Health Issues Age 60 and Older
What’s going on with my life insurance?
If you have a term life insurance policy and want to keep your coverage, you might not know what to do next, or or when to make a change. Learn your options, the dates you need to know, and how your age, health, and policy are all related.
How can Term Lifextender™ help extend your coverage?
Taking the next step isn’t always easy. Term Lifextender™ was designed to make keeping your coverage easier and more affordable while giving your policy a chance to gain value you might not know existed.
What do I need to know about insurance?
Few people think about insurance until they need to. Here’s some context about how insurance works, how your policy might have value during your life, and what you need to know to make an informed decision.
What’s going on with my life insurance?
If you’re like most Americans, you originally bought term life insurance because you figured you would only need it for a limited amount of time. At the end of the term:
You’d have enough money to retire
Your family wouldn’t need to depend on your income
Now that you’re close to the end of your term, especially if your health has declined, you may be wondering:
Will my family be okay financially when I die?
What happens if I get sicker?
What if I want to maintain my coverage?
How can I afford to keep it, but how can I afford not to?
We all have our reasons for holding onto our life insurance policy. But doing so affordably may be more difficult than you think.
And the need to act might be sooner than you think.
Age, health, and the term insurance gap
As we get older, most of us see changes in our health. It’s just part of life.
But if you’ve had a health event since you bought your term life policy, getting a new term policy will probably be a lot more expensive, if not impossible.
It’s math: The higher the chance we will die during the term, the sooner the insurance company may need to pay our beneficiaries,
so the more we have to pay in premiums
Say you own a $1,000,000 term insurance policy that you purchased when you were healthy, at a class called “Preferred Non-Smoker” and have been paying $7,000 a year.
Now you’re 69 years old, and your health has declined. You’re now rated a “Table 6.” Table 6 isn’t terrible – statistically speaking, you’re not in trouble. On average, you have about a 15 year life expectancy. Still, because of this change, you may be required to pay more than $32,000 a year for a new term life policy.
That’s a huge leap to make, and most people don’t take it.
The life insurance conversion gap
Did you know that most term life insurance policies are convertible to permanent insurance?
It’s called a conversion option, and it may have an expiration date that’s earlier than the end of your level term premium.
Sometimes, years earlier. That’s why, even if the end of your term is a few years away, you need to be aware of your options now.
Here’s how it works: Instead of your insurance expiring at the end of the term, by filling out some paperwork, you can maintain coverage for the rest of your life — and your beneficiaries can have the security of the death benefit — as long as you pay a premium. And you don’t need to get a new health rating.
What do you need to do?
Check your policy (or talk to your insurance agent) and see if there’s a “conversion option.”
Don’t delay, though: Your policy may only be convertible up to a certain date, well before the end of your term
So what’s the catch?
The catch is that with permanent policies, insurance companies charge more. Much more.
Take the example earlier. Say you got your $1,000,000 term insurance policy as a “Preferred Non-Smoker” and have been paying $7,000 a year. Now, at age 69, you still have the same health rating, but your “level premium” (what you’re expected to pay every year) is now $36,000. That’s 5 times as much.
No wonder only 2% of all term life policies are converted to permanent life insurance.
How Term Lifextender™ bridges the gap
If your term life insurance policy’s conversion option is expiring soon, and your health has declined since buying your policy,
you have some hard choices:
Buy a new term life policy at your new health rating for much more money
Convert your policy to universal (permanent) life insurance for much more money
Try to sell your policy with an unknown chance of getting a buyer (see our “whats and whys” section)
Let your valuable coverage lapse
Term Lifextender™ bridges the gap.
Term Lifextender™ is a unique, in-force split-dollar loan program that makes it easier if you qualify to:
keep your policy after you convert it to universal (permanent) life insurance, at a significantly lower cost than you could otherwise for 5 or 10 years
hold onto a valuable benefit for your family’s security
keep your financial options open
all while increasing the value of your policy
Upon acceptance into the Term Lifextender™ (TLE) program:
Your insurance agent (and/or TLE) helps you submit the paperwork to convert your term policy to permanent life insurance
You pay the minimum conversion fee (not the yearly premium) to your life insurance carrier
With your policy now in force, you enter into a “split-dollar” loan agreement with the Term Lifextender™ Fund for a period of 5 or 10 years
The TLE Fund pre-pays the premium to the insurance carrier for the entire TLE period — that’s the split dollar loan
You pay an annual fee — much less than otherwise possible — to the TLE Fund
How much less? Talk to us to find out
At the end of the loan period, you have the option to either
pay the Fund back the amount of the loan and maintain the policy for as long as you like
simply walk away,* knowing that you kept your valuable coverage for much less than otherwise possible
*Please consult your tax advisor about tax consequences.
Joe’s Story: Term Lifextender™ in action
At age 67, Joe’s $1,000,000 term life policy’s conversion option is about to end. He’s not as healthy as when he bought his policy.
Convert to universal life—too expensive
Buy new term—too expensive
Sell his policy—no buyers
Joe decides that Term Lifextender™ is a good choice for him.
Joe converts his policy to universal life and pays only the minimum conversion costs
He enters into a split-dollar agreement with the Term Lifextender™ Fund, which loans Joe the cost of the premiums for the full term of the loan
He opts for a term of 5 or 10 years and pays an annual fee, which is significantly less than with other options
At the end of his term, Joe can:
Keep his policy by repaying the Term Lifextender™ Fund and make the decision that’s best for him
Simply walk away
That’s Joe’s story. Talk to us and find out what yours could be.
