Should you buy critical illness insurance?

Over the past few months, we've focused our attention of the blog on critical illness insurance. We went into detail about the origins of it, how much it costs, which riders are worth getting, and how underwriting for it differs from life insurance. One question remains: should you buy critical illness insurance?

Critical illness insurance underwriting

Underwriting is the process that insurance companies use to evaluate the risk of an individual applying for insurance coverage. Underwriters look at factors that are relevant to the likelihood of the payout of a claim, such as smoking status, physical build and medical history. With the information, they can determine whether or not to approve an application and the premium to charge that reflects the applicant's risk. Although underwriting for critical illness is similar to underwriting for life insurance, some differences are apparent enough that they merit attention.

What to do with your term insurance policy as you head into retirement

It's no secret that life insurance becomes more expensive as we age. Premiums are related to the mortality rate and the decrease in our life expectancy as we get older is reflected in the increased premiums. What you may not realize is that this risk is not represented by a linear line. If you graph the probability of death from an actuarial life table, you would notice that the probability of death increases exponentially as we age. What this means for term insurance is that renewal premium also rises exponentially, such that they become unaffordable during retirement. So, what are your options for your term insurance policy as you head into retirement?

How you can save money by layering your life insurance

While life insurance is an integral part of a comprehensive financial plan, we'd all like to pay as little as possible for the protection. Life insurance premiums are often much lower on the priority list than bills, groceries and other mandatory expenses, so people skimp on the coverage to fit it in their budget. But coverage should be the last thing you reduce when trying to save on life insurance, since having enough coverage is the main objective for purchasing life insurance in the first place. For those of you who are looking for other ways to save on life insurance, layering your life insurance may be a strategy you can use. Here we'll introduce the concept of layering your life insurance, and how it saves you money long term.

Should you consider joint first-to-die life insurance?

Life insurance can be bought in several different configurations. The most common is on a single life, where a death benefit is paid out when the insured dies. Other configurations include joint last-to-die, where the death benefit is only paid on the last death of 2 or more insureds. The third most common configuration is joint first-to-die, in which the death benefit is paid upon the first death of 2 or more insureds. Joint last-to-die is suitable for estate planning strategies, but what is joint first-to-die life insurance used for?

How a joint last-to-die life insurance policy fits into your estate plan

Last week, when we mentioned that life insurance can serve a certain need in retirement, we specifically noted the use of permanent insurance. Since all term policies expire at age 80 or 85, they cannot be relied upon to pay out a death benefit. Therefore, a permanent policy must be used to ensure that the funds will be available when needed. Many of the estate planning goals do not require a benefit to be paid on each death. Instead, the goals can be achieved by having a single death benefit paid on the last survivor's death. An effective and relatively inexpensive life insurance policy that covers two people but only pays on the last survivor's death is called joint last-to-die life insurance.

Do you need life insurance in retirement?

Last week we looked at insuring the different stages of life, with emphasis on the importance of life, disability, critical illness and long-term care insurance at each phase. Here, we want to elaborate on life insurance during retirement. While some people believe that life insurance is absolutely necessary even in retirement, others argue that it's a waste of money. We won't comment on which group is right and wrong, since everybody's situation is different and there is no right or wrong. However, we will present the arguments of both sides so you can make your own decision.