29 October 2013 0 Comments

The Age 55 “SPEED BUMP!”

caution - middle age!If you are close to age 55 and haven’t reviewed your life insurance in the past few years, consider this a speed bump.  It means slowing down enough to spend some time with your agent to review what you have, determine what your objectives are over the coming years and make any adjustments that might be required to attain those objectives.

What’s magic about 55?  Nothing, really, other than above that age it can become very costly to make changes in your program and it is a time in life when the future for many is starting to look clearer.  Also, if you have been paying premiums on life insurance policies that were purchased over ten years ago, you may be in for a surprise.  Recently an individual in his 70’s asked me to look at a Universal Life Policy he purchased over 20 years ago.  At the time, the $3500 annual premium was projected as sufficient to keep the policy in force to age 96.  Now, the policy requires a premium of 4 times that amount, increasing annually, or it will lapse.

The decision here is whether to keep this policy, buy a new one, or stop all coverage.  If he is totally uninsurable and can afford the escalating premiums, he will have to die within the next 8 years before future premiums exceed the death benefit…not an appealing option to produce a positive rate of return!

A new policy might make sense as long as the Guaranteed Internal Rate of Return of the death benefit stays on the positive side beyond anticipated life expectancy.  But, he should buy nothing if he can’t afford to continue the new premium for the balance of his life.  And…is he even insurable at this point in his life?

When this person purchased his Universal Life Policy, death benefit guarantees were not a strength of these policies.  Since then, UL policies have some of the best long term guarantees.  The lesson is that someone should have been reviewing his needs with him long before this point.  Shame on the original agent if he just sold and ran!  The initial $3500 premium was based on much higher interest rates that were being earned by insurance company investment departments.  Don’t buy and figure that’s it.  If your current agent isn’t on top of it, find another agent to look after your interests.

Coming up…Bigger isn’t always best!

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