Contact Information: Press Contact: Michael Azzano Cosmo PR for Golden Gateway Financial 415.596.1978
Five Little Known Facts of Life Insurance That Can Have Big Implications for Older Americans
Senior Resource Golden Gateway Financial Uncovers Five Life Insurance Practices That Could Cost Seniors Big Bucks
| Source: Golden Gateway Financial
OAKLAND, CA--(Marketwire - January 27, 2010) - Many older Americans continue to struggle with
finances in retirement as a result of the recession. Life insurance in
particular can represent a tremendous burden on a retiree's finances, as
premiums can rise swiftly and unexpectedly later in life. Senior citizens
should educate themselves early about the potential cost of life insurance
as they age in order to be properly prepared.
In particular, five specific characteristics of life insurance can
significantly increase expenses for those on a fixed income. Senior
financial resource Golden Gateway Financial explains these little known
facts and possible solutions.
1. Avoid Fast Rising Premiums
Life insurance premiums can rise significantly and suddenly for older
Americans, creating challenges for those on a fixed income. Premiums for
universal life insurance (also known as flexible premium whole life) rise
in cost as the consumer ages because the insurer factors in higher
mortality risk. A sample premium table (fig 1.) shows
that premium increases usually begin their steep rise around age 70 or 75.
For those on a fixed income this sudden increase can become unaffordable.
If the policyholder needs to maintain coverage, one option is to reduce the
face amount of the policy. Options for unneeded or unaffordable policies
include selling or surrendering the policy.
2. Monitor Term Insurance Increases
Term life insurance has two points at which premiums can take a big jump.
The first is at renewal. At the end of most term policies, if the owner
cannot or will not convert the policy, then they must either discontinue
coverage or undergo a new medical underwriting in order to get a new
policy. This will often lead to higher rates.
There are also term policies that begin with level premiums, but then
increase dramatically as the insured ages. These sample rates (fig. 2) for a healthy, non-smoking male
demonstrate this significant increase.
3. Pursue Payouts from Policies
Most life insurance never pays a death benefit, meaning most policies never
realize their original intent. According to the Insurance Studies
Institute, this number is as high as 85 percent of all policies. In those
cases, policy owners often leave a significant amount of money on the
table. For example, in 2005 policy owners stopped paying premiums on 19.8
million policies worth $1.1 trillion (Insurance Information Institute).
Policy owners should monitor their policies closely and be aware of all the
life insurance options available to them so as not to leave their money on
the table. These can include adjusting beneficiaries, choosing to receive
cash value, or selling their policy in a settlement.
4. Avoid Cash Surrender Fees
Be wary of the cash surrender option with a life insurance policy. In many
instances, if you choose to access the cash value in your policy, you'll
have to pay a surrender fee. These fees vary by insurer, and can be
substantial. Seek other options for generating cash from your policy such
as life settlement or -- if your policy allows -- taking dividend payments.
5. Be Aware of Policy Maturity
The majority of life insurance policies are only valid through age 95 or
100. If the insured is still alive at that point, then the policy matures
and the carrier will pay out the cash value. However, if the senior had
previously relied on the cash value to pay for the policy's increasing
premiums, then they could be left with little to no benefit at maturity.
One way to address this is to inquire about a life extension rider that can
extend the maturity date to 120 years of age.
Another option available to those policy owners facing unexpectedly
increasing premiums or those who are considering allowing their insurance
to lapse is life settlement. Life insurance was classified as an asset by
the Supreme Court in 1911, and as such, can be sold just like a house or
car. This is useful for those older policy owners seeking to turn an
unneeded or expensive policy into cash.
A recent study found that more than 80 percent of older policy owners did
not know they could sell their policy for cash. This means that many policy
owners simply allowed their policy to lapse or accepted a cash surrender
value instead of seeking a more lucrative life settlement.
For those interested in learning more about life settlement, Golden Gateway
Financial has assembled basic facts alongside an informative online calculator that can help identify the
amount of money possible with a particular policy, as well as how much
money can be saved in premium payments. To learn more, please visit
http://www.goldengateway.com.
About Golden Gateway Financial
Golden Gateway Financial (http://www.goldengateway.com), located in
Oakland, California, is a comprehensive resource for older Americans to
assess their financial health. Through a unique set of online tools and
information, the company helps individuals make intelligent financial
decisions so they can more fully enjoy what should be the best years of
their lives. The company also operates the industry's premier reverse
mortgage and life settlement services with innovative new calculators and
products for each, and a team of trained consultants that helps seniors
better understand and evaluate their options.