A small business owner with an especially busy real estate and business brokerage practice wanted to provide life insurance for his four minor children in the event he passed away or required long term care assistance following an accident or illness. As a “one-man show”, he was concerned about how his children would be able to afford college and maintain their standard of living if something happened to the main breadwinner of the home. He figured his children would remain dependent on his income until they were about 26 years old each. So term insurance worked out to be the least expensive way to obtain this coverage.
On the other hand, he wanted the option to obtain permanent insurance in the future, given his optimistic outlook for a large deal he was putting together, that would impact his income and net worth in the future.
Our insurance team compared the death benefits and cash value projections of the top 2 mutual carriers in the country for limited pay whole life policies, based on the client’s available budget, and shopped the national market for the best term policies.
The client was comfortable with a budget of $13,200 per year. With those parameters, we found $2 million of term insurance for him over the next 15 years that would provide for his children’s education, care, and maintenance, during their dependency, based on the client’s current income and expenses. The recommended term policy offered a long term care illness rider, and convertibility into a permanent whole life product during the term of the policy. This gave the client the opportunity to lock in his insurability, and the flexibility to extend all or a portion of the temporary coverage into a permanent, cash-value building insurance contract, if the large deal he was working on comes through as expected.
In addition, while still remaining within budget, we found an additional $1,350,000 policy on his wife, to cover the costs of rearing and educating his four children as well as her two children from a prior marriage, in case she predeceased him.
The client still had money left over for a 13-pay permanent custom whole life policy with a death benefit of $125,000, that would contain a chronic care rider and accelerated terminal illness rider, as well as a disability waiver of premium rider that would pay for his life insurance if he became disabled.
Thus, for the original budget given, we maximized life insurance protection and living benefits (chronic illness, disability waiver of premium, and accelerated death benefit features) for his entire family’s financial protection.