Continue reading “Pros and cons of whole life and guaranteed universal life”
Category: In your 60’s
Guaranteed Issue Life Insurance
Those late night commercials or mailbox solicitations for life insurance that say, “You can’t be turned down” are talking about graded benefit life insurance, also called guaranteed issue life insurance. There are no medical questions, no medical exams. The applicant must be mentally competent and be able to sign their own application. There is graded benefit term and graded benefit whole life. Eligible ages are generally from 40 to 80, with some variations depending on the carrier. Benefit amounts generally run from $2,000 up to $50,000.
One can be on death’s door with cancer, heart disease or AIDS and get this kind of life insurance. Alzheimer’s, however, you cannot. The catch is that you must wait 2 or 3 years to get the full benefit. If one passes away before then, other than by accident, premiums are returned plus interest. Criteria for judging competing carriers are the premium, the waiting period, and interest rate on return of premium.
Is it a good deal, or at least an okay deal? Presidential Life Insurance Company, a longtime seller of guaranteed issue whole life, made the news this week by showing a profit in the 1st quarter. There are other carriers, but Presidential is usually come up on any short list, so I’ll use them to give a sample quote.
Age 65
| Monthly Premium | Face Amount | Waiting Period | Return of Premium interest rate | Carrier | Graded Benefit Whole Life |
| $90.21 | $10,000 | 2 years | 5% | Presidential | After 2 year waiting period full benefit |
So that comes to $1,082.50 annualized a year for coverage for a $10,000 benefit. Remember that’s the monthly bank draft rate. It’s $1,002.30 a year if you pay it annually. As usual, paying annually is a better deal. Not hard to do in your head math on this one, but let’s see how it figures out exactly: $10,000 benefit divided by $1,082.50 annualized premium equals 9.2 years (10,000 ÷ 1,082.50 = 9.23)
So it’s value as a coverage depends on one’s situation and life expectancy. Since there’s return of premium, you can’t lose on someone passing away in a short period of time, you get your money back plus interest. However for someone who lives a relatively long time, despite poor health, may end up paying more premium than their policy is worth.
Whole Life is better under age 40
I was running $100,000 permanent life insurance quotes today for a woman in her late 30’s. I quoted MassMutual for whole life. Premiums for guaranteed universal life with PennMutal were about half as much. But I recommended whole life even though it was more. Being under 40 the quality of whole life is worth the extra price.
With a participating whole life’s dividends like MassMutual, the face amount increases over the years: $101,000, $102,000, etc. There is also paid up insurance. Whole life has guaranteed cash value and dividends will increase the cash value higher. Over time the policy holder will have many options as those dividends and cash value increases to vary their premiums.
With the guaranteed universal life it’s a fixed course. The face amount remains level. $100,000 all the way. That’s my biggest concern with setting a level face amount too in one 30’s. What will $100,000 be worth 40 to 50 years from now? The payments are level but if you miss a couple of payments, changing banks or whatever, you may rescue the universal life with the cash value, but the lifetime guarantee is broken.
Granted with a universal life (UL) you can opt to structure it with an increasing face amount and to endow, worth it’s cash value, just like a whole life. But it’s not guaranteed to do so like whole life. When you add whole life type features into a UL, the premium rises so close to a whole life you might as well go for the real thing. That is when you’re in your 20’s or 30’s.
Now when you’re in your 60’s or 70’s it’s a different story. You don’t have time to build up cash value in a whole life and the premiums are much higher. A guaranteed UL is better.
AARP life insurance poor choices
AARP life insurance choices are flawed and will tend to be more expensive. When you go to AARP’s website for life insurance, all the options say “No Physical Exam”. That’s more expensive coverage. Actually you want to take a “physical”, called a paramedical exam, even if you’re in your 70’s or 80’s. It’s free, they come to your door, takes about 20 minutes and can save you lots of money. Here’s the proper order of choices for life insurance as a senior.
#1 option
Fully underwritten life insurance. Applications require a blood test and short paramedical exam. Carriers generally request your medical records, all at no charge to you. This way life underwriters can gage your risk classification and make you an offer for coverage. This will save you lots money over a no physical exam policy. Genworth and North American offer lifetime guaranteed permanent coverage, called no lapse universal life, starting at a $25,000 benefit, Penn Mutual starts at $50,000, and multiple carriers, including Lincoln National and Aviva, offer coverage of $100,000 and more for seniors. Unless you’re in really, really poor health, try this first. There is no cost to you to apply, and the worst they can do is offer you a higher rate or turn you down.
