by Hope
My quarterly life insurance payment came out of my account this past week. And it prompted me to take a look at my policy. As I was looking around on the site, I saw “Conversion Option expires: 12/24/2021.” No idea what that meant.
My policy is good for 4 more years. When my ex-husband and I originally purchased the two policies, one for me and one for him, we planned it so that the amount would be enough to take care of the kids through high school. And in just 3 short years, all my kids will have graduated high school.
(I continued to pay for my ex-husband’s policy for a number of years after we split, but eventually just let it lapse. As far as I know, he does not carry any life insurance. The few times we have spoken about “what ifs” he always insists that he should be the beneficiary. Ha, NOT!)
What are My Options
Ok, so I called my life insurance policy holder to find out what conversion means.
For those like me, in the simplest terms, conversion means I can convert my term life policy to a whole life policy with no need to reapply/re-qualify (ie medical exam) if I do it before the conversion date. After that, it will require a new application, perhaps even looking at alternative providers and plans and carefully going through reviews like this Globe Life review to choose the best possible policy for my needs. A medical exam would also be needed.
These are the options in a nutshell…
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| Coverage | Monthly Rate | Term | |
|---|---|---|---|
| Current Policy | $250,000 | $22 | Expires in 2024 |
| Options to Convert or Add | |||
| Whole Life | $50,000 | $72 | Rest of my life |
| Whole Life | $100,000 | $188 | Rest of my life |
| Term Life | $100,000 | $32 | 10 years |
| Term Life | $250,000 | $59 | 10 years |
Any way I go, my cost would go up almost double to keep the same coverage. And significantly more to go with whole life. Ugh!
Calling for Advice
I jumped on a call with my dad to get his advice. And the point that stuck with me was that this insurance is not for my benefit. So what is my goal with life insurance?
When it started, it was very clear, to care for the kids through high school if something happened to me.
Now, I’m not sure.
If everything continues to go as planned, I will be debt free before my current policy expires and all my kids will be at least 1 year out of high school. But I don’t know that any or even most of them will be self sufficient by then.
My initial thought is to extend the existing coverage out 10 more years. The rate is not terrible. And hopefully by 10 years they will all be pretty self sufficient. If, God forbid, something did happen to me, it would help get them all through college and maybe provide a small inheritance.
But I’m not sure…and I have a year to make any moves; although, the costs do go up every year I age. So BAD community, share your wisdom with me when it comes to life insurance please.
If you’re looking for more on insurance, consider reading our article on insurance policies you might need after 50.
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
I would seriously consider keeping term, if you can afford it. Keep in mind you may have final medical expenses, burial costs etc. It seems unlikely that your kids would see all the money, but they wouldn’t be scrambling to cover leftover bills.
My first thoughts are – are your burial plans made/costs covered? Second – think of planning for anyone that might be living at home. They need time to transition. Other than that, I would not worry about inheritance but I like the idea of helping with college expenses
I think you would be better off starting a retirement account with that money. I haven’t heard good things about whole life insurance anyway.
Hope, the life insurance payment seems an affordable expense for you now. Please consider that you may have end of life costs as well as funeral costs to be paid. This policy would help your children with those expenses. A small inheritance would, of course, also help them.
Life insurance, even though viewed by most as such, is not an inheritance policy. Like your original goal, it is to support dependents through to adulthood and to cover your final expenses, as well as any outstanding debt that won’t die with you. (Student loans do just that, I believe)
Term life is always a better choice, whole life is the payday loan of insurance policies. Not a good deal at all.
$250k – 10 year term. You don’t have to pay for the whole ten years. You could cancel after five if your family is all set.
You could also do both the $250k and $100k 10 year term and then cancel the $250k after the kids are set. Keep the $100k for final expenses.
I think a lot of this is going to depend on large decisions you have not made yet. You have talked about buying a house or building a house. I assume you will take out a loan for that. You’ll need to consider stuff like this when the time comes to decide. As it stands without the home or withstanding that you have no debt I would consider term insurance-$100,000. That should cover final expenses and a small sum for each of the kids. I’d also suggest asking the kids what they would do if they had an extra $10,000 to $20,000. It’s an interesting experiment. The good news is your kids will likely master most aspects of budgeting by the time you pass and the bad news is if your kids have not managed to get to a point before then and they have not mastered budgeting then it won’t matter if the amount they split is $100,000 or $250,000 because people who can’t budget tend to blow through large sums of money as easily as they would small sums.