As you get older and life insurance premiums increase the question of whether Senior Life Insurance Plans makes sense for you can be a bit murky.
Regardless if you have any experience with life insurance, we will review the main senior life insurance plans available to you in 2020.
Retirees Life Insurance Portfolio
There are two schools of thought when it comes to a retirees life insurance portfolio:
- 1You don’t need much. This school of thought usually goes back to the philosophy that you were insured by a term life insurance plan and invested heavily. Since you are now at an age when your biggest financial burdens have passed (ie. children are grown, home is paid for, concern of premature death) there is no longer a need for large life insurance policies. In essence you have invested well and you have not only enough money to fund your retirement years (including your spouse), but also cover any estate taxes that your heirs will incur.
- 2You need enough to make sure your wishes are carried out. This school of thought is what our advisers follow! Each person not only has a different financial makeup, but they each have different goals. Let us listen to what you want and then we can help you reach your goals.
What kind of life insurance is right for you?
Traditional Whole Life
This plan is usually paid for the life of the policy.
Whole life insurance provides the fixed guarantees that the benefit will be paid upon your death to a loved one or even a non-profit organization such as your place of worship.
These plans are typically not affected by changes in the market interest rates.
There are certain limited pay options on life insurance plans.
The most popular are 10 and 20 years.
While these plans are more expensive, they do allow you to set a maximum time period that you wish to pay on the premiums.
This type of plan does enjoy some of the same benefits or a whole life policy, but it is usually tied to a projected interest rate that can fluctuate quite dramatically over the life of the policy.
While sometimes this can cause a negative effect, it can also bring about a positive growth of cash value.
If the interest rates being paid on a universal life policy were to drop and remain at levels below the projected amount, the policy could deplete all of it’s cash value.
This in turn would cause the consumer to decide whether to pay a higher premium to keep the policy active or even possibly choose to end it due to affordability.
You may have heard an agent use a phrase such as “the cash value bottomed out”, which describes this exact situation.
Many people have been caught in this exact situation from policies they purchased in the late 80’s and into the 90’s.
The problem began with the amount of interest that was being projected on the consumer proposals.
It was not uncommon for someone purchase a universal life plan with an 8% projected interest rate.
While the consumer may have received an 8% interest rate credited to their cash value for maybe 3 or even 5 years, those rates eventually began to shrink.
This is what eventually led to many policies running out of cash value.
In today’s market it is extremely important to use conservative projections on a universal life plan.
Many plans now have a guarantee that will have the policy last to age 100 (some even longer) as long as the policyholder pays the set premium (target premium) and does not miss a payment.
This guarantee remains in place even if the cash value runs out.
This type of plan usually builds no cash value and has a limited life.
Most people use term life to cover paying off a debt if a pre-mature death were to occur.
An example would be an individual who decided to take out a $100,000 home equity loan with a 15 year repayment schedule.
The least expensive way to cover this loan if death were to occur before the 15 year period were up would be to purchase a $100,000 (15 year term life ) policy.
Variable Universal Life
This type of plan has it’s cash value tied directly to a mutual fund or family of funds.
Senior Benefit Services, Inc. does not offer this type of plan at this time.
Request a free life insurance quote with Senior Benefit Services today!