29 June 2013 0 Comments

Life Insurance After 65

insurance for seniorsFor most people life does not stop at age 65 and for many who reach that age, the need for life insurance also does not stop.  There are a myriad of reasons why people want and/or need life insurance after the historical age of retirement.  Let’s assume that our example in this piece is a very healthy 65 year old male who is intent on having a $1,000,000 life insurance policy in force when he dies.  We’ll call him Sam Sample.

With the knowledge that he is a perfect physical specimen whose parents are still alive and well in their late 80’s, Sam sets out to get the best policy available so he contacts a number of agents figuring he’ll have them compete for his business.  Oh, they compete alright…compete to get his attention, not necessarily provide the best advice.  Sam gets offers ranging from $4,475 to $19,087 for an annual premium.

Is it possible to have such a discrepancy in premiums?  Yes it is and it’s not because one policy is more competitively priced than the other.  Each of the quotes Sam receives is extremely well priced.  It’s because the policies are for different durations.  Here’s what Sam is shown:

10 Year Term                           $4,475

15 Year Term                           $5,755

20 Year Term                           $9,495

25 Year Term                          $14,400

UL to age 100                          $17,654

UL to age 121                          $19,087

Each policy’s premium is guaranteed to provide a $1,000,000 death benefit for the duration shown.  When Sam figures that the agents showing the 10 and 15 year premiums were only trying to get his attention, he tosses them and their quotes out.  He sure plans to live beyond 15 years!  The agent with the 20 year premium figures that 20 years is more than enough to “last a lifetime.”  But, that is not likely.  Keep in mind that Sam is a Preferred-Best risk and in 20 years the total premium the insurance company will have collected is $189,900.  How can they do that if most people will have died within 20 years?  The answer is, they can’t.  Sam’s life expectancy goes beyond 20 years, so he knows that he’ll have to pay more than $9,495 to get what he wants.

What does Sam do?  He’s told that all the term policies can only be converted for the first 5 years and that the premium goes sky high if they are continued beyond the original duration.  The premium for the Universal Life (UL) policy to age 100 may be increased by him prior to age 100 if it appears that his great health might take him beyond that date.  Still, that becomes an unknown, so he settles for the age 121 guarantee.

Sam didn’t have to talk to more than one agent to get all these quotes.  Selecting a single agent with the ability to broker with all these companies would have been a lot easier.

Next…the effectiveness of second-do-die policies for estate planning needs.

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