Additional Cost of Choosing Joint Life Pension Income

[aja8888]

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.

 

[pb4uski]

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.

 

[txtig]

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.

 

[pb4uski]

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

..... 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.