Why Consider “10 Year Term” Life Insurance?

The most affordable type of life insurance is 10 year term.

This insurance is perfect for a young family, who needs some protection, but can’t afford to pay much.  It’s also great for short term needs.

It’s amazing how much life insurance someone in their 30’s or 40’s can purchase for less than $20 bucks per month if they’re in good health, and applying for 10 year term.

10 Year Term Explanation

Most term policies actually guarantee coverage up to age 95 or longer.  However, the premiums are only guaranteed to stay level for the first ten years.  That means your premiums will stay fixed during the initial 10 years, and in most policies, will rise annually thereafter.

There are various term lengths, such as 20 or 30 year term, which means the premium stays fixed for a longer duration, and remember, the lower the term duration, the lower the premiums.  For more information on alternatives to the ten year term, see our post on Types of Life Insurance.

10 Year Term Life Insurance Quotes

Age $500,000 $1,000,000
30 Year Old Male *$14 $21
40 Year Old Male $17 $28
50 Year Old Male $43 $78
60 Year Old Male $117 $217
70 Year Old Male $339 $625

*Note: All prices are MONTHLY as of 2/17/12, based on healthy, preferred plus, non smoker, and are subject to change.

Using Term for Buy/Sell Agreement or Key Man Insurance

Many business partnership arrangements require term life insurance on each partner, in the event that if he or she dies, the remaining partner/s will have liquid cash from the life insurance benefit to buy out the decedent’s family and or heirs of his or her share in the company.

10 year term life insurance is a popular choice for buy/sell contracts, since it’s the most affordable, and most businesses figure they either won’t be working together that long, or will probably restructure the ownership agreement by the end of 10 years anyway.

Estate Planning using Term Life Insurance

With the current “Band-aid” on estate taxes and the exclusion amount, some people aren’t sure what their long term estate tax implications could be.  A 10 year term policy with a conversion to permanent insurance may be a good solution for high net worth individuals whose estate value is approaching the current taxable threshold, but now quite there.

For example, a married couple with an 8 million dollar estate, with a properly structured AB Trust or bypass trust, may not owe any estate taxes if they were to both die in 2012.  However, if the current estate tax exemption (currently 5 million per individual) were to drop to, say, 3 Million per individual, then this couple would have an estate tax problem.

Since we don’t know what the future holds for estate tax legislation, some affluent families are purchasing 10 year term as a “wait and see” type strategy.  If the exclusion amount gets permanently set at 5 million per individual, or if estate taxes are done away with completely, then these wealthy individuals may decide to drop their coverage.

On the other hand, if the exclusion amount is permanently decreased, at least the policyholder will already have a policy in place (the 10 year policy), and could decide to convert it to a permanent policy such as guaranteed universal life or whole life.

You may also want to see this article for more information on using life insurance to avoid estate taxes and life insurance trusts.

Companies Who Sell 10 Year Term

Just about every company offers a guaranteed level 10 year term policy.  In my opinion, the 3 companies who are most consistently among the list of “low price leaders” for term insurance are Banner Life Insurance, ING-Reliastar Life Insurance, and Genworth Life Insurance.

Keep in mind, however, that some companies commonly show up in the top 3 in price quotes, but aren’t quite as lenient in underwriting, so it’s harder to actually qualify for their best ratings.  Two companies that come to mind here are Savings Bank Life (SBLI) and Ohio National.  On the contrary, you have a company life Prudential, who is usually not in the top 10, but maybe top 15 or 20, but are very fair on underwriting .

Apply for Term Life Insurance

To get started, simply call us at 877-996-9383 or get an instant quote using the form on the right.

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Term Life Insurance for Men Over Age 50

Over 50 yr old man - Life InsuranceMen, if you are over the age of 50 years old and need term life insurance, that’s great.  I’ve written this post just for you!

The primary reasons men purchase life insurance in their fifties are:

1.  Family Protection

2. Business Protection

3. Estate Planning

Let’s cover each of these below in terms of how much protection you need, and which type of policy suits you the best.  Please note if you are unfamiliar with the various options available to you, you may want to visit our article about Types of Life Insurance, and you can also use our handy calculator to help determine How Much Life Insurance You Need.

Term Life Insurance for Family Protection

Most of our clients over 50 years old who need coverage are purchasing it because they are still working, and need to protect their wife or children from financial ruin in the event of their demise.  If we take the example of a 51 year old man who makes $70,000 per year and has a $500,000 mortgage, here’s what I would recommend.

