If you were born between 1946 and 1964, you are part of the baby boomer 50's generation. That means you're somewhere between your early and early 70's. Hard to believe, but we're not youngsters anymore! (We may be in our heads, but our bodies tell a different tale!) Now, what does this mean regarding life insurance?
Even though we are all baby boomers, the difference between what's available to you and its' cost is quite significant as we age. The difference from early 50's to mid to late 60's is significant. Additionally, many of us have health changes that impact the ability to purchase and the cost of life insurance. For most people term insurance is the best choice for larger death benefits at an affordable cost and so this information will focus on what is appropriate for the largest group of baby boomers today.
Let's start with the youngsters among us, those in their 50's.
For this article, let's assume that if you're looking for coverage now, you probably have at least one life insurance policy in force that is not part of a group policy through your employer. Most employer-based life insurance is one or three times your salary, which is not enough coverage to protect your family.
Perhaps you purchased a 20-year term policy that is near the end of its' guaranteed level premium period. When it reaches the end of the level term, the price goes up drastically. The insurance carrier planned on covering you for up to 20 years, therefore, as soon as you pass that point in time, they charge much more which makes most policies no longer affordable. If that's the case then you have several alternatives available depending on your health today.
In the chart below, I have assumed that your current (expiring) term policy health rating was "super-preferred" non-tobacco. That's the rating for those people in excellent health who are non-smokers. Most of us in our 30's will be in that category. In addition, I have chosen the lowest cost carrier in each situation even though that might not necessarily be the best policy choice for you, given your particular situation. Also, I have used "preferred" non-tobacco for example for your age now because it's the most likely rating in this age range. Here is a chart comparing the monthly premiums of different face amounts and term policies.
|Face Amount||Term Length||33 Year Old Monthly Premium||55 Year Old Monthly Premium|
|Preferred Plus Rating**||Preferred Rating**|
|$ 100,000||20 year level term||$ 9.12||$ 33.71|
|$ 250,000||20 year level term||$ 13.54||$ 63.87|
|$ 350,000||20 year level term||$ 16.15||$ 87.36|
|$ 500,000||20 year level term||$ 20.64||$ 117.99|
**These examples for a 53 year old show a preferred rating. Certain health issues will allow you to be a preferred rating; others will not. To find a specific premium, the best option is to call us. We can then go over your health and some of the other factors that impact your health rating. These examples are just to give you an idea of the difference in cost in 20 years with minimal health changes.
There are many reasons you may continue to need life insurance as you enter you 50's. These are some of the more common reasons our clients need coverage into and beyond middle age.
There are many other reasons why you may still need life insurance at this time of your life. The reasons are important to help us help you determine the type of coverage your should have, that is, term life insurance or a permanent policy.
There are two different types of policies, term policies that stay level for a specific period, and permanent policies that stay level for your lifetime. (Although there are policies where the premium may change during the policy we will use level policies for this discussion.)
Aside from the obvious differences in premium cost, there are some additional items which need your attention before deciding which type of policy is right for you.
Reasons for coverage and how much you need are a guide to help you with choosing what length of coverage is appropriate. If you had children in your twenties, then perhaps they are finished with their education and your spouse is the only one you need to protect. However, many baby boomers have married later in life and had children in their late thirties or even early forties. Those couples may need protection for another 10 to 20 years just to cover education costs. Remember, a four-year private college education can run $250,000 or more.
Now, let's discuss the most important factor you've probably never heard mentioned or even considered when purchasing term life insurance. That is, how long does my conversion option last and what type of life insurance can I purchase?
With few exceptions, most term life insurance contractually offers the ability for the owner of the policy to convert his/her policy into a "permanent" policy at the same health rating of their current policy without evidence of insurability. That means at any time during the conversion period you can "trade-in" your current term policy for a permanent (universal or whole life policy). This is especially valuable if your health has changed from very good to not good or even uninsurable. Obviously, this is a very important option.
What does this mean in a practical sense when you're considering a term insurance purchase?
There are two questions that should be asked of your agent. They are "At what age does my conversion end?" and "What type of policy can I convert into?".
Let's examine the age that conversion ends.
Let's say by way of example that you are 55 and wish to purchase a 20-year level premium term policy. A quick review of the dozen lowest cost carriers at "preferred non-tobacco" show a range of prices from about $275 to $295 for $1M in life insurance. However, while most policies in this group allow conversion to age 70, one stops at age 65 and one allows it to age 75. Now, if you are 55 when you took out a policy it means that you need to decide if this additional five year period from 70 to 75 is worth an additional $15 a month.
Thinking about this difference can be put in simple terms. What are the chances of a serious illness that could stop you from buying coverage during this timeframe? Certainly greater than in the early years of the policy. What's more, you can convert your entire policy or just a portion of the original death benefit.
Now, what can you convert into? (the policy type)
There is one additional piece of information to this analysis. Conversion can only be into a policy that is offered specifically by some insurance carriers for this purpose. Other companies will allow conversion into any permanent policy they offer. This can also have an effect on premium as well as guarantees. Some carriers will only allow conversion into one or two of their policies that either do not have the guarantees that other of their permanent policies enjoy, while other carriers will allow conversion into any policy the carrier offers. This will affect both the new premium as well as the amount of coverage you can afford to convert.
By now you realize that simply picking the lowest cost carrier for coverage may not be in your best interest. This is why as independent agents we have many carriers that we work with. We can help you find the right carrier for your needs. Remember that understanding the finer points of how term policies work will give you the peace of mind you and your family deserve.