In the mail today I received an offer for a "Guaranteed Life Insurance" policy. This is a permanent policy that has level premiums and some cash value. I guess I received it because they think I'm
older than I am. Maybe they looked at my Facebook profile picture and guessed, "yeah, he's between 50 and 60."
Regardless of how they found my information, it was a great opportunity to take a look at these types of policies and share my thoughts with you.
As I often say, the best policy to have is the one that is in-force when you need it. I'll also be the first to tell you that the offer I received today was from a reputable company with well over 50+ years in the life insurance industry and they are rated (A) Excellent by A.M. Best. In an effort to provide full disclosure, I am able to sell their polices if I chose to do so and may in the future if the need arises.
However, what I would like to look at today is what is so appealing about these policies. The main appeal is that there are no medical tests. That means you do not have to meet with a nurse, get stuck with a needle, or pee in a cup. The other appealing thing is the level premiums. There is comfort in knowing what you are going to pay month to month with no surprises.
So, as most people would ask, "what's the catch?"
These policies are known as GDB or Graded Death Benefit policies. This means that for the first 2 years of the policy your "death benefit" is a return of premium plus somewhere between 2% and 20%. After those first 2 years, your beneficiaries would receive the full face amount. Let's look at an example.
Joe is 50 years old and a $25,000 policy would cost him around $109 per month. He's overjoyed at not having to take any medical exams because he hates needles and his health really isn't that great. Now let's say Joe pays on the policy for 20 months and then passes away. His family would get $2,398 (20 x $109 = $2,180 + 10% = $2,398). If he would have lived 4 more months and a day his family would have received the full $25,000.
As you can see, the goal with a GDB policy is to live two years for the full payout. Of course this isn't the whole story. There are exceptions for accidental deaths etc., so be sure to read all of that fine print on your policy (I'm available to look at it with you).
These policies are ideal for those who hate exams or aren't in the best of health and have extra cash to throw at the policy. After all, if Joe is a healthy 50 who just hates needles but lives to 85, he'll pay $45,000+. In fact, if he lives beyond age 69 he'll end up putting more in than his family will get out.
For the same face amount of $25,000, Joe could get that policy for around $55 with a fully underwritten policy. In fact he could be a smoker with a pretty bad rating before the premiums got close to the GDB premiums. Plus, his policy will actually grow in death benefit and cash value over time. Add to that the fact that for that face amount of $25,000 there's no needles, urine, or even oral swab and it's at least worth the shot at trying for the fully underwritten policy.
Contact me with your life insurance questions for some free, friendly advice from a Catholic perspective.
740-324-0702
hahnjamesm@gmail.com
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