When I talk to people every day about the their life insurance, I’m often amazed at that people don’t realize just how many people outlive term insurance. I was working with an employer the other day and they had just installed a term life plan that would last until an employee turned 80. I think most people would think that was long enough. I’ve got a friend of mine who’s father has had congenital heart failure and numerous other health problems. He turned 80 this year. So, if I guy like that with so many health problems can outlive past 80, what do you think the chance is you will? Pretty good.
While everyone needs term life insurance, it’s important to know that chances are good that you’ll outlive it. I don’t remember exactly where I saw it but I once saw a statistic that 98% of people outlive it. I personally own term life insurance but I realize that while its a great deal and it would be the best decision I ever made if I die while I have it, the likelihood is that I will instead pay thousands of dollars for nothing.
The insurance companies really have it made because of the confusion, their agents and policyholders play right into their hands and here is how. Let’s say you have two choices of policies. The first choice is a policy that is guaranteed to pay as long as you pay your premium which is guaranteed to never go up and a modest face amount of say $75,000. The second policy is one that might pay if it doesn’t expire first. BUT, the second policy is so much better because it pays way way more than the first let’s say $500,000. Most people will look at it and say the second because it will be cheaper and pay so much more. But because you will outlive it, it will most likely be a waste of money.
So what to do?
Here is what I suggest. Buy one whole life policy that will last your whole life that is guaranteed to pay. Buy a second term life insurance policy for as big a face amount as you can get for as long a term as you can get. Make the whole life policy equal to the value of the estimate premiums of both the whole life and the term combined. Then when you die, you’ll capture all of your premiums back instead of being left with nothing which is what most people do.
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