Life stages and Life Insurance

  • One of the signs of growing up is your ability to think about others and their welfare. When it comes to thinking about life insurance you will need to be aware of what you need and when you need it. So, let’s start when most people consider coverage for the first time, and that’s generally when considering marriage.

    Getting married and thinking about having children? These are two great reasons to begin thinking about life insurance for you and your spouse. Because most people in this situation are healthy and starting their careers, term insurance is the ideal choice because of its relatively low cost and the ability for you to purchase a large amount of coverage. In fact, insurance companies understand your need and will consider coverage for many multiples of your current earning ability. Both spouses should have life insurance regardless of whether one or both spouses are working. While the need for a wage earner to be covered is obvious, a spouse dying prematurely can mean many additional expenses for the surviving spouse, especially if children are involved.

    Most term policies are available with guaranteed level premiums for up to 30 years. Although more expensive than shorter guarantees, this extended period will allow you to build up your savings without undue strain from high life insurance premiums.

    This strategy will not only protect your family, but will guarantee your health category to remain the same for a new permanent policy. Let me explain in more detail.

    When you purchase a term policy from most carriers, you have a “conversion privilege” in your contract. If you do nothing else, make sure you read and understand this clause as it may be the most important feature of your policy.

    For example, if you are in your twenties or early thirties and have no health issues, no adverse family history or lifestyle issues, you will probably qualify for the best health rating. This means your premium will be the lowest offered by the company for the amount and guarantee period you choose. We all know 30 years is a long time, time for children to grow and graduate and start work themselves. But, it also means that you as the insured may have suffered from cancer, heart disease and a myriad of other less serious health problems. These issues would normally translate into less advantageous health categories or even a decline of coverage.

    However, because of the “conversion privilege”, you have the right to convert part or all of the term policy you own into a “permanent” policy with the same life insurance company at the same health category you received when the term policy was issued. No exam, no blood work, no medical history, no underwriting even if every carrier would decline you for coverage.

    Yes, permanent life insurance is more expensive than term. However, the amount of coverage needed at older ages may be considerably less that at the time you purchased a guaranteed level term policy.

    In fact, that $1,000,000 plus policy you bought in your 20’s, 30’s or 40’s could be reduced (depending on circumstances) to $100,000 or even less depending on carrier.

    Remember, life insurance for seniors over 70 will be even more expensive, not only because of your age, but inevitable health issues that become part of your health history.

    Bottom Line: Most people need life insurance. Here are some thoughts about how it can be managed throughout your lifetime.