How Long Will Your Life Insurance Coverage Last?

Henry Montag

Henry Montag

There are primarily four types of Life Insurance coverage.

Whole life Insurance – Allows you to build a cash value on a tax-deferred basis, which can be used to supplement your retirement. Because it is guaranteed to last throughout your lifetime, it is usually the most expensive type of life insurance.

Universal Life Insurance – Allows you to purchase life insurance whose performance is tied to interest rates and which can be designed to last for the rest of your life. But because it is based on interest rates which have greatly fluctuated over the years, its coverage is NOT Guaranteed to last for the rest of your life.

Variable Life Insurance– Allows an you to use the various indexes of the stock market to determine how long your life Insurance coverage will last. Depending on the performance results of the stock market index chosen by the Insured, the length of time your life insurance will last and how large or small your accumulated cash value will amount to is dependant on that performance . This product, because it is based on market performance, is NOT Guaranteed.

Term Insurance – Allows you to purchase a fixed amount of Life Insurance for a guaranteed premium and a guaranteed death benefit for a guaranteed period. The time period can be 1 year (least expensive), 5, 10 15, 20 or 30 years, the most expensive. Term Insurance does not accumulate any cash value and must end at age 80, which is why it is far less expensive than any of the other above-mentioned types of Insurance contracts. It is best used for a short period of time only.

Most insurance sold over the last 20-25 years has been universal insurance type whose death benefit is tied to an Interest rate, and whose coverage period is not guaranteed. This type of life insurance first appeared in the mid 1980s as a result of interest rates at banks and CDs paying in the vicinity of 15%. People unfortunately assumed that interest rates would always stay in that range and because of the consumer purchasing and the salesperson selling those products based on a reduced projected interest rate of 7-8%. However even those numbers proved to be too high as current interest rates have for the last few years paid in the 4-5% interest rate range. As a result, many consumers wound up purchasing a life insurance contract under the false impression it would last for the rest of their lives. However due to a much lower interest rate actually earned by these policies over the last 20 plus years, these contracts have been expiring significantly sooner than had been anticipated. The result being that many individuals were left without the valuable coverage that they thought they would have when they first originally purchased their contracts. 

Many more individuals are now unfortunately finding out that their life insurance contracts are expiring far sooner than they had originally thought. In order to prevent this from happening to you and your family it is important to review your current universal life insurance contracts by obtaining a historic projection directly from your insurance company. This information as well as your annual statement will assist you in determining exactly how long your current life insurance contract will last based on actual performance rather than on what it was projected to earn.

Today the life insurance industry as well as many of its consumers and salespeople learned a very hard lesson: guarantees do matter. As a result, many life insurance companies have now switched to a guaranteed universal contract, where the death benefit and the time the contract would stay in force for is contractually guaranteed.

Although the premium is higher, it is in my opinion well worth the extra premium. The good news is that in many cases if the insured is still in good health, he or she may do a 1035 tax-free exchange of the cash value from their existing non-guaranteed product into one of the new guaranteed universal life insurance products.

It was important for you to keep your life insurance in force for the rest of your life when you originally purchased your contract, therefore I cannot stress too much the importance of reviewing your current life Insurance portfolio with an experienced life insurance professional to make certain that your current contract does not expire before you do. In addition, you want to make certain that all of your beneficiary designations are also up to date.

 Should you have any questions or need further assistance feel free to contact the writer at the link below.


Henry Montag CLTC
Phone: {516} 695-4662
Fax: {631} 549-2786
6800 Jericho Tpke. Suite 202W
Syosset, NY 11791
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