This man will probably work another 15 to 20 years before retiring.  That’s over 1 Million dollars his wife would miss out on if he were to die unexpectedly.  In his case, I don’t normally add in the balance of the mortgage, but recommend replacing his income for at least 15 years.  This way, his wife will be able to continue paying the mortgage and other bills if he dies.

If we assume a 3% inflation, and 6% earnings on the funds, our handy life insurance calculator shows he needs approximately $865,000 to provide an annual income to his wife of $70,000 for 15 years.  So in his case, we would probably look at quotes in the $750,000 to $1 Million range.

Business Life Insurance Over 50 years Old

Another popular reason men purchase life insurance in their fifties is for business insurance needs.  The most common business insurance policies are sold for:

  • Key Man Insurance – If you own a business with a key executive, board member, or salesperson who your business just could not survive without, your business should consider taking out a policy on that individual.
  • Buy-Sell Agreement – Many partnership agreements mandate life insurance be taken out on each partner for a quick and easy buyout in the case of one of the partner’s passing.
  • Non Qualified Deferred Compensation – Many owners set up cash value policies for themselves (executive bonus plans) and for their employees, since they are so simple to administer and to comply with ERISA.  Plus the plans can discriminate between which employees will receive the benefits.

You won’t use the life insurance calculator to determine the amount of coverage needed in the above situations.  For partnerships, the amount is typically already pre-determined in the buy-sell agreement.  In the case of key man insurance, the value of the employee or executive may be measurable, in which case 5-10X annual production is appropriate.  But in the case of a founder, director, key board member, etc., their value may be more intangible, and will depend if your company has planned for an unexpected death, has a succession plan in place, etc.

For company deferred comp plans, the level of death benefit is usually irrelevant.  Instead, a policy is usually chosen for its cash accumulation features and outlook.

If you own a business and have any of the needs above, call us at 877-996-9383 or you can get started by filling out the quote form to the right.

Estate Planning

When I refer to estate planning, I’m speaking specifically of advanced planning you may do with your attorney to provide for liquidity upon death, as well as putting a life insurance policy in place in preparation for estate taxes.

We don’t typically deal with this level of planning for individuals who are in their 30′s or 40′s, as under current estate tax law, and estate is not taxable at the federal level until it is valued at over $5 million dollars, and you can imagine that very few individuals in their 30′s and 40′s have accumulated that sort of money.  But we do get quite a lot of estate planning type cases from people over 50 years old, many of whom have done well in business or real estate.

Let’s take an example of a wealthy, 55 year old single man, who will enjoy a estate tax exclusion amount of $5 million dollars upon his death, per C. Tucker Cheadle, a renowned California trust attorney, and how life insurance can help him.  If we assume he has a net worth of $6 Million dollars, the excess $1 million above the estate exclusion amount would be taxed at a federal rate of 35%, according to Cheadle, if this man were to die.  That sort of estate would generate a $350,000 tax bill.

So our 55 year old gentleman has two choices now.  Will he allow his estate to be reduced by $350,000 upon his death?  That’s his first choice.  Or alternatively, if he is a healthy non smoker, he could purchase a guaranteed universal life insurance policy with a $350,000 death benefit for as little as $3,708 per year, which would generate an tax free, cash benefit of $350,000 upon his death.  (Please note most people use some sort of permanent policy for estate planning needs, rather than term life insurance).

With proper planning, even the $350,000 death benefit would be separate from his estate, effectively solving his estate tax problem.  Even if our 55 year old lives to age 85, he will have only paid $111,240 in premiums (thereby reducing his estate value by the same amount), and paying his estate tax bill for pennies on the dollar.

Questions for Men Age 50 and Older

Please feel free to contact us with your questions at 877-996-9383.  You might also see C. Tucker Cheadle’s article on gifting, trusts, and avoiding estate taxes here.

Quotes for Second-to-Die Life Insurance and When It’s Appropriate

Family Estate Planning using Second-to-Die Life InsuranceBy far, the most common type of life insurance purchased is on a single individual.  But in the right circumstance, a second-to-die life insurance policy may be exactly what you need.

A second-to-die policy is unique in that there are two insureds (usually spouses) and a death benefit is only paid out upon the second insured’s death.  So we have two lives covered, two deaths, but only one death benefit.

In most traditional types of life insurance sales, the proceeds are left to the surviving spouse for various financial needs.  Obviously, that’s not the case here, so let’s take a look at why someone would purchase a second-to-die policy.

The top reasons to purchase second-to-die life insurance are:

Estate Planning Purposes – Approximately 90% of these policies are purchased by couple’s with large estates, who may have an estate tax problem.  This is really a simple concept.  The first spouse passes an unlimited marital deduction upon his or her death to the surviving spouse.  Upon the second spouse’s death, their entire estate is subject to various forms of taxation (income tax, possibly estate tax, etc.)   So what better way to pay the estate tax bill than with a life insurance policy, which cost pennies on the dollar, and pays out an income tax free death benefit?

