I want to know about term life insurance vs. whole life.?
If I am 63 years old, male; if I were to buy a $10,000 term life policy today and should pass away 2-5 years after starting the policy, Will all or any portion of the $10,000 be paid??? Also what is the best practice for a 62 year old on a less that $800 month Social Security check to do to purchase life insurance?? Thanks for any advice and answers.
There may be very, very valid reasons for someone in the position you indicate to have life insurance if only to cover burial costs, final debts, probate expenses, or just to leave a small legacy to family members, etc.
The downside though is that at your age it might be fairly expensive depending on your health, medical history, etc. Also, the insurance company is going to want to see the insurable need. Frankly, between burial costs and just winding up a person’s estate; bills, etc., $30-50,000 should be no problem at all.
Just for the heck of it, I checked for $50,000 with one carrier (10 yr term at non-tobacco rates (other companies often call a similar rating “standard”) and with no lower rating brought about by a health challenge) and it was $54.43/month; A 20 yr term, was $88.64 (That’s over 10% of what you’re bringing home a month and I, personally, would question any client who did that unless all other living expenses were otherwise covered.)
I then looked at lower coverage:
$30,000 for 10 yr. would be $35.46/month
$30,000 for 20 yrs. would be $55.98/month.
$25,000 for 20 years would be $25.72
$25,000 for 10 years would be $30.71
With this particular company, $25,000 is the lowest term they have. I only went thru this exercise to give you some sort of idea of potential outlay for yourself versus potential benefit to family members.
As to your second question, yes, if you die during the time period you mention then, yes, the full benefit would be paid. During the first two years, there is a "contestability period". If you died during that time, (with this particular carrier) the full benefit would most likely be paid unless there were some evidence that you had lied or did something fraudulently during the application process. Be aware that there are policies out there (often those that are guaranteed acceptance) that will only refund premiums paid in (and not pay the death benefit) if you should die before the end of the second year.
Please make sure that you are comfortable with the policy you get and that you understand what it is. If your financial situation improves later, you might consider converting to a permanent policy if the company allows. (Many here will scream even at the suggestion about permanent coverage, but I’ve found loved ones left behind really appreciate it when the policy is actually active when someone dies.)
Remember in a term policy, if you die one day, one hour, one minute after the term is up, then no benefit is payable. But term policies are cheaper and in the case that you state preferable.
I, personally, despise whole life policies. If I were to chat with you about a permanent policy, I’d consider either a Universal Life (UL) or Indexed Universal Life (IUL) (No, this is NOT a solicitation to do business). Good luck – I know what it’s like to have family members die without any insurance and it’s not fun for the survivors.
Recommended Reading
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The best practice for a 62-year-old whose only income is from social security is not to purchase life insurance at all.
References :
There may be very, very valid reasons for someone in the position you indicate to have life insurance if only to cover burial costs, final debts, probate expenses, or just to leave a small legacy to family members, etc.
The downside though is that at your age it might be fairly expensive depending on your health, medical history, etc. Also, the insurance company is going to want to see the insurable need. Frankly, between burial costs and just winding up a person’s estate; bills, etc., $30-50,000 should be no problem at all.
Just for the heck of it, I checked for $50,000 with one carrier (10 yr term at non-tobacco rates (other companies often call a similar rating “standard”) and with no lower rating brought about by a health challenge) and it was $54.43/month; A 20 yr term, was $88.64 (That’s over 10% of what you’re bringing home a month and I, personally, would question any client who did that unless all other living expenses were otherwise covered.)
I then looked at lower coverage:
$30,000 for 10 yr. would be $35.46/month
$30,000 for 20 yrs. would be $55.98/month.
$25,000 for 20 years would be $25.72
$25,000 for 10 years would be $30.71
With this particular company, $25,000 is the lowest term they have. I only went thru this exercise to give you some sort of idea of potential outlay for yourself versus potential benefit to family members.
As to your second question, yes, if you die during the time period you mention then, yes, the full benefit would be paid. During the first two years, there is a "contestability period". If you died during that time, (with this particular carrier) the full benefit would most likely be paid unless there were some evidence that you had lied or did something fraudulently during the application process. Be aware that there are policies out there (often those that are guaranteed acceptance) that will only refund premiums paid in (and not pay the death benefit) if you should die before the end of the second year.
Please make sure that you are comfortable with the policy you get and that you understand what it is. If your financial situation improves later, you might consider converting to a permanent policy if the company allows. (Many here will scream even at the suggestion about permanent coverage, but I’ve found loved ones left behind really appreciate it when the policy is actually active when someone dies.)
Remember in a term policy, if you die one day, one hour, one minute after the term is up, then no benefit is payable. But term policies are cheaper and in the case that you state preferable.
I, personally, despise whole life policies. If I were to chat with you about a permanent policy, I’d consider either a Universal Life (UL) or Indexed Universal Life (IUL) (No, this is NOT a solicitation to do business). Good luck – I know what it’s like to have family members die without any insurance and it’s not fun for the survivors.
References :