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Old 05-03-2014, 01:34 PM   #21
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Yes mickeyd " Don't let policy accidently lapse". Or you could say "Don't let policy conveniently lapse". The benefactor should be in charge of making payments because if the marriage ever ended up on the rocks, a few conveniently missed payments and....then what?
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Old 05-03-2014, 03:51 PM   #22
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Don't have the exact numbers at hand, but we had to make this decision with two different pensions in the last few years when DW retired.

Pension #1 - state teacher's, wanted to ensure some ongoing annuity for me if she passes in order to have health insurance, cost for 100% survivor benefit (with popup should I go first) was about 10% +/-

Pension #2 - private catholic school pension, not covered by ERISA so no PBGC coverage and no requirement to publish the full documents regarding financial health, what I could get told me it was OK, but not as good as state. It was also recently frozen, with dollar amounts fixed (someone young who had earned $x benefit will get that amount in 20-30 years upon retirement). The option for 100% survivor benefit was approximately 1/3 reduction.

I was surprised at the difference in the reduction for the 100% joint benefit. Given that difference, no PBGC coverage or COLA for the private, we elected 100% on #1 and SLA for #2... still have a few years of term life from way back, so we'll keep that in the event something happens soon, but once we pass that date I figure she'll have collected extra for enough years that I'll take the hit... Another factor is that both are modest, though enough to be appreciated... We have the proverbial multi-legged stool...
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Old 05-03-2014, 04:37 PM   #23
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Originally Posted by mickeyd View Post
....Will LI company still be in business at time of death?....
If you think this is a legitimate concern then you obviously don't understand how regulated the insurance industry is and how few companies have experienced financial trouble since regulatory reforms put in place in the 1990s. The likelihood of a life insurance company still being in business is very, very high. And even for those very few companies that run into financial trouble, in most cases healthier companies assume the business the troubled companies have written.
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Old 05-03-2014, 08:00 PM   #24
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If you think this is a legitimate concern then you obviously don't understand how regulated the insurance industry is
I fully understand the LI industry. I'd want it as part of my calculus if I was making a decision.
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Old 05-03-2014, 08:09 PM   #25
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Yes mickeyd " Don't let policy accidently lapse". Or you could say "Don't let policy conveniently lapse". The benefactor should be in charge of making payments because if the marriage ever ended up on the rocks, a few conveniently missed payments and....then what?
I'm no lawyer, but I believe that "What happens to the life insurance?" is a standard part of a divorce agreement.
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Old 05-03-2014, 10:42 PM   #26
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I'm no lawyer, but I believe that "What happens to the life insurance?" is a standard part of a divorce agreement.
When I got divorced (California style ), the legal agreement was for both of us to terminate coverage on each in policies that named us as beneficiary. In other words, the policy on wife that named me beneficiary had to be terminated and vice versa.

That way there would be no financial incentive to end up in an episode of The First 48 or Law and Order.
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Old 05-03-2014, 10:52 PM   #27
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I fully understand the LI industry. I'd want it as part of my calculus if I was making a decision.
You're hopeless. If you actually think it is a concern that should be seriously considered then you don't understand the industry as much as you think you do.

To the best of my knowledge, there has never been a default on a life insurance policy death benefit in the US - ever.
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Old 05-04-2014, 07:42 PM   #28
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Joint survivor benefits for the annuity may be your best bet. I just had a $500,000 15 year term policy expire at age 61. The insurance company offered to renew at at annual premium of $11,000!!! I had been paying $900 so that was a non-starter. I looked into other life insurance companies, and it looked like I could replace the term policy for about $1800. Not too bad. But then, they turned me down on medical reasons. High blood pressure, but well controlled with medication. So, I'll do without the insurance . . . not that big of a deal, but I would have bought it I could have gotten if for a reasonable cost.
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Old 05-05-2014, 09:35 AM   #29
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Interesting article on the insurance option and laddering term policies with different terms to fit a reducing need for insurance over time and lock in the coverage at the time you select the single life pension option.

Creating a Life Insurance Ladder

Quote:
..... for a person who needs life insurance during retirement (e.g., a married person with a defined benefit pension that provides insufficient survivor benefits), the amount of insurance needed declines over time because the number of remaining years of retirement that must be funded declines over time.

For example, a person’s life insurance needs might look something like this:
  • A current need for $1,500,000 of death benefits,
  • A projected need for $1,000,000 of death benefits for the period 10-20 years from now,
  • A projected need for $500,000 of death benefits for the period 20-30 years from now, and
  • No projected need for death benefits after 30 years.**
For this person, rather than buying a $1.5 million 30-year policy, there’s an opportunity to save some money by “laddering” life insurance policies. That is, break the coverage up into a few policies of varying terms: a $500,000 10-year policy, a $500,000 20-year policy, and a $500,000 30-year policy. ....

**When projecting how much life insurance you will need at some point in the future, be sure to include a guesstimate for inflation. $500,000 of death benefits 25 years from now will surely be worth meaningfully less than it would be worth tomorrow.
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