Conversion from Term to Whole Life - Resulting Balance

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Conversion from Term to Whole Life - Resulting Balance

Postby lawman3966 » Sat Jul 27, 2013 5:29 pm

A friend received an offer to buy term life insurance for a family member for a specified period having a benefit amount of $10,000. Apparently as an inducement, the promo literature noted that once the period expires, the beneficiary could retain the policy in the form of a Whole Life Policy and have a cash balance therein. The premium was quoted as being about $75/year for four years.

The blurb from the insurance co did not say what the cash balance would be after the four-year policy period expired. I was wondering whether, based on experience, anyone here can provide some indication how such balances are usually calculated. (I don't want to call the ins co in connection with another person's policy).
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Re: Conversion from Term to Whole Life - Resulting Balance

Postby LAlearning » Sat Jul 27, 2013 5:32 pm

lawman3966 wrote:A friend received an offer to buy term life insurance for a family member for a specified period having a benefit amount of $10,000. Apparently as an inducement, the promo literature noted that once the period expires, the beneficiary could retain the policy in the form of a Whole Life Policy and have a cash balance therein. The premium was quoted as being about $75/year for four years.

The blurb from the insurance co did not say what the cash balance would be after the four-year policy period expired. I was wondering whether, based on experience, anyone here can provide some indication how such balances are usually calculated. (I don't want to call the ins co in connection with another person's policy).


10k Term Life Insurance? Why bother......
I know nothing!
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Re: Conversion from Term to Whole Life - Resulting Balance

Postby dhodson » Sat Jul 27, 2013 5:49 pm

Nobody can say for certain with the info you provided but I'd say about 20% of the total premiums paid for the whole life.
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Re: Conversion from Term to Whole Life - Resulting Balance

Postby lawman3966 » Sat Jul 27, 2013 6:43 pm

dhodson wrote:Nobody can say for certain with the info you provided but I'd say about 20% of the total premiums paid for the whole life.


Thanks for your reply.

The whole idea made no sense to me, especially since this a mother getting insurance on a 25 year old son whom she is supporting, not the other way around. Having some idea what the balance of some future whole life policy for the son would be worth could be helpful if this friend asks me about the issue. (I erred in the top post - it's the insured who can convert the policy into a whole life policy)

I asked, in part, because the ins co blurb seems to hint at the notion that the resulting whole life policy would be worth $10K after four years.
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Re: Conversion from Term to Whole Life - Resulting Balance

Postby dhodson » Sat Jul 27, 2013 7:06 pm

the death benefit would be worth 10k so if the person dies then the statement is accurate. Otherwise not likely so.
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Re: Conversion from Term to Whole Life - Resulting Balance

Postby Jaxfann » Sat Jul 27, 2013 7:40 pm

dhodson wrote:the death benefit would be worth 10k so if the person dies then the statement is accurate. Otherwise not likely so.



I believe the situation is that she can buy a 10 year (or longer) term life plan which pays death benefit only should he die within the term period and this premium should be very, very inexpensive (need to shop around) and cost will not change during the term. At any time during the term he will be able to convert to a permanent plan which will pay out at death and will (from the conversion date only) gain cash value from that point on. He will then pay the prevailing rate depending on his age for a permanent plan (much more especially the older he gets) however he will not be rated up or declined based on his medical condition at the time he converts.

As the earlier poster suggests - $10k for 10 years - why bother! - however for a young person a 25 or 30 year term life for $500k or more makes a lot of sense as the likehood of getting married and supporting a family is significant and the cost is still relatively low and will not increase during the term. As an example $100k death benefit for 30 years for a non smoker in good health should cost somewhere around $13 a month.

At age 50 to 60 the kids should be independant, his investments should be significant (if he follows the advice of this blog) and his need for life insurance is over - the cash value of a permanent plan builds way less that if the premium were wisely invested so unless he needs it for estate planning purposes the term life should be all he needs to do.

Hope this helps.
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