Annual Statement: Review and Save Thousands
I was reviewing an annual report for one of my life insurance clients this morning. Agents are cc’d a copy, and I make it a point on the policy anniversary to contact my clients. This policy is guaranteed universal life (G-UL) policy, also called a no-lapse guaranteed UL. As long as the premium is paid on time, the policy’s benefit is guaranteed. This one is guaranteed out to age 120 and is on bank draft, so it’s on auto pilot and in that sense the annual report is not that important.
But there is one key element worth considering: the policy’s cash value. This policy has a $25,000 level benefit. The cash value is building up towards $2,000. Since it’s a level benefit, when the policyholder passes away the beneficiaries only get the $25,000 face amount. Any cash value remaining in the policy disappears.
So what good is the cash value? There are several ways it may come into play: Continue reading “Annual Statement: Review and Save Thousands”
Survivor Universal Life Uses
A couple for estate planning purposes may create one life insurance policy that pays out when the last surviving person passes away. The product used for this is called a SUL or Survivor Universal Life. To lock down the death benefit, a lifetime guarantee is usually part of the coverage, so look for the the letter G in the mix, as in SUL-G. It is less expensive to have a joint policy as a couple than two separate individual policies. Also you qualify for coverage even if one of you is uninsurable or in poor health. It’s uses are generally:
- Estate Taxes
Dial-A-Guarantee
Mutual of Omaha uses Dial-A-Guarantee to market their universal life insurance (UL). It’s an apt phrase. You can dial in coverage UL for any age: 90, 95, 100, or whatever to save money. Many carriers offer 30 year term up to age 65, so you can dial in less expensive term to age 95. How long you dial-in coverage is debatable. It’s tough to make it to 100. Then again, recently Fred Buckles, the last U.S. First World War veteran, died at 110. Genworth Life and Annuity’s UL fixed rate maximum is age 110, but has a catch up provision to extend it to age 121. If you do decide to dial-a-guarantee, make sure the coverage has a catch up provision. Stay away from universal life that covers to age 100 and stops. It’s just not necessary when age 120 coverage is not much more. Age 120 UL rates are so good that dial-a-guarantee is generally not worth it. But then again since Genworth’s Term UL has such great rates and a versatile UL extension, you have to take a close look at your options.
Best Guaranteed Cash Value and Lifetime Coverage
For permanent life insurance guarantees matter. Two vitally important ones are lifetime guaranteed coverage and guaranteed cash value. Whole life insurance has these elements built in, but it’s expensive. To get something affordable once you’re past 50, look to a guaranteed universal life, or GUL.
American General Life Insurance Company has introduced a new product called “AG Secuce Lifetime GUL”. It has lifetime guaranteed Universal Life, a GUL, with also guaranteed cash value. In the comparisons I’ve done with Banner’s “Life Choice UL”, it has best guaranteed cash values.
Continue reading “Best Guaranteed Cash Value and Lifetime Coverage”
Lifetime Guaranteed Coverage
One key element to permanent life insurance is the age guarantee. If you’re over age 60, look for something called guaranteed universal life, or GUL for short. The best of these products guarantee coverage at a fixed rate to age 120 or beyond. Banner Life has a good product that guarantees cash value accumulation as well. All you have to do with a GUL is pay on time. The contract provides a lapse protection guarantee as long a you make timely payments.
Whole life insurance was traditionally guaranteed to age 100 with guaranteed cash value. Universal life, UL, came out in 1980’s promising higher returns but took out those guarantees. About the year 2000, carriers introduced universal life with lifetime guarantees. A guaranteed UL is much less expensive than whole life, so much of what you see out there today are guaranteed ULs.
Which company has the best guaranteed UL for you will depend on your age and health. As an independent broker I have access to multiple carrier comparison quote systems not available to consumers on the internet. You can compare term on the internet but not permanent. Let me know, and I show you the top 5 for your age and health.
If you bought cash value life insurance in the 1980’s or 1990’s let me review it for you. It may not be a permanent as you think.
Term to permanent: Conversion is Your Ace in the Hole
Often something is better than nothing. If you need life insurance, and can’t decide what to get, or can’t afford a permanent policy as big as you need, get term life insurance. Then at least you can convert the term to permanent, even if you’ve developed a health problem. Term is generally all about lowest price, but conversion options is where quality comes in. Genworth has the best conversion with their new Term UL. It’s a fixed price from the get go, locking in the universal life premium rate to age 105.
I got a 10 year term policy after my first child was born. At that point, I needed the most bang for my buck, in case something happened to me. I’m still healthy so when the term ends I can shop for the best deal. But many people run into health problems, and that’s where conversion comes along. Many people in their 60’s end up converting their term policies.