Why whole life and not term insurance?

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Q. I have a question on your recent article about covering future medical costs with life insurance.  Why is whole life insurance recommended over term life insurance for someone covered under their spouse’s benefits? While I’m sure some money will be needed for a supplemental Medicare policy at 65, I wouldn’t imagine the cost would be as expensive as footing the entire bill for medical insurance prior to becoming Medicare eligible. So, if I’m 57 and I have 8 years to go until Medicare, why would I need whole life policy to pay for the rest of my life if my only concern is paying “full freight” for my medical benefits up until 65? Isn’t that the meaning of term insurance?
— Confused

A. It’s a great question.

Let’s start by saying that planning for the future is a very individual thing, and what’s right for one consumer isn’t right for everyone.

We went back to Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock, who answered the initial question.

Gaelick said in the last question, the reader’s surviving wife would need to pay for medical coverage after he died, and that was a concern for him. It did not address comparing the cost of Medicare plus a supplement to that policy.

“My answer focused on having the resources to pay premiums — whatever they may be — with the uncertainty of when he died,” Gaelick said. “There was no time frame, so in that case whole life made sense to have permanent protection.”

But if you’re asking whether commercial medical coverage prior to being Medicare eligible costs more money than Medicare plus the necessary supplements, the answer is that it depends.

Medicare A (hospitalization) is free, Medicare B’s cost (doctors, testing, labs, etc.) depends on a person’s income, Medicare D (prescriptions) has many options with different associated costs and there are many options for a Medicare supplement (to cover what Medicare doesn’t cover), Gaelick said. Each has many different levels of coverage, and each has a different premium. That makes the ultimate cost unclear.

“The decision of which type of life insurance policy to purchase is certainly influenced by the purpose and the specifics of each situation,” he said, noting your situation and question isn’t exactly the same as the other reader. “Term may very well be appropriate for you for the next eight years if you can accurately predict the cost of coverage eight years out.”

If you want to make sure there’s extra money there when you’re gone — no matter when that is — a permanent life policy should be considered.

With that in mind, dear readers, please remember that our answers to your questions are specific to the information you send to us. If you see a question that applies to you, we hope the advice helps, but you need to remember that your status may not be the same as the question’s asker. That’s why we encourage you to send in your questions, even if they’re similar to something we’ve covered here before.

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This post was first published in May 2016.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.