Can my 86 year old mother have life insurance?

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PostPosted: Sun Jun 07, 2009 4:12 pm   Post subject: Can my 86 year old mother have life insurance?  

I need to get a policy for my 86 year old mother for reasonable premium.

pettewayg
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PostPosted: Mon Jun 08, 2009 8:51 am   Post subject:   

Okay, reasonable is a very relative word, what is reasonable to someone might not sound right to another. I hope you understand that your mom is too old for life coverage. And, at her age the premium rate would be outrageous anyway.



Why exactly do you want a policy for her at this age?

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PostPosted: Mon Jun 08, 2009 10:51 am   Post subject:   

You should be able to purchase (if you're interested) a 'final arrangements' policy...I doubt any carrier will take on an 86 year old..



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PostPosted: Mon Jun 08, 2009 12:47 pm   Post subject:   

Hi pettewayg,



Quote:
I need to get a policy for my 86 year old mother for reasonable premium.


Why didn't you try for it earlier? Any particular reason?



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PostPosted: Mon Jun 08, 2009 2:12 pm   Post subject:   

There are a few carriers that will insure an 86-year-old, but it will be highly dependent on her health. The premiums are not cheap (ex: $2400 per year for a $25,000 policy for an 86-year-old woman at a standard rate), but it may still be an option. If you want to contact me to discuss the options in further detail, please feel free to send me a PM or an e-mail.

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PostPosted: Wed Jul 01, 2009 2:21 am   Post subject:   

86 is absolutely NOT to old for life insurance. Your premiums will depend on health (preferred, standard, table rating...etc) and desired death benefit. The upper age limit on life insurance is 91.

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PostPosted: Wed Jul 01, 2009 4:12 am   Post subject:   

Okay Experts, what life insurance options can a 86 years old person have? Would she get a 20 years term plan at reasonable price?



IMO irrespective of her health the premium rate would be exorbitant and beyond one's affordability. And, if that is so then we are not talking about medically underwritten life policies, right?


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PostPosted: Wed Jul 01, 2009 5:13 am   Post subject:   

"Okay Experts, what life insurance options can a 86 years old person have? Would she get a 20 years term plan at reasonable price?"



No. you can not buy a 20 year term policy on an 86 y/o. The only term insurance you could buy would be an annually renewable term policy who's premiums would not be cost effective.







"IMO irrespective of her health the premium rate would be exorbitant and beyond one's affordability. And, if that is so then we are not talking about medically underwritten life policies, right?"



Also not correct. There are no guaranteed issue policies available for an 86 y/o.



An 86 y/o standard non-tobacco female can buy a $1,000,000 policy for $88,000 a year (or $9,788 per year for $100,000). An 86 y/o female has a life expectancy of approximately 6 years. So to put this into perspective it is as though she was buying a dollar for 50cents. or you could say she was making 16% tax free simple interest a year on her money. Not bad compared to the stock market.



Let me give you a real life scenario: a 86 y/o female has $500k in CDs at the bank. She pulls out $200k and put it into an single premium immediate annuity. This annuity generates $29k a year for the rest of her life. we back out the taxes and we spend the remainder...about $25k a year to buy a guaranteed life insurance policy with a death benefit of $282k income tax free.



This type of situation (older aged individual wanting to buy life insurance) come up a lot in estate planning also.



Hope this helps.

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PostPosted: Wed Jul 01, 2009 11:35 am   Post subject:   

An 86 year old female who can get standard rates on life insurance has a life expectancy of greater than 6 years.



You are not putting up a very compelling life insurance argument with your example. If she could invest her money and earn 5%, as long as she lives 8 years, her family comes out behind with the life insurance.

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PostPosted: Wed Jul 01, 2009 12:28 pm   Post subject:   

Hi Marpol,



Quote:
about $25k a year to buy a guaranteed life insurance policy with a death benefit of $282k income tax free.


Did you come across such an example in real life?

Or is it you're just trying to explain a possibility of earning benefits?



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PostPosted: Wed Jul 01, 2009 3:03 pm   Post subject:   

Steven,



I think that he's being overly optimistic in his post. If the taxes are only $4,000, that puts the person in a combined federal, state, and local tax bracket of 13%. Additionally, if the death benefit is $282,000, the person is probably getting super preferred rates. Not too many 86 year olds can get this rate.



Regardless, assuming that the numbers are accurate, and I have no reason to believe that they aren't in his example, it still doesn't make much sense.



