En español | In our youth (remember that?), we bought term life insurance. Term pays off if you die; there's no long-term savings element. As a result, large family-protection policies can be had at a modest cost. Coverage typically ends after 20 or 30 years. By then you expect to have saved enough money in a retirement account to protect a dependent spouse. But what if you're in your 50s or 60s, your term policy is expiring and you find that you still need coverage? Perhaps you married or remarried late in life and still have children to support. Perhaps you chose (or were pushed into) early retirement before you had saved enough money to protect your spouse if you die first. Perhaps an illness ate your retirement savings. There are four ways of getting (or keeping) coverage past middle age.
1. If you're in good health and need coverage for just a few years, shop the term-insurance market for a new five-year, 10-year or 15-year policy. Prices are still reasonable in your 50s and early 60s, especially if you don't smoke. And remember: You probably won't need as much coverage as you did when you were 35 and had many more years of life ahead. A 60-year-old man might pay about $80 a month for $250,000 in 10-year term, depending on his health, the state where he lives and the insurance company. A 50-year-old might pay around $100 a month for $500,000 in 20-year term. For a broad look at prices, go to the website Term4Sale.com.
See also: Spousal benefits and Social Security
2. If you're in good health and know you'll need coverage that will last as long as you do, consider a type of insurance known as "guaranteed no-lapse universal life" or "universal life with secondary guarantees." These policies provide almost nothing in the way of cash values. So if you cancel, you'll probably get no money back. On the other hand, they cost less than half as much as traditional whole-life insurance. Effectively, you're getting late-age term insurance with a lifetime guarantee. Ask an insurance agent about no-lapse. But note: To keep the guarantee, you must pay the premiums on time.
3. If you aren't in good health and can't buy insurance on the open market at a reasonable price, your current insurer will generally convert part or all of your term policy into some form of permanent insurance. There's no medical exam. You'll be offered whatever types of conversion policies the insurer has on the shelf (often, no-lapse is available). Timing is important. You must convert within the time period that the term policy requires, usually in the months or weeks just before it expires but sometimes much earlier. If you miss that window, you've lost your chance.
See also: Are you properly insured?
4. If you're in poor health, can't pass a health exam and miss your chance to convert your term policy to permanent insurance, you'll be really, really sorry. You can continue your expiring term insurance regardless of health, but only at an incredibly high premium. Worse, the premium will jump every year by large amounts until you can't afford it anymore. You would keep such a policy only if you're likely to die soon. Very soon.
Finally, one overall piece of advice: Don't extend or replace your term insurance if you already have enough money to provide for your family after your death. Put the money you currently pay in premiums toward retirement savings instead.
Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW.
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