Category: In your 80’s

Universal Life vs guaranteed UL what works best depends on age

by

October 12, 2011

2:53 PM

Leave a comment on Universal Life vs guaranteed UL what works best depends on age

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.

Term vs. Permanent it’s all a matter of age

by

July 29, 2011

11:43 AM

Leave a comment on Term vs. Permanent it’s all a matter of age

Below Average Health: Substandard, Impaired Risk, Estate Planning, Final expenses, guaranteed universal life, In Your 20's or 30's, In your 40's, In your 50's, In your 60's, In your 70's, In your 80's, Term Life Insurance

Should one choose term or permanent life insurance?   Granted every situation is different, but a general guideline is simple.  Go by the age you need to cover.

Term before retirement and permanent after retirement –  Term to replace a breadwinner’s lost income: permanent for final expenses or estate planning.

Term –   pre-retirement

  • 20’s:  30 year term
  • 30’s:  30 year term
  • 40’s:  20 or 25 year term
  • 50’s:  10 or 15 year term
  • 60’s:  10 year term

7 to 10 times annual salary is general rule of thumb. Most important: get something with affordable premiums.  If need be, drop back on the term length, rather than the face amount, for affordability.

If you have children, get term long enough to cover your youngest child past college age.  For example, if your youngest is 9,  a 15 year term.   9 + 15 =  age 24.    It used to be that age 22 was the benchmark year for college graduation, but since the 5 year plan is more the norm, so you may want stretch it out a bit more.

Permanent  –    post-retirement:  60’s, 70’s, 80’s, 90’s

Ideally, start a separate permanent policy in your 30’s, 40’s or 50’s.  If not, permanent is available into one’s 80’s.  If unhealthy, you can convert your term policy into permanent in your 60’s.

First choice: fully underwritten life insurance, which requires a blood test and medical records.  It’s less expensive, and you get more coverage.  There’s a big industry out there, including AARP, that misleads seniors into needlessly expensive no exam term and permanent. That coverage is only plan B if very unhealthy and for permanent only.  Don’t be fooled into no exam term.

North American currently has the best policy for final expenses, a $25,000 guaranteed universal life.

For estate planning purposes there are guaranteed universal life policies at whatever coverage level that suits your objectives.  The most choices are for coverage at $100,000 or more.  Please refer to my sample quotes by age.

Images: Wikimedia Commons

Permanent life insurance more suitable for seniors than term

by

June 6, 2011

12:50 PM

Leave a comment on Permanent life insurance more suitable for seniors than term

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.

 

AARP life insurance poor choices

by

May 11, 2011

11:11 AM

Leave a comment on AARP life insurance poor choices

Graded Benefit whole life, graded benefit whole life, guaranteed acceptance Whole Life, guaranteed issue whole life, In your 60's, In your 70's, In your 80's, non par whole life, Product, Simplified issue whole life, Whole Life

AARP life insurance choices are flawed and will tend to be more expensive.  When you go to AARP’s website for life insurance, all the options say “No Physical Exam”. That’s more expensive coverage. Actually you want to take a “physical”, called a paramedical exam, even if you’re in your 70’s or 80’s.  It’s free, they come to your door, takes about 20 minutes and can save you lots of money.   Here’s the proper order of choices for life insurance as a senior.

#1 option

Fully underwritten life insurance.   Applications require a blood test and short paramedical exam.   Carriers generally request your medical records, all at no charge to you.  This way life underwriters can gage your risk classification and make you an offer for coverage.   This will save you lots money over a no physical exam policy.  Genworth and North American offer lifetime guaranteed permanent coverage, called no lapse universal life, starting at a $25,000 benefit, Penn Mutual starts at $50,000, and multiple carriers, including Lincoln National and Aviva, offer coverage of $100,000 and more for seniors.   Unless you’re in really, really poor health, try this first.  There is no cost to you to apply, and the worst they can do is offer you a higher rate or turn you down.

Continue reading “AARP life insurance poor choices” →