Support of Children – Since the death benefit does not pass to the surviving spouse, it is usually purchased with a married couple’s children in mind.  Perhaps there are unpaid bills or debt such as a mortgage to be willed to the children, and the parents don’t want to pass away leaving their children with a loan on the house.

Affordability – Second-to-die policies are, on average, 25-40% cheaper than purchasing a policy on just one individual.  The savings could be even more drastic if one of the spouses has some health issues, but the policy is issued anyway based on the good health of the other spouse.

Sample Quote for $1 Million Death Benefit

70 Year Old Male Individual Policy through Prudential, Preferred Health = $30,305 Annually

70 Year Old Male/Female Second-to-Die through Prudential, Preferred Health = $16,907 Annually

Cash Accumulation – Since the cost of insurance (COI) in these policies is so low, some people leverage them as investment vehicles to grow its cash value account.

Charitable Bequests – Perhaps you have a favorite charity or educational institution.  Many libraries have been named and scholarship funds have been created due to the proceeds of second-to-die policies from generous benefactors.  Perhaps you can’t afford a $500,000 outright gift, but you can pay $10,000 per year.  Leverage your dollars and buy a 2nd-to-die policy with your favorite charity as beneficiary.

Types of Second-To-Die Policies

The most common type of second-to-die policy sold is universal life.  All the big carriers such as Prudential, Met Life, and ING offer a 2nd-to-die option.

Protective Life is the only life insurance company I’m aware of that has term policy with this option.  You can purchase 10, 20, or 30 year convertible second-to-die term, and boy, is it ever affordable.

The only downside with Protective’s term policy is the best health class they’ll offer is Standard.  So if you’re both in excellent health, you get somewhat of a downgrade in health classification here, as the best you can qualify for is standard.

Do the two Insureds have to be Husband and Wife?

No.  You can have second-to-die policies with mother and son, siblings, 2 business partners, etc.

For example, I used to volunteer on the board of a private school in San Diego, which had been co-founded by two wonderful women.  You could make the argument that a 2nd-to-die policy would be appropriate for the school to purchase on them for succession planning.

You see, if one were to die unexpectedly, the other could take over her responsibilities, but when they’re both gone, you could argue the school could suffer from decreased attendance while the successor moves into his or her new job.

How to Get a Second-to-Die Quote

You may notice in the quote results, you won’t find an option for second-to-die policies, so to get a quote, you’ll need to call us directly at 877-996-9383.

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Yes, You Can Still Qualify up to Age 85. Sample Quotes Below.

Life Insurance for 81 to 85 Years OldYes, you can still purchase life insurance between the ages of 81 to 85, and in some cases, even to age 90.  Before reading too much below, let’s look at some sample cost of insurance rates.

I always feel it’s best to discuss life insurance pricing right out of the gate when dealing with my clients over age 80, since sometimes the premiums are prohibitive.

The quotes below are for a male age 81, 82, 83, etc in good health, who can qualify for the best health classification, and purchasing a 10 year term policy.

Age                        $100,000              $250,000
Male Age 81       $395                       $903 per month
Male Age 82       $453                       $1049 per month
Male Age 83       $531                       $1245 per month
Male Age 84       $620                       $1468 per month
Male Age 85       $718                       $1719 per month

Note: Life insurance for people over 80 listed above are valid as of 12/2/2011 and subject to change.  Not available in all states, and based on Preferred Non Tobacco User.

Psst! As an added bonus, you can find out what my picks are for the best life insurance companies – click here to read more! 

Please keep in mind you can also get quotes for $25,000 or $50,000.  You don’t have to buy $100,000 if the premiums are out of your budget.  Use our quote form on the right for a quick quote.

You should also be aware that if the cost of life insurance as a senior is prohibitive, you can potentially save thousands per year by purchasing a second-to-die policy, which only pays a death benefit upon the second death.  This could be the perfect solution for a estate planning need or to leave an inheritance to your children.

How to Purchase Life Insurance at Ages 81 to 85

The key purchasing life insurance at age 82 or 84 years old, or any age for that matter, is your health.  If you’re healthy and have had no history of serious medical impairments, such diabetes, COPD, or heart disease, you will pay a lower premium than the policyholder who has had medical problems.

Having said that, be sure to speak to an experienced independent agent such as myself, Chris Huntley, about your health history.  A good agent will know which company will give the best health classification, and therefore lowest premium….(continued on page 2)