Realtors typically agree that they do not want to work forever. Most have a realistic dream of a comfortable retirement where the beach or lake is close by, and the breeze is comforting while spending time in the hammock. Like all professionals, realtors work hard, and they plan hard. It’s in their nature to have a light at the end of the tunnel and a way to get them there. One particular way is to supplement your average retirement income.
You know you want a comfortable retirement, and you’ve probably already put a plan in place to fund it. You also know that if God forbid, the worst should happen on the journey to your golden years, you have considerable life insurance to make sure loved ones are financially cared for. What if you could do both? What if you could supplement your retirement plan using low-cost term insurance? Guess what? You can.
Low-Cost Term Insurance
Without a doubt, term insurance is the most economical type of life insurance available today. While every other product and service appears to be going up, term insurance has remained a bargain or even gone down over the last ten years. Why is term so much cheaper than whole life or universal life?
The primary reason term remains the cheapest life insurance is because it is temporary, not permanent like whole life. Since the maximum amount of years a term policy will be in force is thirty years, it is much less likely that a claim will be paid out. Whole life, on the other hand, is guaranteed for life as long as premiums are paid, so it is more likely that a death benefit will be paid.
Term policies rarely expire, especially the thirty-year term policies. In most cases, the policyholder will convert it to a permanent policy or simply cancel it when the amount of insurance needed is substantially reduced. Why would you cancel a cheap insurance policy? Because you don’t need it anymore, that’s why. If your $400,000 home mortgage is paid off, you might want to reduce your life insurance coverage, but with term insurance, you can’t.
But, if you have a policy in place, especially at very affordable rates, you may want to keep it just for that reason. If you have some important riders included, you may want to keep them because of the value they represent. There are several important riders that make keeping a term policy until it expires a very financially smart decision and can help you increase your average retirement income.
Accelerated Death Benefit
Although many term policies include the accelerated death benefit whether you ask for it or not, the companies that don’t will typically allow you to add it at no additional cost. This benefit makes very good financial sense because it allows for the policyholder to have a living benefit.
The accelerated death benefit provides for the policyholder to receive a large portion of the death benefit if they are diagnosed with a terminal illness. If this happens, the insurer will pay out a percentage (usually 50 – 75%) of the death benefit to the insured so they can deal with life-ending expenses such as funeral arrangements and end-of-life care. The amount that is paid in advance to the insured will then be deducted from the death benefit that will be paid to the beneficiary at the death of the insured.
The proceeds from the accelerated death benefit allow the insured to participate in the funeral arrangement (if they so desire) and participate in getting final expenses paid. End-of-life care can leave unforeseen expenses to surviving loved ones, and the advance on the death benefit makes it possible to take care of them in advance.
Return of Premium Rider
The return of premium rider can help supplement your average retirement income, so it’s definitely a living benefit for the policyholder. This rider provides that if the insured outlives the policy term, all premiums paid to the insurer will be returned in a lump-sum payment. And by the way, this lump-sum payment is non-taxable to the insured because it is a return of after-tax premium payments. Here’s an example:
John Smith is a 30-year-old male non-smoker in excellent health. To cover all of John’s debt and provide for his family’s living expenses, pay off the mortgage, and fund for his child’s college education, John purchases a $750,000 30-year term policy and elects the return of premium rider for a total monthly premium of $57 per month.
At the end of the policy period (30 years), John is still living, so the insurance company sends him a check in the amount of $20,520 which represents the premium he paid during the policy term. John is a winner!
John has many options here. He can pay off debt, help pay for his grandchildren’s college tuition, take his wife to Hawaii, or John can invest his tax-free money into his retirement plan and know that he will live a little better when that glorious day arrives. Since John had other permanent life insurance for final expenses, he has financially protected his family in a safe and affordable manner.
Many people may ask John why he didn’t just invest the money, and John will reply, “I needed the life insurance anyway, so why not pay an extra $15 toward my retirement plan?”