8 November 2013 0 Comments

Life Insurance When You Least Thought You Needed It

a good ideaYou’re age 68 and your wife is 65.  You had a minor heart attack a few years ago, but you’re fine now…been watching your diet and lifestyle.  Your wife is in great physical condition!  Life has been good to you.  You have invested wisely, your home is paid off and the net worth of your other investments is slightly north of $3,000,000.  You were smart enough to have purchased Long Term Care Insurance a few years before you had your heart episode.  Your income from Social Security, investments and an IRA rollover is more than you will ever need to take you comfortably through your remaining years.

You have no life insurance because you figure you don’t need it.  There is no loss of income when either one of you dies and you are well under the $10 Million+ estate tax exemption.  You have grandkids who you would like to leave something for after you are gone.

You figure you can safely put away $8,500 per year for ultimate delivery to your grandkids…and you’ll still have enough to help them out while you are still here.  How might life insurance work into this picture?

You look at a second-to-die policy.  Remember, you had a heart attack so you’re policy will carry an extra charge (probably table two), but your wife is a Preferred Best risk.  You apply for a $500,000 policy and pay $8517 per year.  That premium guarantees the $500,000 death benefit when the second of you dies, no matter when that may be.  Is this a good way to provide a fund for your grandkids?  Well, here’s what you would have had to earn after-tax each year to produce $500,000 based on the year the second of you dies:

Years Until the Second of You Dies                           Annual Required Earnings 

10                                                                                  31.01%

15                                                                                  15.77%

20                                                                                    9.42%

25                                                                                    6.06%

30                                                                                   4.04%

Even if you die first and your wife lives to age 95 the after tax return of $500,000 would have required earning each year of 4.04% after tax.  The coverage continues to age 121 with no increase in premium.  And the life insurance return is 100% guaranteed by an extremely strong, old life insurance company.

Could this be a viable option for you to pass on wealth to your loved ones?   It also works for individuals.  Contact your agent to find out.

Stay tuned for more surprises!

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