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Golfgal, Excellent response. I couldn't have said it better. According to LIMRA (Life Insurance Marketing and Research Assn.) less than 1% of term life policies pay a death claim. This is based on most people cancelling their policies at older ages. I picked this up at a conference and after 8 years as an advisor doing this for a living I felt dooped slightly. Term is good, but just understand that you will probably cancel it at older ages and then you have nothing. My opinion is blending a little permanent and term together. I typically blend $25,000 to $100,000 of whole life with a mutual insurance carrier and make the rest up with term insurance. Another solution that you don't see because most of the premium is non-commissionable to insurance agents is taking out a smaller faced permanent policy and add a rider called, "Annual Renewable Term" ART is non-commissionable most of the time, but it provides maximum coverage for the least amount. As your need for life insurance decreases, simply request the amount of ART to be reduced through your years in life until you have it reduced to the base amount of permanent. This will probably not only provide the most cost effective way to handle your life insurance, but also ensure that you have coverage in your older years of life when you finally do pass.
I haven't seen this issue posted and if I missed it, I apologize. A former colleague of mine had a UVL policy and when her spouse's health declined to the point where he could no longer work, they borrowed the maximum amount from the policy. He died within a short period of time after that and she was unable to pay it back. She entered the workforce, for the first time in her life at age 53. It was sad.
Term insurance is what we bought. We're 8 years into a 10 year term and we will likely discontinue paying the premiums early since we have adequate assets and neither of us will need the death benefit payment. Point is, just because you purchase a 30 year term policy doesn't mean you're locked in - stop paying premiums when you don't need the insurance.
Golfgal, Excellent response. I couldn't have said it better. According to LIMRA (Life Insurance Marketing and Research Assn.) less than 1% of term life policies pay a death claim. This is based on most people cancelling their policies at older ages. I picked this up at a conference and after 8 years as an advisor doing this for a living I felt dooped slightly. Term is good, but just understand that you will probably cancel it at older ages and then you have nothing. My opinion is blending a little permanent and term together. I typically blend $25,000 to $100,000 of whole life with a mutual insurance carrier and make the rest up with term insurance. Another solution that you don't see because most of the premium is non-commissionable to insurance agents is taking out a smaller faced permanent policy and add a rider called, "Annual Renewable Term" ART is non-commissionable most of the time, but it provides maximum coverage for the least amount. As your need for life insurance decreases, simply request the amount of ART to be reduced through your years in life until you have it reduced to the base amount of permanent. This will probably not only provide the most cost effective way to handle your life insurance, but also ensure that you have coverage in your older years of life when you finally do pass.
Lance Kolbet, RHU, LUTCF
That's why I got a return of premium rider on my policy. The only thing I don't like about it is, the base premium is going to be level for 30 years, but the rider won't. So my effective premium could still go up each year and may eventually cost me more than the premium itself. Come to think of it, I don't know if I can recover the ROP rider at the end. I'm going to try and clarify that.
I haven't seen this issue posted and if I missed it, I apologize. A former colleague of mine had a UVL policy and when her spouse's health declined to the point where he could no longer work, they borrowed the maximum amount from the policy. He died within a short period of time after that and she was unable to pay it back. She entered the workforce, for the first time in her life at age 53. It was sad.
Term insurance is what we bought. We're 8 years into a 10 year term and we will likely discontinue paying the premiums early since we have adequate assets and neither of us will need the death benefit payment. Point is, just because you purchase a 30 year term policy doesn't mean you're locked in - stop paying premiums when you don't need the insurance.
What was sad about it? They had the cash available to pay bills in that time. That is a good thing, isn't it? The loan from the policy should have been deducted from the death benefit and been done with it--except that the universal policies are NOT a good policy and if you have one, get out of it. A universal policy is a totally DIFFERENT policy then a whole life policy.
golfgal gives reliable and useful advice, I've found her to be highly accurate and very informed on insurance issues. I must agree with her absolutely that UVL is a really bad policy for most people (IMHO) and one best avoided. Insurance should be a protection against risk through time (without a bunch of fancy bells and whistles (and cost), which quite simply is to replace assets (or income) lost through an untimely death during one's income producing years. Hopefully, one 's assets increase through time and one's need for insurance declines with advancing years and a reduction in financial responsibilities to zero in retirement mode. This does not negate the absolute need for funds at the "end of the road", whether insurance or in other assets, to cover the final transition expenses of an individual, e.g., medical and funeral expenses. Individuals can incur very significant medical costs in one's last year of life which can, and have, proved to be a burden on their survivors. A well thought out medical directive/power of attorney is a very important component to an individual's insurance plan. The medical/industrial complex can empty your estate with useless and unnecessary services if you let them. It's best, IMHO, to plan for the big jump and minimize the waste of your estate by planning in advance for it. Personally, I've preferred term life (from sound and responsible companies) for the kiddie/spouse protection years and a separate fund for close-out costs. Whether one chooses cremation (usually very inexpensive) as opposed to traditional burial is a personal matter - what is important is that an individual plans ahead to cover such expenses. Appropriate insurance specific to an individual's financial needs is a great way to meet that need. We all will "meet the Maker", aside from taxes , it is an unavoidable fact of life. It does take a seemingly inordinate amount of research and analysis to wade your way through this stuff, but it is necessary (and be warned, there are hustlers out there who will sell you insurance that is not in your best interests - cavaet emptor applies in all such dealings), I am a firm believer in having a sound and appropriate insurance plan, most especially for younger breadwinners who really need to provide for their tribe. Just my $0.02.
Last edited by Pilgrim21784; 02-28-2009 at 03:57 PM..
Reason: spelling correction
What was sad about it? They had the cash available to pay bills in that time. That is a good thing, isn't it? The loan from the policy should have been deducted from the death benefit and been done with it--except that the universal policies are NOT a good policy and if you have one, get out of it. A universal policy is a totally DIFFERENT policy then a whole life policy.
Agree my post should be removed. The UVL is quite different than whole life. The only point remaining is that a term life policy is not an absolute contract, if there is no consideration, there is no policy in effect.
The reason it was sad, as I explained earlier is that the loan against the UVL, meant she had to pay the mortgage and other recurring expenses because they'd already spent the loan monies during his illness. It was not a good plan/policy in their case. Again, my post was inaccurate and not on topic with the OP. Apologies to all for the inaccurate post.
Agree my post should be removed. The UVL is quite different than whole life. The only point remaining is that a term life policy is not an absolute contract, if there is no consideration, there is no policy in effect.
The reason it was sad, as I explained earlier is that the loan against the UVL, meant she had to pay the mortgage and other recurring expenses because they'd already spent the loan monies during his illness. It was not a good plan/policy in their case. Again, my post was inaccurate and not on topic with the OP. Apologies to all for the inaccurate post.
Your post brought up a good point, also, I am wondering why there wasn't money left. Typically you can't take a loan for the entire policy amount. Generally with the universal policies what happens is the cost of insurance gets to be so high that unless you pay higher premiums each year it eats away at the cash value, my guess is that the loan combined with the higher costs of insurance ate away at the policy which caused it to lapse.
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, it is an unavoidable fact of life. It does take a seemingly inordinate amount of research and analysis to wade your way through this stuff, but it is necessary (and be warned, there are hustlers out there who will sell you insurance that is not in your best interests - cavaet emptor applies in all such dealings), I am a firm believer in having a sound and appropriate insurance plan, most especially for younger breadwinners who really need to provide for their tribe. Just my $0.02.
