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Whole life or Permanent Insurance

This means that you are insured until you die. The probability of death rate for 100,000 at your age is computed as with a term policy, but is based on your life expectance, as found in the tables shown below. They are betting on your long life; you are hedging against it being cut short.

Life expectance tables:

Department of Health and Human Resources 1996
Age	Male	Female	Age	Male	Female
41	34.6	39.9	63	16.8	20.7
42	33.7	39.0	64	16.1	19.9
43	32.8	38.0	65	15.4	19.2
44	32.0	37.1	66	14.8	18.4
45	31.1	36.2	67	14.2	17.7
46	30.2	35.3	68	13.5	16.9
47	29.4	34.3	69	12.9	16.2
48	28.5	33.4	70	12.4	15.5
49	27.6	32.5	71	11.8	14.8
50	26.8	31.6	72	11.2	14.1
51	25.9	30.7	73	10.7	13.5
52	25.1	29.8	74	10.1	12.8
53	24.3	29.0	75	9.6	12.2
54	23.5	28.1	76	9.1	11.6
55	22.7	27.2	77	8.6	10.9
56	21.9	26.4	78	8.1	10.3
57	21.1	25.5	79	7.7	9.7
58	20.4	24.6	80	7.2	9.2
59	19.6	23.9	81	6.8	8.6
60	18.9	23.1	82	6.4	8.1
61	18.2	22.3	83	6.0	7.6
62	17.5	21.5	84	5.6	7.1
			85	5.3	6.6

If you have a whole life policy that has considerable cash value, you should review the numbers to see if it is worth keeping. Consider the need for the coverage and the investment potential of that cash value. Remember that the cash value is your money and will come back to the family on your death as part of the insured value, not in addition to the $100,000 policy. So your premium is buying insurance for the difference between your cash value and the face value of the policy. Perhaps it would be better to take the cash value and invest it, for example, an investment paying 7% will about double in 10 years. Remember to check the tax issues, but that cash value is your money to use, and cashing out an unneeded policy eliminates an expense in your budget. But, always be careful liquidating a policy, because you can never get it back at the original purchase price. We just keep getting older and sometimes uninsurable.

Check your whole life policy for long term care provisions. Some will suspend premiums if you enter a long term care facility, and some will actually payout part of the insured amount to the care center on your behalf. There are many options: look for them and understand the benefit and how much they add to the premium.

Variable Universal Life (VUL)

This title reflects one of the different ways to own a whole life policy with options on investing, payment plans etc. It is nice to have flexibility, but remember each option has a fee attached. VUL is almost always marketed as an investment tool. It may work for you, but compare it to a term policy coupled with an investment plan. This second approach will probably be more cost efficient, but is likely to have on going income tax consequences on the investment side, where an insurance product is tax deferred but ends up as ordinary income as a retirement product.

Illustrations are the basic selling tool for the insurance industry. Unfortunately, clients do not understand the many misleading components that are instrumental in the creation and design of these hypothetical projections. Are they talking gross return (before expenses) or net return. They will assume that you will never have a down year in the market. Anyone believing this should not be in the market. Some well researched studies show only a 50-50 chance of reaching their projections.

There are costs associated with a VUL policy, but what are they? You will never know because they are bundled in the software. You get a current cost number and a maximum cost number but will then be told that these will change. Because loads and commissions may make up as much as 150% to 230% of the first year premium, insurance companies protect their high up front outlay by attaching heavy surrender charges going out for many years, be certain that you know and understand those charges.

Long Term Care Insurance

What is long term care? It is an insurance policy that will pay you while you are in a nursing home or at home. It payout is related to what are called "activities of daily living" such as bathing, dressing, eating, moving back and forth from chair to bed, using the bathroom, and remaining continent. The inability to perform two or more of these for at least 100 days is when most policies begin to pay.

Long term care policies may cover nursing home stays, community services such as adult day care, in-home care, assisted living or a combination of these services. But they are not for everyone, it must be affordable in the retirement budget. Compare costs and benefits. Be certain you are dealing not only with a reliable insurance company but with a reliable long term care facility.

Generally, you can start benefits when a licensed health practitioner declares that you are eligible. A cognitive impairment such as Alzheimer's may also qualify you. Once it is determined that you are eligible for benefits, there is often a waiting period before benefits begin. We would guess it to be 60 - 90 days for most policies. For the first 100 days Medicare may help. See the Social Security and Medicare topic.

How much dollar coverage should you have and how long should your policy coverage last? Check the costs of care in your area. It may be under $30,000 or more than $70,000 per year, not including medication. Average cost in 1997 was $55,000 according to USA Today. No doubt, those costs have gone up. Figure what your income is with SS and retirement plans. Then compute the difference between income and cost. It may be that a policy of $100 to $150 a day will be sufficient to cover your expected expenses.

These policies come with or without inflation protection. The inflation provision, which provides for more payout as the cost-of-living increases, are somewhat more expensive. Get a quote for both options, and be sure you can continue to afford this coverage in retirement.

How do you figure how long a time might you need the policy to pay? Around 20% of folks in a care center will need it for 5 years or more. Nearly half of us will require 24 hour care, but only one in four of these will need it for 2-3 years. 5% of the population age 65 and over reside in a nursing home. 23% of the population age 85 and over are in nursing homes. 75% of those are women. We have gathered these statistics from various sources and some are fairly old so we don't guarantee them for accuracy, but they should give you an idea as to your possible needs. Below are statistics used by a reputable insurance company in their promotional material. We do not question the figures but in reviewing them we see that even one day in care would be included in compiling these stats. This might have skewed their numbers.

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