Sort of a follow-up question to Augustine`s: I`m thinking of getting a 20-year term life insurance policy at age 45. My wife is at home, so she has no income of her own. Our only income 20 years from now will be my retirement income. So, should I worry about buying term insurance, since it will be too expensive to renew at that point (20 years)?
At first glance the answer appears to be no. Your wife is "at home" so it appears that there is no lost income to worry about. Do you have dependent children with which she stays home? If so, the forgone cost of daycare could be considered her "income". You make no mention of this, so I will initially assume this is not the case. Also, is there a likely chance that she will be returning to the work force in the near future?
Do you expect to have a substantial and illiquid estate? If yes, estate taxes could be a concern worth insuring. This also doesn't sound like it applies, but please correct me if I am mistaken.
If her loss will not cause you or your dependents a financial hardship then you probably don't need to insure her life.
If you are concerned about the NEED for LIFE Insurance BEYOND the age of 65, then you should in all probability be looking at some form of PERMANENT Insurance. As you have already stated, the cost of a RENEWAL or NEW purchase at age 65 is fairly HUGE.
One alternative might be to look at 30 year Term (if that period serves your need).
You do not offer sufficient info as to your overall situation, so it is rather difficult to offer any specific advice.
Cal Lester CLU
At 45, a 20 year term policy is probably all you'll need. You need to consider what your situation will be when the (20-yr) policy expires. What are you insuring to protect? For most people, they want to insure that if they die, their children will be covered at least through college and the spouse will not be impoverished. The stay at home person may need to be insured as the working person would need child care to cover for the loss of the homemaker. At 65, retired, you might have no need for insurance as you would have no income.
On the other hand, some insurance may be desired to cover any potential estate tax issues, should you be fortunate enough to have that kind of wealth. The laws on the estate exemption continue to change, so that's really an unknown.
You can certainly look at the cost of a permanent insurance policy vs term. Then do the math. You'll likely find that investing the difference will build up enough of an extra nest egg to keep the decision to go term. You don't mention children, or any estate issues. Others have offered that there are those with a desire to use insurance to leave a large windfall to those heirs or to a charity. I won't question that, but offer that there are things that should come first, like proper retirement planning.
JOE
To clarify: The life insurance is to be on me, for my wife and family, should anything happen to me (not her). The most currently affordable insurance for us at a reasonable amount is a $500,000 20- year term policy. However, in 20 years we`ll only be 65, and I`ll be retired. At that point, should something happen to me, my wife will have my retirement pay (from the federal government). In addition, our mortgage will be paid off by then, and we plan to have long term care insurance (working on that now). So, I suppose this policy will work. I also have a $200,000 life insurance policy with the government, and this can be continued at reasonable cost (with a gradual reduction in coverage) after I retire.
In short: I think I`ve convinced myself that the plan I have outlined will work for us. Thank you for your advice. I would welcome any further input.
Alan
I retired in 06 so the life ins policy benefit ended of course. I also had a single-term policy that I had bought in 1984--this policy cost me $5000 and had grown to $17000 due to interest. BUT it was only worth $39000 if I died, and the 17K would be lost. So last October I cashed in that policy, paid the taxes up front, and invested the rest. Then I bought a term life ins policy for 100,000. I am age
61 and extremely healthy--I managed to get the lowest possible premium available--$462/year. It is fixed for 20 years so can't go up until I'm 81, at which time I'll drop it (it goes up to 14,000/year then). I know, I know, I've read here and other places that I don't need an insurance policy since we have no dependents at home. But, for various reasons, I made a decision to get it anyway. If you are healthy, you should be able to get a policy for less than $462 since you are 16 years younger than me. By the way, I had to undergo a bunch of medical tests, am not on any medication, don't smoke, have never had a serious illness, etc. Mine is with Genworth, the lowest price I was able to find. SandyBeth
Sorry for the misread of the original post, Alan. I thought the coverage was on the wifey. In this case, I think your analysis is absolutely correct. You have dependents (your wife) that will rely on you for earned income for approximately 20 years. After that time, your passing will not likely impose a financial hardship on your depenedents as they will have your unearned income.
Barring any estate tax issues that Joe and I mentioned, I think you got a sound plan.
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