Term life insurance conversiion

Submitted by Joseph Biebel on Wed, 2019-11-20 16:01

I just viewed Ed’s DVD on life insurance as a planning tool. I have a level premium term life insurance policy that is ending. The renewal premium, because of my age and death benefit amount is very expensive and not guaranteed. I was offered a conversion to a universal life policy with a lower death benefit at a guaranteed premium that is about half of what the renewal premium is, and without medical underwriting. Because of changes in my health I would have difficulty getting a new permanent life insurance policy.
I do have a 403b account from my employer that I have not moved or taken distributions from. I retired 2 years ago at age 65 and collect my company pension, but not social security.
Should I convert this policy? Do a Roth conversion? Invest money that I would use to pay premiums in some other vehicle?



Submitted by Bruce Steiner on Fri, 2019-11-22 19:26

  • Life insurance should generally be viewed as insurance rather than an investment.  In most cases, the purpose is to protect against the risk of dying early and family members losing the support that the insured was providing.
  • However, in this case, you have the option to convert based on your health at the time you took out the policy.  If your health is substantially worse now, then it would probably make sense to convert if you can afford to do so.
  • Along those lines, assuming it makes sense to convert, you would probably want to convert to as large a policy as you can afford.
  • You may want to have your insurance agent, or some other insurance consultant, compare the universal policy to other types of policies.  While the premium on the universal policy is lower, with a whole life policy you may be able to use the dividends to increase the coverage, which may make sense if your health is significantly below average.
  • Roth conversions generally make sense to the extent you can convert at not too high a tax bracket, assuming you have other money with which to pay the tax on the conversion.
  • Bruce Steiner

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