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If you watch daytime TV, especially the nostalgia channels, you know that every celebrity on earth is trying to sell you insurance to protect your survivors from spending their own money on funerals, settling your outstanding bills, and paying for other final expenses.
“You can’t be turned down!” they shout. “Less than $10 a month!”
So how much is hype and how much is real?
There are two types of life insurance that pay benefits to your survivors: whole and term.
“Whole life insurance requires that you pay monthly or yearly premiums for as long as you live,” said Paul Bird, a local independent insurance agent who has been in business since 1979, “but you can’t outlive the amount of the benefit, and it accrues dividends.”
Term life, on the other hand, requires premium payments only for the term of the policy—say 20 years.
“You’re betting the insurance company that you’re going to die before the term is up,” Bird explained.
Once 20 years and one day roll around, you are no longer insured and you lose the premiums you paid and any money your family might have gotten in the event of your death.
“Whole life policies build in value, and after a certain amount of time can be used to get tax-free ‘loans’ against their value,” said Jillian DeVaney, another local independent insurance agent/broker with 35 years’ experience.
She said that even though seniors may have retirement accounts, stocks, mutual funds and other retirement funds coming on death, it takes a long time for those funds to come to the beneficiary, whereas, once an insurance company is presented with a death certificate, the surviving spouse or other heir will have tax-free cash in hand within a short period, sometimes as soon as 10 days.
DeVaney also mentioned a type of insurance called custom whole life. She said this is where you decide how many years you want to pay the premiums and once you reach that time limit, you’re paid up. The premium doesn’t increase, and the value increases, which tends to be a good strategy for younger people.
Bird said that while most of the companies that offer low rates on TV are reputable, “What the ads don’t tell you is that the $9.95 per month is per unit of insurance, for instance $500 in benefits per unit.”
So if you want $10,000 to go to your children or other survivors, you have to buy 20 units at $9.95 each, or almost $200 per month.
DeVaney compared term insurance to renting an apartment.
“You pay for as long as the lease lasts, so to speak, and when the term ends, so do your benefits.”
Bird and DeVaney are independent agent/brokers who represent many different companies. They both stress that there is never a fee for a consultation or policy sale, and both are willing to work with clients to find the best policies for the best prices.
To contact Bird, call 549-2500 or stop by his office, 125 Grand Ave., Suite B, in Grand Junction. You can also email paul@paulbirdinsurance.com. DeVaney sees clients by appointment only and may be reached at 778-3199 or at jedevaney@NYL.com
Insurance FYI
Insurance companies can turn you down or increase your premiums if you have past medical problems.
• Within the last five years, have you been advised by a member of the medical profession to have surgery requiring general anesthesia or diagnostic tests, except those tests related to the AIDS virus, which were not completed?
• Are you currently hospitalized, confined to a nursing home, receiving hospice care, institutionalized, waiting for an organ transplant, or received kidney dialysis within the last 12 months?
• Have you been diagnosed by a member of the medical profession as having a terminal medical condition that is expected to result in death within the next 12 months?
If you answer “Yes” to any of the above, the company will not issue a policy or may increase your premiums.
