Friend of Greenberg, Wexler & Eig, Maurice Offit of Offit Kurman, recently wrote a blog post outlining ways to make sure that people who have divorced and remarried ensure that their new spouse and the children from their first marriage each receive a proper inheritance.
We are thrilled to see him point out that life insurance is often the cleanest and easiest way to accomplish this is using life insurance. It is the viewpoint of GWE that life insurance is something that is often overlooked or not complete thought through in divorce planning and planning for mixed families.
If you or someone you know is going through a divorce or getting remarried, please give us a call.
In the meantime, we hope you enjoy Maurice’s excellent post.
In today’s post, I would like to focus on a contractual provision of term life insurance contracts. In today’s marketplace most of the major carrier’s term insurance contracts have a contractual provision called the “conversion option”. In its simplest form, this provision allows the policy owner to exchange his/ her term life policy for some form of permanent life insurance coverage without medical evidence of insurability.
The consideration is that not all conversion options are created equally and their language can differ substantially. The following are things that we consider when comparing contracts:
1. How many years / what age you may convert the contract to permanent coverage
2. What types of permanent coverage you are allowed to convert to in the carrier’s portfolio of products
For example, certain carriers only permit you to convert for the first ten years of the policy, some carriers for the full length of the term, while others may restrict the conversion to a specific age (such as 65 or age 70).
While these differences seem subtle at the onset of policy during the purchasing phase of the process, for longer term planning and flexibility, they can prove to be quite substantial.
We at Greenberg, Wexler, & Eig take pride in paying attention to the details for our clients. Contact us today to find out more information about converting your existing term life policy.
This is part 1 of a series discussing life insurance as personal financial security. You can find part 2 here.
The primary purpose of life insurance is the transfer of financial risk of death to a life insurance company in exchange for premium payments. This is simple in concept. However, life insurance products, contract forms and how they are designed for use are deceptively complicated.
In the simplest of terms, there are two type of life insurance policy forms: temporary coverage called term life insurance and permanent coverage.
- Term life insurance is coverage that pays a death claim if you die during the term of coverage. For example a 10 year term policy provides coverage for 10 years and terminates at the end of 10 years. Term coverage does not accrue any cash value.
- Permanent life insurance pays a death when you die. It also accumulates cash value.
The first planning tenant for personal financial security is “it is more important to have the right amount of life insurance than the right kind of life insurance.” For personal financial security, the amount of life insurance is determined by quantifying objectives for final expenses, paying off debts, educating children, replacing lost wages and family members with special needs. Then liquid assets are deducted from the quantified objectives and the gap is filled with life insurance. This gap is frequently filled with term life insurance on the theory that over a long period of time debts get paid off, children complete their education; wealth is created by savings, investments, retirement plans and business interests.
Over time, if enough wealth is accumulated then the family may have sufficient resources to self-insure their financial security and the need to life insurance may become superfluous. However, if the accumulated wealth is insufficient, then it would be prudent to continue life insurance coverage (more on coverage continuation options later).
Please contact David Wexler, CLU, ChFC, AEP to find out more about planning for Personal Financial Security