Category: Product

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.

 

Guaranteed Issue Life Insurance

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May 19, 2011

3:18 PM

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Alzheimer's, Below Average Health: Substandard, Impaired Risk, In your 60's, In your 70's, Product, Whole Life

Those late night commercials or mailbox solicitations for life insurance that say, “You can’t be turned down”  are talking about graded benefit life insurance, also called guaranteed issue life insurance.   There are no medical questions, no medical exams.   The applicant must be mentally competent and be able to sign their own application.   There is graded benefit term and graded benefit whole life.   Eligible ages are generally from  40 to 80, with some variations depending on the carrier.  Benefit amounts generally run from $2,000 up to $50,000.

One can be on death’s door with cancer, heart disease or AIDS and get this kind of life insurance.  Alzheimer’s, however, you cannot. The catch is that you must wait 2 or 3 years to get the full benefit.   If one passes away before then, other than by accident, premiums are returned plus interest.   Criteria for judging competing carriers are the premium, the waiting period, and interest rate on return of premium.

Is it a good deal, or at least an okay deal?   Presidential Life Insurance Company, a longtime seller of guaranteed issue whole life,  made the news this week by showing a profit in the 1st quarter.   There are other carriers, but Presidential is usually come up on any short list, so I’ll use them to give a sample quote.

Age 65

Monthly Premium Face  Amount Waiting Period Return of Premium interest rate Carrier Graded Benefit Whole Life
$90.21 $10,000 2 years 5% Presidential After 2 year waiting period full benefit

 

So that comes to $1,082.50 annualized a year for coverage for a $10,000 benefit.    Remember that’s the monthly bank draft rate.  It’s $1,002.30 a year if you pay it annually.  As usual, paying annually is a better deal.   Not hard to do in your head math on this one, but let’s see how it figures out exactly: $10,000 benefit divided by $1,082.50 annualized premium equals 9.2 years  (10,000 ÷ 1,082.50 = 9.23)

So it’s value as a coverage depends on one’s situation and life expectancy.  Since there’s return of premium, you can’t lose on someone passing away in a short period of time, you get your money back plus interest.   However for someone who lives a relatively long time, despite poor health, may end up paying more premium than their policy is worth.

 

 

 

 


AARP life insurance poor choices

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May 11, 2011

11:11 AM

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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.

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Survivor Universal Life Uses

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March 23, 2011

11:55 AM

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In your 60's, In your 70's, Product, Universal Life

A couple for estate planning purposes may create one life insurance policy that pays out when the last surviving person passes away.   The product used for this is called a SUL or Survivor Universal Life.  To lock down the death benefit, a lifetime guarantee is usually part of the coverage, so look for the the letter G in the mix, as in SUL-G.  It is less expensive to have a joint policy as a couple than two separate individual policies.   Also you qualify for coverage even if one of you is uninsurable or in poor health.   It’s uses are generally:

 

  • Estate Taxes

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Prudential New Product Review

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February 16, 2011

9:49 AM

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In Your 20's or 30's, In your 40's, Product, Term Life Insurance

Prudential has introduced “PruTerm WorkLife 65” life insurance which waives premiums for one year if you are unemployed.   This is geared for a breadwinner in their 20’s, 30’s or 40’s with a spouse or children to protect.

Good idea Prudential.  But at what cost?  I ran $500,000 quotes for a male at age 35 and 45 covering them up to age 65, best health rate.   Prudential was about 30% higher than Genworth Life & Annuity at age 35 and about 40% higher at age 45.

Conversion with Prudential is to age 65.   Conversion means switching the term to permanent without health evaluation.  Genworth’s Term UL has a fixed rate conversion to universal life.   Prudential, like nearly all other carriers,  leaves the conversion’s cost and product selection up in the air, depending on what’s offered at the time of conversion.  In the last few years this has proven to be a minefield.   Some carriers have severely limited their conversion options in a very unfavorable way.   Conversion is the second most important factor to choosing term life insurance after price, and right now, hands down, Genworth is the best for conversion.