The odds favor her being able to leave more money behind by investing the money instead.



As an aside, if she is in a higher tax bracket, a single premium life insurance policy will make more sense than using an annuity to fund annual premiums.

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PostPosted: Wed Jul 01, 2009 4:54 pm   Post subject:   

"An 86 year old female who can get standard rates on life insurance has a life expectancy of greater than 6 years."



Actually the standard mortality for an 86 y/o using the IRS 2005 mortality table is 6.08 years. Or if you want to use the 2001 CSO table it come out to 6.16 years.



"You are not putting up a very compelling life insurance argument with your example. If she could invest her money and earn 5%, as long as she lives 8 years, her family comes out behind with the life insurance."



I dont think you remember your rule of 72. 72/5%=14.4 years. So it will take 14.4 years to double your money at 5% interest. Or we could work my example in revers to give..... 72/6 years=12%



I also don't think you understand how an insurance carrier underwrites there clients. Standard for an 86 y/o is NOT the same as standard for a 35 y/o. a 35 y/o standard will obviously be in better physical shape then a 86 y/o preferred. This is because the preferred rating for an 86 y/o is based on a statistical evaluation FOR AN 86 y/o.

Marpol
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PostPosted: Wed Jul 01, 2009 5:58 pm   Post subject:   

"I think that he's being overly optimistic in his post. If the taxes are only $4,000, that puts the person in a combined federal, state, and local tax bracket of 13%. Additionally, if the death benefit is $282,000, the person is probably getting super preferred rates. Not too many 86 year olds can get this rate.



Regardless, assuming that the numbers are accurate, and I have no reason to believe that they aren't in his example, it still doesn't make much sense.



The odds favor her being able to leave more money behind by investing the money instead.



As an aside, if she is in a higher tax bracket, a single premium life insurance policy will make more sense than using an annuity to fund annual premiums."



Ok so the number i used are from the actual illustrations i ran last night. All the number i will be using are 100% accurate.



This was a real life example....although the client was actuly 89 y/o. I just changed everything to 86 because of OPs original question.



InsuranceExpert.....i did not run a detailed analysis for the sake of time but if you want to see the REAL scenario here goes:



This is a very common strategy known as annuity arbitrage where we use the different mortality calculation between SPIAs (Single Premium Immediate Annuities) and life insurance.



Client Info:



Female

86 y/o (we will assume age nearest)

Standard Non-tobacco risk

$200k in cash with a $200k basis.

Life Expectancy 6 years (see previous post) (using IRS 2005 or 2001 CSO mortality tables)

Resident state: CA

Federal Tax: 25%

State Tax: 8%

Total tax: 33%



Option 1:



Client put money into a CD paying 5% for the next 6 years.



In 6 years account value will be $268,019. heirs will receive $268,019 - (68,019 * .33) = $245,562



Option 2:



By a single premium Life policy for 200k.



This will buy her a 265k paid up policy.



Appon dealth heirs will receive $265k



Option 3:



Buy a SPIA with a life time payout option generating $28,824 a year for life with a 100% exclusion ratio. this will generate (after tax) the following income stream:



1-$28,824

2-$28,824

3-$28,824

4-$28,824

5-$28,824

6-$28,824

7-$28,824

8-$19,312

9-$19,312

10-$19,312

.

.



This net income will buy her a Life Pay guaranteed UL with a $320,000 Death benefit.



on death heirs receive $320,000





The SPIA is with AG and the Life Policy is with Transamerica.



This does not always work out but it often does. It also seem counter intuitive to believe that a life pay UL buys more DB then a 1 pay...but because of the way the SPIA mortality is calculated vs. life insurance makes it work.



Hope this helps clarify my previous post.

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PostPosted: Wed Jul 01, 2009 6:30 pm   Post subject:   

Razz I love Marpol. Wink


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PostPosted: Wed Jul 01, 2009 6:34 pm   Post subject:   

Thanks Gary,



This strategy work a lot better before SPIA rates dropped (about 1 month ago). Although they are inching up a bit recently.



Also if you look at the SPIA income it returns the clients principal in 7 years (normaly on a life pay it will pay back principal at life expectancy) wich validates our 6-7 year LE.



The Trans policy is also only Guaranteed to age 100. if you want to go to age 107 you would get 300k and if you want for a life guarantee you would get 291k. just depends on how much risk the client wants to take and family longevity history.....although you could always pay catch up premiums for a few years if you needed to.....now i am just rambling......sorry.

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