Term Life Insurance for Life
I just spoke to a 68 year old gentleman who was looking for a 30 year term life insurance policy. At his age, there arent any companies that would issue a term policy for 30 years, so we looked at a 20 year term policy with a $1,000,000 death benefit. If approved at Preferred Plus, the most favorable health class, his annual premium would be approximately $16,000 a year. The policy would take him to age 88, at which time it would be very difficult to secure a new policy.
I know, there really isnt a product know by this name. However, if it walks like a duck, etc., etc., it is a duck. A Universal Life Insurance policy with lapse-protection is a policy that lasts a lifetime (until age 121, in most cases). These policies wont typically accumulate cash-value, like a whole life policy or universal life policy (without the lapse protection). Even when the cash value dips to zero, something that would be cause for alarm in a standard universal life policy, the death benefit and premiums are still guaranteed (provided the premiums are paid in a timely fashion). Lets recap guaranteed level premiums, guaranteed death benefit, no cash value sounds like a term life insurance policy to me.
We quoted one of these policies for this gentleman and, if approved at the best health class, his premium would be $21,000 annually for a $1,000,000 death benefit. Would this make sense for this gentleman? If he could predict that he would die before age 88, the term policy would be the best choice, but being that he cant, it would make sense to me for him to go with the policy that will pay the death benefit, regardless of how long he lives.
It seems that Im not the only person with this idea. Several life insurance companies have ditched their term policies and replaced them with, you guessed it, guaranteed universal life policies with fixed-year guarantees 10, 20 and 30 years. So now these universal life insurance policies are looking exactly like the term policies they replaced. And, theres no downside to the consumer. These policies perform life a term policy and are even priced to be competitive with term policies from other companies.
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