Kelly had just suffered a life-threatening stroke at 57 years old. Her prognosis was uncertain, and she had months of recovery ahead. She took comfort in the fact that she had purchased a one-million-dollar term life insurance policy when she was 37 years old to protect her family.
Comfort turned to despair when she discovered her policy was non-renewable at the end of the term period of twenty years. In fact, her coverage would end in one month; the month of her birthday. Through perseverance and focused determination, she would fight to recover to her former self, both physically and mentally. However, because she was now uninsurable, there was nothing she could do about not having life insurance.
Like many consumers, Kelly purchased her life insurance protection from a large brokerage firm where the prevailing perception was all policies are the same. This meant price was the predominant factor in choosing a policy and Kelly thought, “Why not go with the cheapest?”
Term life policies are not at all the same
Modern term insurance policies come with a variety of conditions and riders and each of these variables must be considered when choosing a policy.
Renewability and convertibility are two options that can be extremely important. If Kelly’s policy was “guaranteed renewable,” she could have paid the adjusted premium at the end of the initial 20-year term and kept her policy in force.
A policy that is “convertible” can be changed to a permanent insurance plan, within a designated timeframe, or at any time within the initial term period.
These options can make a term life insurance policy slightly more expensive. There are also times when insurance companies offer guaranteed renewable and convertible term life insurance that is less expensive than their competitors. At WisMed Assure, as your financial partner for life, our job is to research these contracts thoroughly when advising you on finding the very best coverage for your needs. Our loyalty is to you, and not to the insurance companies.
Riders: pay more to get more
While shopping for a term life policy, there are many additions, or “riders,” to consider. Some of the more popular include disability waivers, disability income protection, accidental death protection, children’s insurance and living benefits or long-term care protection.
If the insured becomes disabled, a disability waiver will no longer require them to pay insurance premiums, and disability income protection can provide a monthly payment to the policyholder throughout a period of disability. Children’s insurance can place life insurance protection for one’s children under the same base policy, and an additional insured or other insured rider will place life insurance coverage in force on an added named individual. If death occurs as a result of an accident, the accidental death rider will increase the base amount of coverage. In many instances, the base amount will be doubled.
Due to the exploding costs of long-term care, many modern policies now make a percentage of the life insurance benefit available to assist in paying these costs. Qualification is usually contingent on the inability to perform two or more activities of daily living or to be cognitively impaired for life.
Living benefits are also very popular, where benefits can be paid while the insured is alive, upon sustaining a life altering health condition such as a cardiac event, cancer or a stroke.
A convertible policy works
Larry and his wife Dawn came into WisMed Assure’s office the other day. Dawn said, “Tom there is something we think you should know. Larry has been forgetting things lately, so we talked to our doctor, and Larry has early stage Alzheimer’s.”
After sharing comfort and empathy, our focus shifted to Larry’s life insurance policy. Since the policy was “convertible,” we decided to convert the coverage to a permanent plan which would be in force for Larry’s lifetime. We also discussed the policy’s living benefits rider, which, if Larry’s condition became too severe, benefits would be paid out while Larry was still alive to help Dawn in caring for Larry.
Not all term life insurance policies are created the same. In fact, it can be an intensive effort to design a policy for one’s budget that will provide needed benefits during a time of crisis. At WisMed Assure, our team of professionals are here for your well-being.
Article originally posted here.
WisMed Assure Insurance Advisor
Back to top