Deferred Term Life Insurance?

[Gearhead Jim]

I'm 70, and my pension stops when I drop.
Between SS and our other investments, my wife won't be eating dog food if she outlives me (she's 2 yrs younger) but it would be a big comedown.

Right now I have a $500k 20 year term life insurance policy that ends when I'm 78. Buying more term life at that age would be awfully expensive.

Is there any way to buy something like a "deferred term life insurance", where I would pay the premium now but the coverage wouldn't start until age 78 when my current term expires? That could reduce the premium in two ways- the insurance company gets to invest the money for 8 years or longer before the coverage begins, and I have about a 20%-30% of dying before the insurance takes effect and so the company pays out nothing?

Or is there another way to skin that cat?

 

[Whisper66]

Don't know anything about life insurance. In our situation, I've discussed my wife getting a reverse mortgage on the house if I passed and she was short on funds. Not sure if that's the best answer for us but it may be one option.


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[DrRoy]

I'm not personally familiar with this need but if you have an insurance agent that you trust, ask them.

 

[pb4uski]

I suggest that you talk with a life insurance agent. I would start with someone from Northwestern Mutual or Mass Mutual since what you are looking for is a bit unusual.

 

[Big_Hitter]

Isn't that sort of a pure endowment? I thought pure endowment only paid after you attained a specified age.

 

[Independent]

Interesting idea, but it's new to me. I've never seen one.

If it were available, you might find that the premium advantage isn't as big as you'd expect. Since insurers only issue policies to "healthy" people, the number of deaths from ages 70 to 78 is much lower among people who bought life insurance at age 70 than among the general population. The big gain from the policy might be that it "protects your insurability", i.e. you don't risk a change in health between 70 and 78.
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Talking about that, I'll guess that your current policy doesn't really "end" at 78. The level premium period ends, but you can renew it annually for much higher premiums. They will be printed in the contract. This is important because you avoid the frustrating experience of being told on your 77th birthday that you probably won't live another three years, and having $500k hanging on a few days difference in your demise.

 

[Gearhead Jim]

You are correct, I can continue past the 20 year period but the premiums do become astronomical. Approximate numbers-


Current premium $3,000
First additional year premium $8,000
Second additional year premium $10,000
Third additional year premium $12,000
Etc.

 

[pb4uski]

Commonly, these contracts are written that the insurer is compelled to provide coverage after the initial term at a premium that will not exceed $x but can be lower. Are the numbers above maximum contractual premiums beyond the initial term or what you will actually be charged? You may want to call the insurer and ask what the premiums currently are for insureds with this policy who are 78 and older.

 

[Independent]

You are correct, I can continue past the 20 year period but the premiums do become astronomical. Approximate numbers-


Current premium $3,000
First additional year premium $8,000
Second additional year premium $10,000
Third additional year premium $12,000
Etc.

That $8,000 for a $500,000 death benefit may be "astronomical" to a healthy person. But, if you happened to be nearly certain that you'll die in the next three years, $8,000, or $18,000, or $30,000 would look like bargain.

Not saying that's a reason to just ignore this issue, just that insurability isn't as big a deal as it would be if the policy really terminated at 78.

 

[Gearhead Jim]

Commonly, these contracts are written that the insurer is compelled to provide coverage after the initial term at a premium that will not exceed $x but can be lower. Are the numbers above maximum contractual premiums beyond the initial term or what you will actually be charged? You may want to call the insurer and ask what the premiums currently are for insureds with this policy who are 78 and older.

As best I can tell, the numbers I quoted (I rounded them off to the nearest thousand) are the actual premium at 78, not a ceiling.

 

[Gearhead Jim]

That $8,000 for a $500,000 death benefit may be "astronomical" to a healthy person. But, if you happened to be nearly certain that you'll die in the next three years, $8,000, or $18,000, or $30,000 would look like bargain.

Not saying that's a reason to just ignore this issue, just that insurability isn't as big a deal as it would be if the policy really terminated at 78.

I agree, with impending death those premiums would be a bargain.
But if I'm not in that situation, then I'd like to get longer coverage at affordable prices. Stay tuned...

 

[mystang52]

2 possible options, subject to the policy contract:
1) Can you renew, now, rather than wait until the current policy expires. Premium would of course be much higher, but at least you can extend the term of the policy - and for less than at age 78.
2) If # 1) is feasible, but you don't like the premium, renew policy now at a lower principal.
2a) Along the same lines, renew at age 78 for lower principal. I have a 20 year term policy that ends November 2016. We don;t need the $$, but DW likes the comfort of knowing there is an in-force policy.
In my case, I am uninsurable so my only option is to invoke the guaranteed renewable term. I will probably renew, but for whatever principal amount my current premium would pay for.

 

[Gearhead Jim]

Good ideas, thanks.

 

[pb4uski]

+1 two good ideas. On 2a particularly, your need for insurance declines each year as there are less years to fund... ignoring the time value of money I guess the need would decline each year by the amount of your pension.

 

[mickeyd]

I would start with someone from Northwestern Mutual or Mass Mutual
since what you are looking for is a bit unusual.

Are their agents smarter or more honest than others?

 

[pb4uski]

Are their agents smarter or more honest than others?

In general, they are probably better than average but it is always luck of the draw. The comment was more focused around them being good quality companies (I guess you could add NYL and Guardian to this list too).