Maximizing Your Insurance During a PandemicJun 30, 2020
Are you avoiding updating your life insurance because of the current pandemic? The uncertainty of your budget/cashflow and committing to a longer-term policy when times are tough?
I get it, as important as life insurance is, when money is tight all spending needs to be monitored – but this should not be at the expense of your life insurance.
We have a solution for clients that will meet their insurance and budget needs all at once.
Insurance is not something we can all get. If you have or have had health issues in the past, getting approved could be challenging. So, if you are healthy now, you shouldn’t wait to apply.
Most of our clients are looking to cover off a debt, mortgage, or income replacement – so we usually look at a Term-20, Term-30 or Term-65 to meet the needs. This locks in the rates and coverage for the client now while they are healthy and young. Renewing insurance in your 50’s or later can be awfully expensive.
Our strategy to keep costs lower now, but get coverage for long term is by applying for Term-10 now (coverage that is locked in for up to 10 years – client can cancel at anytime) and then use a switch option most insurers give you in the first 5 years. This allows you to switch from a Term-10 to a longer-term solution. So, you lock in coverage now with lower premiums, but have the ability to switch to a longer-term solution within the first 5 years with no medical underwriting.
Let’s work through an example:
- Clients: 45 year old couple, both non-smokers and in good health.
- Insurance need: $1 Million of coverage each until age 65.
- Concern: 1 spouse temporarily laid off, so budget will be tight for 2-6 months. They need coverage but can only afford $150 per month until they get their job back.
We would typically look at a Term-20 for this couple. It locks in coverage to age 65 and would meet their need. A Term-20 for them would cost $243.90 per month. This comes in over budget.
Our strategy would be to apply for a Term-10, costing just $133 per month, which meets their budget and insurance need.
When they get their job back we would switch to a Term-20 to meet their longer term need. When we make that switch there is no medical or financial underwriting. Anytime in the first 5 years is guaranteed.
The Term-20 would be priced at nearest age.
Life insurance is based on your nearest age – so keep this in mind when applying. Let’s say you turn 50 on July 1st. For insurance you were considered 50 back on January 1st and are considered 50 until Dec 31, 2020.
If you have been putting off your insurance due to budget uncertainty, we likely have a good solution for you that can meet both short- and long-term needs.
When was the last time you reviewed your insurance with us?