For some reason, most Americans feel they need less insurance as they grow older. The kids are through school, the house is paid for, etc. I disagree! What about those medical bills later in life, longevity of one spouse, and inflation? It’s hard to get someone who has had level premium term for the last 20 years to swallow the cost of a new life insurance plan now that they are 20 years older and may have some medical conditions. Even smaller face amount policies are tough on a fixed income.
Enter a new type of level premium term! Well, it is really not new, just structured a bit different – level premium term that is built on a universal life chassis. The beauty of this particular product is that at the end of the level premium period, the cost for the coverage does not go up, the face amount begins to decrease and the premium remains level.
Let’s take a look at how this works. With a regular 20 year level premium term for $500,000, a 45 year old client with a preferred non- nicotine rate would pay $714 annually. At the end of the level premium period, they would have the option of converting the coverage at a much higher cost or look at alternative term (not recommended at age 65, but it happens) at a cost of around $8,880 for a standard non-nicotine rate class. That is hard to swallow. At this point many clients just give up the coverage. They are looking at retirement and fixed incomes.
As an alternative, you could work with a level premium term built on a universal life chassis that reduces the face amount of the policy at the end of the level premium period instead of increasing their cost. Let’s take our 45 year old again at the cost of $714 annually. At age 65, the coverage amount drops to $158,575 and slowly decreases to $10,000 at age 91 with a guaranteed premium throughout the policy and a benefit to age 105.
Another great use for term on a universal life chassis is to cover a mortgage. Decreasing term is a dinosaur, and typically more expensive than a level premium term policy, but the coverage is necessary. Instead of having our same 45 year old client purchase a 30 year level premium term for $989 annually, consider a 20 year term for $591.05 that begins to decrease at the end of the level premium period to cover the decreased mortgage at that time.
Want to learn more about this new (well not really) term built on a universal life chassis? Give us a call and we’ll give you all the details.