It’s much easier to get qualified than it was in the past because underwriting has improved,” Rafael Rubio, president, Stable Retirement Planners in Huntingdon Woods (Michigan), says. Paul LaPiana is a financial planner who also heads MassMutual’s U.S. Products.
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It’s possible you may be wondering why you should. You may wonder why you should care. After all, life insurance is no longer useful once the children are grown and the mortgage is paid off. It’s not necessary. Not necessarily. These days, your life expectancy is longer and the cost of long term care is more expensive. And that mortgage isn’t always paid off when you are. Life insurance policies can help ease the financial burden of a mortgage that is still owing to your survivors, and offer other estate planning benefits.
These policies are not cheap and you shouldn’t get them just because you’re eligible for it. Retirees can only use life insurance in estate planning. They can also afford the premiums which can run into thousands of dollars each year. If you don’t, your policy will expire, your coverage will cease, and you will be wasting your money.
There are many ways to use the policies
The 2019 Setting Up Every Community for Retirement Enhancement Act was passed. This legislation made life insurance more important by becoming the new stretch IRA. Most heirs no longer have the option to make “stretch distributions” over their lifetime. Most heirs, other than a spouse, must dispose of an IRA within ten years of their original owner’s death. This forces them to take more distributions than they would for a traditional stretch IRA, and may have to pay more taxes if the money pushes the recipient into a higher tax bracket. These distributions are usually taxed as income to beneficiaries, while death benefits from life insurance policies are income-tax-free.
Life insurance can help increase a spouse’s income. This is especially true if only one Social Security check will be sufficient. If you have a pension, it could be even more beneficial. Retirees must decide whether their spouse should receive their pension after they pass away. Greg Klingler, director for wealth management at Government Employees Benefit Association, Fort Meade (Md.), says that selecting the survivor benefit reduces pension payments by approximately 10%. This survivor benefit is $10,000 per year for a pension that pays $100,000 per year. That’s $200,000 over a 20 year retirement. If you are unable to live with your spouse for many years, adding the survivor benefit is a smart move. Otherwise, it’s not a financial gain. You can buy life insurance to get a larger single-life pension. Your spouse will receive the insurance payout if you die first.
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Getting Past Underwriting
Rubio states that unless you are seriously ill or in serious danger, there is a chance you could qualify, even if you have a medical condition. However, you will likely pay a higher premium. Klingler says that a 70-year-old male with excellent health could pay $3,293 annually for a policy with a $100,000 mortality benefit. A candidate with diabetes or other health issues might pay $5,449 each year.
LaPiana suggests that you take control of your health before applying. If you have high cholesterol, take medication and eat a healthy diet. LaPiana advises that it is important to document and follow treatment plans, as insurers can often examine one’s behavior. He says that insurance companies will look at whether applicants are trying to live a healthy life. This can be a crucial factor in determining whether they qualify or not.
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Klingler says that choosing the right life insurance company is important because they all have different guidelines. Klingler says that one company may consider diabetes less risk than another, or have different definitions of smoking. He says that one company might consider someone who smokes a few cigarettes per week a nonsmoker, while another might classify them as smokers. This would result in much higher rates.
Permanent or Term Life Insurance
Permanent life insurance policies, on the other hand, won’t expire so long as you continue to pay your premiums. These policies may offer additional benefits that can be used to cover long-term care or critical illnesses, which is what a term policy won’t usually cover. Some companies offer policies for applicants as young as 90, while others will accept applicants over the age of 65.
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Permanent life insurance comes in many forms, depending on what the premium is and what the benefits are. Universal policies allow you to adjust your premiums every year, while whole-life premiums cannot be adjusted.