You
were one of the responsible ones. You
saw the financial responsiblities coming
with the new baby or with the college
age kids and so you bought your term
life insurance policy years ago if not
decades ago. It's served you well and
knock on wood, you made it through
without having to ever use the policy.
Yes, you paid premium which is now gone
but that was a small price to pay on the
piece of mind it afforded you and the
premium was quite low you were so much
younger then. Now, the term life
insurance term is coming to an end
(whether it's 10 years or 30 years) and
you need to decide what to do. Let's
take a look at what do when the term
life policy ends.
First
of all, it's a good time to contact the
life insurance carrier or broker to see
if there are any options to extend or
pay up more term life coverage off the
existing policy and at what price.
Depending on how old the policy is, many
different riders were in circulation and
you may have this on your policy. Just
a head's up...we don't usually recommend
such a rider since the additional cost
is probably better served buying
additional coverage or for an extended
period of time when the original policy
was written. On a per dollar/per year
of term life protection, the cheaper
approach is original coverage and not
rider add-ons but that's our take on
it. If some type of extension option is
available through the carrier (or was
selected and pre-paid during the life of
your policy), we need to compare the
cost and eligibility requirement. If
your health has changed since the
original policy to where you might not
qualify based on current underwriting
requirements, this extension might be
something to look at. Assuming this is
not the case, we need to re-evaluate
your current financial standings.
The
reason you purchased your original term
life insurance policy might no longer be
applicable. Let's say you purchase term
life due to a new family originally.
The kids may be grown up now. Your
financial situation may be quite
different (and hopefully for the better)
so that you the day to day expenses that
occur can be maintained in your
absence. Your spouse may have entered
(or left) the work force since the
original policy which would figure into
needs as well. Either way, to some
extent, we need to go back through the
process and re-evaluate your life
insurance needs to find what is needed.
Each phase of life has it's own
financial responsibilities which are
distinct and no more so than in how long
any new policy's term would need to be.
When
starting a new family, you might have
selected a longer term period to match
your expecting needs. Let's say you're
50 now and that term life policy is
coming to an end. You may now want to
look at just 10 years of term to address
retirement needs or the elimination of
existing debt, mortgage or otherwise.
The goal life insurance, in our opinion
is not to cover your entire life. This
would be tantamount to paying a $1 to
get a $1 back and more likely, it's like
paying $1.25 to get a $1 back. The
insurance carriers are in the business
of making money after all. This is the
critical distinction with Whole life.
Some proponents of whole life insurance
(typically carriers and brokers) might
say that the eligibility issues at an
older age is reason to get whole life.
The problem is that you will pay so much
more to do so that the benefits don't
materialize and this assumes that you
don't lapse the policy the way many
whole life policy owners do during
economic downturns since whole life is
generally 10 times more expensive.
Basically, when one term life policy
ends, it doesn't necessarily mean
another one starts but it does deserve
the research to establish if additional
term life is appropriate based on the
same criteria we used many years back
with the original policy. Of course,
we're happy to help you with this
analysis.
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