26 Apr Planning ahead to cover medical costs

Q. I trying to decide if it’s smarter to purchase either term or permanent insurance for a very specific purpose. I am 57, in good health and will retire with a state pension and medical benefits. My wife, 57, is covered by those medical benefits as long as I’m alive. My thinking is to purchase a small policy to cover monthly premiums in case I pass before her?
— Need advice

A. This is the kind of planning ahead we love to see.

While considering your own death isn’t pretty, it’s important to think about what benefits could change your spouse’s life after you’re gone.

The decision which type of life insurance policy to purchase is certainly influenced by the purpose, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

“Term would be appropriate if the need is for a specific period of time such as a loan or a temporary business need,” Gaelick said. “If the protection is more long term or the amount of time needed uncertain, permanent insurance would make a lot more sense.”

Gaelick said with whole life from a mutual life insurance company, you will have fixed premiums for life, accumulate cash value that is not market risk sensitive, have a death benefit that can grow keeping pace with inflation and you’d share in the profits of the carrier.

That means a small whole life policy can end up bigger in the future if you live, he said. If you don’t live, your wife would have the proceeds needed to pay future monthly premiums.

“In your specific case, the number of years needed to pay these premiums is unknown so whole life would make the most sense,” Gaelick said.

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This post was first published in April 2016.