The “whats” and “whys” of life insurance
What is life insurance?
Life insurance is a contract wherein you pay an annual fee called a premium, and when you die, your beneficiaries get a lump-sum payment called a “death benefit.” We usually buy an insurance policy to protect the people who depend on our income in case we die.
How is life insurance priced?
By and large, life insurance is priced based on your age and health. More specifically, it’s based on “underwriting classes”: huge numbers of people with your age and health profile. With huge groups of people, insurance companies are able to predict how many will live for how many years. They can’t tell who will live longer, but they can predict the averages really accurately within each class. Underwriting classes with shorter life expectancies pay higher premiums.
What is term life insurance?
Term policies are only in effect for a “term,” or a specific amount of time. Usually we take out term policies because our premiums are less than with permanent life insurance, and we don’t think we’ll need the coverage at the end of the term.
What is permanent insurance?
Permanent insurance is permanent. It’s effective for the rest of your life, as long as you pay the premium. There are different kinds of permanent insurance policies, such as whole life and universal life. Term Lifextender™ is designed to work with universal life.
What is a conversion right?
Most term life policies have a conversion right, a contractual obligation from your insurance carrier that guarantees you the right, for a specified period, to convert your term policy to a permanent policy at the same underwriting class that you were when you bought your term policy.
This is a very valuable right, and something that many people don’t know exists. As you come to the end of your term policy, it’s a good idea to discuss all your options with a life insurance agent.
How is an insurance policy an asset?
An insurance policy may seem like just a piece of paper, but it’s actually an asset that you own, like a house, a car, or a piece of art. Like other assets, it has a value.
Most people know about the “face value.” That’s the amount that your beneficiaries collect as a death benefit.
What many people don’t know is that, as an asset, an insurance policy can also have value while you’re alive. As long as there’s someone willing to buy it, it can be sold.
Why might holding onto my policy be a good idea?
When we’re young and healthy, the amount someone is willing to pay to own our policy is usually nothing – most likely there is no buyer.
In that case, holding onto the policy so that our beneficiaries can collect a death benefit makes sense. The older we get, though, and the more our health declines, the more the value of our asset increases, and the more the thought of selling our policy for cash while we’re alive starts to become a more viable and reasonable option.
How does selling a policy work?
If you are able to sell your policy, you get cash, you transfer ownership of the policy to the buyer, and the new owner pays the ongoing premiums to the insurance carrier. When you die, the new owner of the policy collects the death benefit.
What do my age and health have to do with the value of my policy?
Although no one can predict the future, as we age and our health declines, our life expectancy gets shorter. That’s just the way it is.
People who buy policies in the secondary (or “life settlement”) market are investors. They pay more for policies with shorter life expectancies.
The theory is that a shorter life expectancy means they’ll likely pay the premium for a shorter amount of time before collecting the death benefit, so they make more money.
The bottom line is, the longer you can affordably keep you policy, not only will your beneficiaries receive the death benefit should you die, but the policy is likely to gain in value in the secondary market.
The “whats” and “hows” of Term Lifextender™
How could Term Lifextender™ help me?
Term Lifextender™ helps you convert your policy more affordably than doing it on your own, so you can maintain your valuable coverage and protect your family’s financial security.
During the TLE loan period, as you get older and if your health declines, your policy may become more valuable. After you pay back the loan, you can
keep your policy for as long as you choose, or
as long as there is a secondary market, you may be able to sell your policy for cash
How does a split-dollar loan work?
Split dollar financing has been used for decades in the insurance industry to help people better afford their valuable coverage. In short, it means the money we provide, we get back at the end.
The TLE Fund pre-pays your premium to the insurance carrier for the loan period; that’s the split dollar loan
You pay a low annual fee to the TLE Fund
At the end of the loan period, you repay the TLE Fund the split dollar loan and keep the policy as long as you like
In case of death during the loan period, your beneficiaries collect the full death benefit, minus the amount of the split dollar loan
Once the loan is paid back in full, and as long as you keep your policy, your beneficiaries regain the full death benefit
What if I don’t pay back the loan at the end of the TLE period?
Term Lifextender™ is designed to make it possible for you to hold onto your valuable insurance and maintain your policy even after the loan period, with the option to sell it yourself when you decide the time is right.
If you choose, assuming there is a buyer, you could pay back the loan and sell your policy at the same time. Your agent can discuss your options as the time approaches.
We believe that there is tremendous value in your keeping the policy. That said, should you decide that it’s not in your best interest to repay the amount of the loan, that is your option. In that case, ownership of the policy would transfer to the TLE Fund.
Please talk with your tax advisor about tax consequences.
I’m still relatively healthy. Is Term Lifextender™ right for me?
Great question. If you’re relatively healthy and you haven’t had a change in your health status since buying your original term policy, you might not need TLE. You might decide that it’s in your best interest to get a new term life policy.
You can of course apply for TLE. Although we do not require a physical, we will look at your health records and create a customized proposal. If we feel that you can do better with a new term policy, we’ll let you know.
If I’m interested in TLE, what do I need to do next?
Find your term life policy. Check to see if there’s a conversion option, and when your conversion option expires. That will tell you how quickly you need to act. OR
Contact us to discuss all your options, including Term Lifextender™
A unique, in-force split dollar loan program that makes it easier for you to:
• maintain and afford your valuable life insurance
• keep your financial options open
• regain control of your family’s financial security
Talk to us today about Term Lifextender™.
Find out how you can
• Maintain your valuable life insurance coverage
• Control future costs
• Keep your options open
• Increase the value of your policy