Lifetime Guaranteed Coverage

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February 14, 2011

10:52 AM

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In your 60's, Product, Universal Life

One key element to permanent life insurance is the age guarantee.   If you’re over age 60, look for something called guaranteed universal life, or GUL for short.   The best of these products guarantee coverage at a fixed rate to age 120 or beyond.    Banner Life has a good product that guarantees cash value accumulation as well.   All you have to do with a GUL is pay on time.     The contract provides a lapse protection guarantee as long a you make timely payments.

Whole life insurance was traditionally guaranteed to age 100 with guaranteed cash value.  Universal life, UL, came out in 1980’s promising higher returns but took out those guarantees.   About the year 2000, carriers introduced universal life with lifetime guarantees.  A guaranteed UL is much less expensive than whole life, so much of what you see out there today are guaranteed ULs.

Which company has the best guaranteed UL for you will depend on your age and health.  As an independent broker I have access to multiple carrier comparison quote systems not available to consumers on the internet.  You can compare term on the internet but not permanent.  Let me know, and I show you the top 5 for your age and health.

If you bought cash value life insurance in the 1980’s or 1990’s let me review it for you.   It may not be a permanent as you think.

The difference between Whole Life and Universal Life

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October 21, 2010

11:13 AM

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Product

When I bring up universal life (UL) people naturally ask, “What’s the difference between whole life and universal life?    One thing is for certain: whole life builds guaranteed cash value.   A $100,000 whole life policy taken out today is generally guaranteed to “endow” be worth $100,000 in cash value at age 120.   Pay your premium on time and whole life is also guaranteed for life.

Universal Life (UL) is an apt name because, like the universe, it structure goes all over the place.  If you purchased a UL from 1980 to 2000, I strongly recommend you let an agent review it, because no telling  how well it’s orbiting.  It could be headed for the sun, i.e. destruction, so pull out the latest annual statement, if you got one, and call an agent or the carrier.

Those of you who purchased anything between 1980 and 2000, that was not term, should heed this advice and have your policy reviewed.  Most so-called permanent policies sold at that time were most likely a UL.  They were less expensive and promised better returns.  But if you ask a 1980’s or ’90’s policy holder, they think they have whole life, and it’s guaranteed for life.   Not so!    You need a close look at the policy, an annual statement or in force illustration to find out.

After about 2000, the life insurance  industry came out with a rock solid product called guaranteed ULs (G-UL) or no-lapse UL’s: pay your premium on time and the policy lasts to whatever year set, like age 121.    This G-UL lifetime guarantee is like a whole life’s lifetime guarantee.  But a (G-UL) doesn’t build much cash value, so it’s low orbit, miss payments can cause it to come crashing down to earth, i.e. lapse.   I highly recommend guaranteed ULs for someone in their 60’s or 70’s.  Just pay your money on time and the benefit is guaranteed for a set period of time.   You can easily set it to at least age 110.

For someone in their 40’s or 50’s, I generally recommend a regular UL.   It’s interest sensitive, so it builds cash value.  Pump sufficient premium into your UL ,and it should last a lifetime.   You got to watch it though.   The difference between a whole life and a regular UL is sort of like the difference between driving a car and being chauffeured by a limousine.   Driving a car requires a bit more attention.   A UL’s gas is premium.   The carrier’s interest contributions is the oil.  The gas tank is cash value.  If the regular UL gas tank goes empty, has zero cash value, the car quits.   (With a G-UL you don’t have to worry about zero cash value, if you pay your premium on time.)  If you set it up correctly and you watch it over the years, with the help of your trustworthy agent, it should serve you well.   (Those who purchased UL’s in the 80’s and 90’s often, ominously, haven’t checked the oil or know how the gas tank works.)

The difference between whole life and UL is mainly about price and guarantees.  UL’s have a much better price.   Once you’ve reached your 40’s, a whole life’s price,  for a decent sized policy, generally becomes out of reach.  You take a UL, understand how it basically runs, like one does a car, and you can manage it quite well for your journey towards the horizon.