This afternoon I received a call from a 70 year old women. She was referred to me by a major life insurance carrier, after calling them to discuss her life insurance plan. She and her husband (74) bought two $50,000 term life insurance policies 15 years ago. As their 15 year policy anniversary approaches, they received a letter stating that if they wish to keep their policies beyond the term period, that their policy would automatically convert to a whole life insurance policy and their new premium would be $1400 a month (each). Without the life insurance policy, if either were to pass away, the other could no longer afford to stay in their small condo alone.
With a history of cancer and her husband with a recent triple by-pass surgery, they would now be considered uninsurable. Needless to say, the woman was very upset - not at her agent; but herself for spending over $30,000 in premiums and having nothing to show for it.
Term insurance is a "temporary problem solver". Most term policies do not result in a claim, but rather as a policy lapse due to non payment (as you get older it becomes too expensive to keep - for most people).
Life insurance is designed to provide "dollars". Term insurance is ideal for short term business notes, having extra coverage while the kids are approaching college years, alimony years or any other situation that is short lived. Life insurance is also used to pay off debt, a mortgage or most commonly used to replace a lost income. In these situations you need permanent coverage, whether that be whole life or universal life coverage. For more consumer friendly information about life insurance, disability income, medicare supplements or long term care, visit the insurance information institute at www.iii.org
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