Dh’s company just did open enrollment of all their benefits this last week and he discovered something about his term life insurance with them, that he was told applied to all life insurance policies. He turned 65 in February and we expected a hike in the premium as a result, that just makes sense because we crossed a threshold into the more likely to die category due to age. That is not what surprised us.
Per the representative, and we verified this with other companies as well, once you cross that 65 age mark your policy value goes DOWN 35%!!! By this I mean if you are paying for a $50,000 policy and something, God forbid, happens you only get 65% of the face value! Furthermore, every four years after that your premium goes up and your true value goes down!
I knew this was common with whole life policies, DR talks heavily about this, but we believed that if you were paying for a certain amount for a policy that was what you got with term life, but it’s not so. The companies we checked with all said the same thing. So if you are near the 65 age mark, you might want to check your coverage. Because with ours the premium due went up and the value of the pay out went down, as of February.
Dh and I looked at our insurance needs and decided that we are getting closer to the mark of what we’d need to be paid out by lowering our coverage and putting that extra money on our debt snowball. Because I am only 62 we kept mine high for now. As we get more and more debt free we will need less to cover our expenses from insurance in the future. So it made sense to us to lower our premium cost some and apply that money to fixing it where we’d only need burial money in the future. Right now we are still paying for much more than burial, but four years from now we will lower our term life coverage even more.