The question that commonly faces those in the retirement zone is: What should be done with my life insurance policies? And, should I consider putting money into a new plan?
Typically, we have been indoctrinated to understand that life insurance is intended to replace income when there are dependents who would be impaired if the breadwinner passes on. Who would make the mortgage payments, bring home the bacon, pay for education, etc? These are valid reasons for carrying Over 50 Life Insurance protection that may no longer be true for seniors, and may lead one to terminate coverage, and thus reduce the outlay required to maintain the coverage in force.
Over the last few years, there have been significant changes in the life insurance industry that should be evaluated. In short, these changes have made life insurance benefits available to the insured while still alive. Known as ‘accelerated benefits’ , these innovations first became commonly available some years back as a offer to advance a portion of the life insurance face amount if one were to be pronounced ‘terminally’ ill. In other words, if a doctor certified that your life expectancy was 24 months or less, you could be advanced up to 50% of the face amount of your policy while still alive as a financial relief during that time.
Since that benefit was introduced, there has been an increase in the benefits offered to cover ‘chronic’ illness. This means that a doctor certifies that you are not able to perform at least two out of six normal ‘activities of daily living’. Those who have purchased insurance for long term care will recognize this term as the same requirement for benefits to be paid under that type of contract. Typically, there is a restriction on the amount that can be used while living, and that normally limits the available benefit 2% of the face amount of the insurance per month. For example, a $200,000 face amount could provide up to $4,000 monthly to help pay for health care either at home or in a facility.
This development now casts the life insurance decision in a whole new light. If a senior citizen is healthy enough to qualify for new insurance, he can set up a $250,000 life insurance plan that he can use to eliminate the need for long term care insurance. Unlike insurance for long term care, he can know in advance that he will never be subjected to increased premiums if the insurance company finds they have a need for more money to pay claims, as they are now noticing. And, recognizing that many seniors believe the long term care insurance is only needed for the ‘other guy’, because they are too healthy and so on, that objection is no longer valid. Everyone will use this plan someday, since nobody lives forever.
If you have an existing life insurance plan, your may question the wisdom of discontinuing it in favor of a new plan. You can look at it this way: If a new car came out that doubled your gas mileage, would you consider trading in the old one? If you are under the impression that your cost of insurance is lower because you bought the plan at a younger age, you need to have someone show you how to calculate the true cost of life insurance protection. You may be surprised.
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