If you have a spouse or children and currently have a Term Life Insurance Policy, you may need to reconsider your options. Maybe you want to ensure that your partner or spouse isn’t burdened with mortgage payments, or that your children are left with substantial college loans in the chance something happened to you.
Or perhaps, you simply want the comfort in knowing that your family will remain financially stable long after you are gone.
Most Common Type
The single most common retirement mistakes for most are not planning early enough and not having enough life insurance. There are some key differences between Term Life Insurance policies and Universal and Whole Life Insurance policies, so it’s important to know what plan is right for you and your family.
Term Life Insurance is attractive because it’s the least expensive policy out there. Term Life insurance works by maintaining a certain premium for a distinct period of time. At the end of that time period, you can opt to continue coverage with a premium that increases annually. There are guarantees that premiums will remain fixed, especially useful if you have a fixed budget.
Life Insurance as an Investment?
You may also consider that you can use your life insurance policy as you would an investment. For instance, certain Whole or Universal life insurance products within your 401k offer tax free “cash values.” Whole Life Insurance offers a guarantee on the death benefit and guaranteed cash value for a guaranteed premium. This is often most expensive kind of life insurance, but may pay dividends (refunds of unneeded premium) that can be used in a variety of ways.
Universal Life Insurance is a more flexible policy. If your monthly income is variable this might be a better option as you can adjust the premiums per month if your income varies over time. There may be a death benefit option that can either increase or reduce the death benefit as needed, which is important to consider if your children are of younger age. Universal Life Insurance also allows you to maintain certain levels for lengthy periods of time, but then reduce the benefits when your children are grown and non-dependent.
As you can see, boomers have many choices on deciding what to do with their life insurance policies. In regards to converting, sometimes it makes the most sense to stick with the insurance company you’re already with. Since they have already approved you, it might make it easier to a get new policy reissued with them.