Life Insurance Question

[julieakc]

I'm going to take out some additional term life on myself and have been offered 2 choices. A straight term life (I think I requested 30 years) for say $45 per month or for a little more, say $62 I could get a term policy that will expire at the end of 30 years but will also pay back all premuims paid if I am still alive (it is NOT a whole life policy with any cash value).

I don't have the figures in front of me, but the numbers above are pretty accurate. I tur 39 in a couple of months so we're looking at me being 69 at the end of the policy.

Which would you go for?

BTW, I have an insurance background, but my experience is with P&C not L&D, but I know/understand the basics of Life Insurance, I just want some opinions/thoughts..things maybe I haven't thought about.

TIA

[hillview]

I think it depends on what the policy is for. For me I want a policy that will take care of my kids should I die. So I'd be asking what age will your kids be at 69? Would they still need any financial support? What about DH? If you go to buy life insurance at 69 of course that will be insanely expensive. So the only way I'd do the expires at 69 is if I didn't need any policy after I turned 69. Other questions, is it a level payment (eg won't ever go up?)? Can you increase the amount withOUT another health check up?
HTH
/hillary

[BillK]

Keep in mind that even IF you keep your 30 year Term to age 69 at $45/mo. - the premium on year 70 is going to go up by quite a bit - then at 71 - even more - then it almost starts increasing exponentially every year thereafter. It gets REALLY ugly - REALLY fast once a Term policy "runs out".

For that small of a price difference - I'd take the premium refund plan - and use that returned premium at age 69 to buy another - smaller term policy at age 70 (if you even need it then) - or go on a nice family cruise or something (if you don't need it then).

:)

[julieakc]

I think it depends on what the policy is for. For me I want a policy that will take care of my kids should I die. So I'd be asking what age will your kids be at 69? Would they still need any financial support? What about DH? If you go to buy life insurance at 69 of course that will be insanely expensive. So the only way I'd do the expires at 69 is if I didn't need any policy after I turned 69. Other questions, is it a level payment (eg won't ever go up?)? Can you increase the amount withOUT another health check up?
HTH
/hillary

Sadly...DS will need a conservator his whole life (unless they can find a cure for his syndrome), so regardless of his age when DH and I depart this earth our life insurance and whole estate will go to fund his special needs trust.

Both will expire at the end of the 30 years. I suppose I could try for a 40 year term (does that exist?), but I would imagine that the premuims would be higher because of those extra ten years and because I'll be 69-79 for them.

My understanding is that both policies are fixed amounts for the 30 years, just like any other term - not sure about increasing the amount. That's a good question.

[julieakc]

For that small of a price difference - I'd take the premium refund plan - and use that returned premium at age 69 to buy another - smaller term policy at age 70 (if you even need it then) - or go on a nice family cruise or something (if you don't need it then).

:)

That's a good plan - (all of the options)....depending on DS's situation at the time we very well might need to buy another policy in order to make sure his trust is adequately funded.

[hillview]

didn't read the term!! In that case I'd run the numbers. Additional $18/month into a mutual fund compounded say at 5% over 30 years vs the you get your money back and see where you end up.
/hillary

[Momof3Labs]

Skip the return of premium option - it's a huge profit-maker for the company. If you want money at the end, just invest the difference in premiums.

30 year level term is as long as you'll find out there. If you need something longer, then you'll need to look at whole life or something along those lines.

[bubbaray]

OK, I don't profess to know squat about insurance, but have you considered getting some high-end financial advice? Tax lawyer or accountant or similar? Your situation with a conservatorship/trust likely poses some unique challenges. Its not just the ins. that you are getting, you might want to cover off the whole trust issue so as to minimize the amount to income/estate/probate taxes.

[julieakc]

didn't read the term!! In that case I'd run the numbers. Additional $18/month into a mutual fund compounded say at 5% over 30 years vs the you get your money back and see where you end up.
/hillary

Ok, if I did this right....the $17/month at the end of 30 years would be roughly $13,553, compared with $22,320 if I got all premuims paid returned to me.

Over the course of 30 years the total extra premuim is $6120.

The difference seems pretty minimal when thought about over 30 years, plus the full return of premuim is significantly higher than if I were to invest the $ (which, realistically probably wouldn't happen anyway).

Thanks Hillary for suggesting that way to look at the numbers.

[julieakc]

OK, I don't profess to know squat about insurance, but have you considered getting some high-end financial advice? Tax lawyer or accountant or similar? Your situation with a conservatorship/trust likely poses some unique challenges. Its not just the ins. that you are getting, you might want to cover off the whole trust issue so as to minimize the amount to income/estate/probate taxes.

Melissa - thanks - DS's trust was set up by an attorney who specializes in special needs trusts (in fact she trains other attorneys on this topic), so we are set in terms of protecting assets for DS.

[Momof3Labs]

Ok, if I did this right....the $17/month at the end of 30 years would be roughly $13,553, compared with $22,320 if I got all premuims paid returned to me.

Over the course of 30 years the total extra premuim is $6120.

The difference seems pretty minimal when thought about over 30 years, plus the full return of premuim is significantly higher than if I were to invest the $ (which, realistically probably wouldn't happen anyway).

Thanks Hillary for suggesting that way to look at the numbers.

I pretty much agree with your numbers, but they don't make sense at all from a life insurance pricing perspective. I'd double check that you are being quoted comparable policies (esp. level premiums for 30 years) with identical benefits, with the only difference being the return of premium rider. If they are otherwise totally identical, you may have found a glitch in their pricing, and I never discourge someone from taking advantage of that!

[bubbaray]

Melissa - thanks - DS's trust was set up by an attorney who specializes in special needs trusts (in fact she trains other attorneys on this topic), so we are set in terms of protecting assets for DS.


Cool. I'll bow out and leave it to the insurance folks.

Good luck!