Life Insurance Companies Court Seniors

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Tom Russell

With a growing population of American citizens over age 60, life insurance companies have created products to serve the financial needs of this important demographic. Sometimes these products make sense; however, some life insurance policies unfairly enrich the pockets of the company. This list of eight types of life insurance can help you be well informed, and avoid poor choices and tricky fine print:

  1. Final Expense Life: These are small face amount policies (often sold on television) designed to pay for funerals, etc., usually with a death benefit of $5,000 to $10,000. They have few health questions and can be fairly easy to get; however, if you’re healthy and can pass a health checkup, you can often double or triple the amount of your policy, for the same premium.

  2. Life/LTC combination: This relatively new type of policy combines life insurance with long-term care insurance. If the owner of the policy does not need long-term care, the policy pays out the life insurance to the designated beneficiary. If the policy owner needs extended, chronic care, it is paid for from the face amount of the policy (the death benefit). What is not used for care, the remainder of the life insurance, goes to the insured’s estate. These policies address the common objection to long-term care insurance: What if I never need it?

  3. Term Life: This insurance covers someone only for a set period, a term, and then ends. Term Life gets more expensive the older we get. However, longer life expectancy tables are now used by some insurance companies, so someone 65 or 70 can often find an affordable rate. When you shop for Term Life insurance, always compare rates from at least 10 top companies.

  4. Single Premium Life insurance: This policy is a way to leverage a single cash deposit into an immediate increase in one’s estate. For example, if a 65-year-old female, nonsmoker deposited $25,000 into a Single Premium Life insurance policy, this would create an immediate death benefit of $42,500. No additional premiums would ever be due. Perhaps this is money not needed for ongoing living expenses, and is earmarked to go to a specific beneficiary.

  5. Universal Life insurance: These policies first became popular 20 or 30 years ago, and many people over 60 own one. Unlike Whole Life insurance, where the death benefit is guaranteed if a set premium is paid, Universal Life has flexible premiums and fluctuating internal interest rates. The death benefit is NOT necessarily guaranteed. Those who own a Universal Life policy need to do periodic reviews in order to avoid having the policy “bust out.” To be safe, order an “in force projection” from the company, and perhaps review it with a qualified life insurance agent. When these policies “bust out” all premiums paid are lost, and the life insurance is no more. Good for the insurance company, but not for you.

  6. Lifetime Income Annuities: Life insurance companies sell policies in case you die too soon, but some also provide policies that protect you if you live too long. These are called Lifetime Income Annuities, designed to provide predictable monthly income immune from market fluctuations. Like other insurance products, it is wise to shop companies for your highest payout; however, be sure it is with a highly rated A+ company that will be there to pay you for the rest of your life.

  7. Life insurance for grandchildren: These Whole Life policies can be purchased for youngsters, and when the insured turns 21, he or she takes over paying the premiums. These policies can be little gold mines if kept to middle age, and they create a fond memory to the grandparent that started the policy all those years ago. However, more than 85 percent cash in their policy after turning 21! Insurance companies get richer.

  8. Second-to-Die policies: Often used to pay estate taxes, or to create a multi-generational legacy, or restore to an estate money used for long-term care expenses, a Second-to-Die policy insures two people, and pays the death benefit on the second death.

Conclusion: Life insurance companies with high solvency ratings offer secure financial options, since the laws governing their financial reserves are usually more stringent than banks. In the Great Depression, not a single life insurance company went bankrupt. So don’t hesitate to use the tools, including interest paying deposits in an insurance company (perhaps you can find a better interest rate than through your local bank), but always get the insurance companies competing with each other for your business.

Tom Russell is a health and life insurance specialist, serving the Rim Country for 19 years. Reach him at (928) 474-1233 or online to www.TomRUSSELLinsurance.com.

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