universal life policy with the target premium of $150 a month.   Five years later, her child needs braces and her monthly budget is tight.   Since there is $3,000 cash value in her policy, Mrs. Wright, after reviewing an in force illustration, lowers her premium to $100 a month.   One year later after getting back on better financial footing, Mrs. Wright increases her premium to $200 a month until the policy back on track to the original target of age 100.  Later she is able to lower the premium back down to $150 a month.

Guaranteed UL: 60’s, 70’s and 80’s

When older, lock in a benefit amount for a set premium for life.

For example:

Mr. Ward, age 68, would like to leave $500,000 to his son.  He chooses a guaranteed universal life product because the premiums are fixed and the policy is guaranteed to age 121.   He has a secure retirement income and can well afford a fixed premium payment.  He puts those payments on bank draft and can rest assured that this portion of his estate plan is secure.

Small permanent life insurance in your 60’s and 70’s

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August 8, 2011

2:42 PM

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Age 68, guaranteed universal life, In your 60's, In your 70's, Whole Life

Looking for a smaller life insurance policy for final expenses?   What’s best?   It depends on how much coverage you need.

American General Life recently sent agents and brokers a notice that they were lowering their prices on the whole life product, called American Elite Whole Life.   They had pretty good prices already, so I looked into it.  For example,  a $10,000 whole life policy with American General for a female 68 non tobacco is $48.20 a month.   That beats Liberty Bankers Life $51.97 a month.   Both are “non par” or non participating whole life: no dividends and so the face amount is level; it will always be a $10,000 benefit.  American General has paid up insurance.  That’s a plus if you decide to stop paying premiums.  You would have the option to surrender the policy for its cash value or keep a smaller paid up policy.   For example, after 10 years this 68 year old female would have the option of taking $2,330 in cash value or keeping $3,918 in paid up insurance. American General however requires full underwriting, meaning a blood test and possibly a review of medical records, for people over 55.  Liberty Bankers life is simplified issue, no blood test.

In contrast a $25,000 guaranteed universal life policy with North American is $47.68 a month at their best rate, $50.26 at preferred non tobacco and $64.03 at standard non tobacco.   This required full underwriting: blood test and usually medical records.

$25,000 of coverage for $50.26 a month or $10,000 for $48.20 a month?   Easy choice.  You pay about the same for a $25,000 guaranteed UL as a $10,000 whole life.  Both offer permanent life insurance coverage at a fixed rate.   American General’s whole life only real advantage is if you terminated the policy.  You have the choice of the guaranteed cash surrender value or reduced paid up coverage.  North American guaranteed UL builds little or no cash value, but if you pay on time the coverage is guaranteed to age 120.  Guaranteed Universal Life is a better deal.

What if all you need is something like $5,000 or $8,000 in coverage?   Let’s use female age 68 non smoker again as an example.   For $5,000 it’s $24.10 a month with American General and $28.22 with Liberty Bankers Life.  For $8,000 it’s $38.56 with American General and $42.57 a month with Liberty Bankers Life.   American General is less expensive.  It would depend on your individual health situation, because American General requires more underwriting.   Regardless, look to whole life for coverage amounts less than $10,000.

Face amounts as low as $5,000, $1,000 for term conversions.

8/8/2011, quotes , non tobacco, rates subject to change, quote accuracy or completeness not guaranteed

image source: Wikimedia commons

Permanent life insurance more suitable for seniors than term

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June 6, 2011

12:50 PM

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Age 60, Age 61, Age 62, Age 63, Age 65, Age 66, Age 67, Age 68, Age 69, Age 70, Age 71, Age 72, In your 70's, In your 80's, Product

Over the last few days, I compared life insurance websites for seniors in ages 60 through age 72 by Google searching life insurance and adding an age, “life insurance age 68”  for example.   It’s misleading for those in their 60’s and 70’s to see at the top of Google’s list websites with term life insurance given such prominence. Term is not usually the right product for seniors.  The primary purposes of term are to replace lost income or settle an outstanding debt like a mortgage.   Sure if you have less than 10 years to go on a mortgage, term life insurance might make sense.   I would surmise term gets promoted and sold simple because it’s less expensive.  But if one buys term in your 60’s or 70’s, chances are you will outlive your term, and then you’ve paid all that premium for nothing.  Even if you take the best term out there, Genworth, and have the option to convert to a fixed rate universal life, you have to pay higher premiums as your age goes up.

For the majority of people in their 60’s and 70’s permanent life insurance is the most suitable coverage.  If at all healthy, guaranteed universal life insurance is the best.  Coverage starts at a $25,000 benefit amount, and premiums are affordable.  North American has an excellent G-UL right now.   There are also small whole life policies, called simplified issue because there is only a short questionnaire and no blood term.  Coverage starts at a $2,000 a $3,000 benefit amount.   Either choice is better than term because it’s fixed rate coverage for life.