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- My husband and I had a 10 year term life insurance policy that expired several years ago.
- We paid $45 a month for it when we bought it in our 40s; in your fifties, coverage would be much more expensive.
- Instead, we decided to buy a universal life insurance policy since we can cash it in if we need to.
My husband and I purchased a 10 year term life insurance policy in our 40’s. At the time, retirement and being over 50 seemed a long way off in the future. We purchased a plan to cover my husband with a $300,000 death benefit.
We assumed that we would pay off our mortgage when the policy expired, and we also assumed that I could dip into his pension and our investments if something happened to him.
Life, including our financial lives, doesn’t always go as planned, and time has a way of passing, ready or not.
When the policy expired, we still had at least 10 years left on our mortgage, and we’re not going to retire in the traditional sense, even though my husband will be leaving his full-time job in less than 10 years (we plan pursue other work opportunities after this period). So we discovered that we still needed life insurance; If anything happened to my husband, I would still need a lump sum cash payment to pay off the mortgage on our condo.
The problem is that 30, 40 or 50 life insurance premiums are different. When we bought our policy in our 40’s it was already way more expensive than if we had bought it in our 30’s but with a health check and a discounted rate to be nicotine free we ended up paying around $45 per month. Which I found reasonable for peace of mind.
We switched to a universal life insurance policy when our term insurance expired
When our term insurance expired and we discovered we needed a new policy to cover my expenses, a policy with the same death benefit was much more expensive than 10 years before. So we decided to look at other options as we still wanted enough money to cover the mortgage and death costs and death related costs in the worst case scenario.
After reviewing term, whole and universal life insurance policies and what each offered, we decided not to renew our term life insurance and purchase a universal life insurance policy instead. The premiums are much higher; we pay $342 per month for our new policy.
The difference is that we accumulate money (with interest) that we can withdraw if we have an unexpected hospital bill, the need for home health care, or any other unexpected expense as we age. The policy also has a death benefit of $300,000.
Politics may not seem like much, but it’s worth it for the peace of mind
We have been contributing to politics for almost seven years now. If we cashed it now, we would have over $23,000 less a redemption fee of about $7,000 and less the fee they charge for the death benefit. That would leave us with a lump sum of just over $16,000.
If you calculate it, we paid over $28,000 into the policy. Sounds like a terrible deal, but the longer you hold the policy, the lower the surrender charge until it finally (around year 19) is zero. So, for a higher fee, we’re building another form of emergency fund with a death benefit of $300,000.
I know it’s not affordable for everyone, especially if you’re still young enough to get cheap term insurance. Still, it gives us peace of mind that the mortgage will be paid off if my husband dies, and we have an account we can draw on to pay unexpected bills if we find ourselves in dire financial straits as we get older.
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