Many times people hit a midlife crisis and are not even aware of it!
- You're Apathetic. ...
- You Dread Getting Out Of Bed. ...
- You're Debating, But Not Taking Action. ...
- Your Life Is On Autopilot. ...
- You've Lost Your Purpose. ...
- Your Plan Isn't Working Anymore. ...
- Making Big Changes That Aren't 'You' ...
- You're Jealous Of Others.
My Midlife Crisis
We are all unique and different in our little subtle ways, please allow me to share my unique and subtle midlife crisis.
As a 48-year-old, I am a proud father of a 4-year-old daughter and my trophy wife, Ginger! My wife and I met 10 years ago and got married 3 years ago. It's my first (only) marriage and our only child. I got a late start on life, however, my social circles have lived a more normal life with respect to getting married and having kids earlier in life, so I am exposed to many people my age that go through their own midlife crisis.
My midlife crisis is that I am now 48 years old, have many of the feelings from the list above and yet I have a 4-year-old daughter and a wife that I must think about if something were to happen to me. I absolutely NEED some type of life and asset protection at age 48 that most people require at much younger ages.
Midlife Crisis and Life Insurance
Okay, now the good stuff - at least if you would like to learn more about life insurance!
When it comes to life insurance, there is a transition age between the ages of 45-60 in which life insurance eligibility will transition from TERM LIFE insurance to WHOLE LIFE insurance. In the cases of those people with health conditions or people with smaller amounts of disposable income, after age 50 final expense whole life insurance starts to become a viable option, the best option.
NOW, in the other cases where someone does not have health issues and has enough disposable income to afford say $60+ per month for life insurance, there are some INCREDIBLE options that are WAY better than final expense or traditional whole life.
In these cases, Term vs. Whole Life, it's NOT just one or the other. There are options and alternatives, little known and seldom talked about alternatives, to final expense and traditional whole life for healthy people ages 45-60.
Option #1: Participating Whole Life
Truth be told, final expense life insurance is indeed WHOLE LIFE insurance. With final expense whole life, policies do accumulate cash value but there are not any dividends and interest. The cash value that is accumulated is SLOW (very slow) to accumulate. For most of these policies, the cash value accumulated will equal the face value (death benefit) at age 100, and the accumulation is just a straight-line of equal amounts every year between the year the policy was purchased and age 100.
SIMPLISTIC EXAMPLE: A 55 year old female purchases a $25,000 final expense policy. There are 45 years before the cash value of the policy will equal $20,000. If we divide $25,000 by 45, then the policy will grow an average of $555 per year, every year (this is a very simple example, it's not EXACTLY how policies accumulate cash but it's VERY close). At age 80, the policy will have a value of $13,888.
Participating (or dividend-paying) whole life, on the other hand, are whole life policies that pay dividends and interest. If you are purchasing a participating whole life policy (i.e. from a mutual company), policyholders are also shareholders and will receive a percentage of return in the form of a dividend. The dividends also accumulate compounding interest. There are some non-mutual companies that also pay attractive dividends.
Over the life of the policy (i.e. at age 100), participating whole life policyholders will typically receive 3-5 TIMES the total benefit (cash and death benefit) vs. a traditional whole life policy.
Ask yourself;
If you could earn 3-5 TIMES more cash and/or 3-5 TIMES more benefit for your heirs for just a few extra minutes of time researching and understanding the options, would you be interested?
Below is a list of some of my favorite participating and dividend-paying whole life policies. PLEASE NOTE: the list of companies below is not biased in any way and is pretty much aligned with sentiment throughout the industry.
- Foresters Advantage Plus
- Mass Mutual
- Securian Accumulator Whole Life
READ MORE ABOUT FINAL EXPENSE & PARTICIPATING WHOLE LIFE
Option #2: Term ROP (Return of Premium) Policies
Using the word [FREE] can be a compliance nightmare for an insurance agent. That said, term ROP is about as close as you get to FREE when it comes to life insurance.
Term ROP, return-of-premium, policies return premiums to people that outlive the term. It is important to note here, that return of premium will NOT include the annual policy fee (usually in the $50-70 per year range) and some insurance companies have an additional fine print for the ROP policies.
One additional consideration is that you need to find an insurance company that offers low face value term policies AND ROP. An example of a low-cost face value term would be $25,000. There are four companies that meet this requirement.
- Assurity
- Americo
- Baltimore Life
- Cincinnati Life
NOW, the neat part about this option is that when you receive your ROP funds from the insurance company, that money becomes the CASH to fund your final expenses! You can invest the funds in an interest-earning account, an annuity, or (MY FAVORITE) use about 75% of the premiums returned and purchase a single-premium whole life policy and use the other 25% as a down payment for a new car!
SIMPLISTIC EXAMPLE: A 55 year old female (Jane Doe) purchases a $25,000 face value 20 year term from one of the carriers above and will pay $55.63 per month (which, incidently is LESS THAN Final Expense would be). After 20 years, she will receive about $12,000 back in premiums. Jane Doe can then purchase a $10,000 face value single premium whole life policy that will serve as her permanent final expense insurance, pocket $2,000 and NEVER PAY A PREMIUM EVER AGAIN!
READ MORE ABOUT TERM ROP AND FINAL EXPENSE
Option #3: A Split-Ticket Term & IUL Strategy
Okay, this concept is a little extreme as a comparable to final expense - BUT - well worth sharing! This strategy requires a little more disposable income and also requires a need for a higher death benefit.
The concept is to fulfill the life insurance coverage with a smaller face value term policy (i.e. $25,000, $50,000, $100,000, etc.) and allocate the remainder of the budget to an indexed universal life (IUL) policy. Once again, the trick is to find an insurance carrier that will write low face value term policies and has a carrier that has relatively low minimum death benefit for their IUL (i.e. $25,000 minimum).
We are not going to go into too much detail however this strategy is GREAT for people that want a period of 10-20 years of higher life insurance coverage (maybe someone that has children in their mid-teens) and also wants some permanent coverage with cash value accumulation.
This is a MUCH more complex strategy and requires more than just a couple of paragraphs however I felt it was very important to mention because this strategy is VERY popular with 45-50 year old people that;
- Still has children at home
- Have a need for a little more death benefit coverage
- IMPORTANT: Have a need to supplement income and funds in their retirement
Final Expense Alternatives - Conclusion and Takeaway
I genuinely and sincerely hope you found this article valuable. Final expense policies are GREAT for people that need final expense, the problem is that too many times people will be SOLD a final expense policy when there are indeed much better options.
If you are between the ages of 45-60 and are currently looking for whole life insurance or final expense life insurance, please do take a minute to further investigate these options, it's time well spent.
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