I Hate Insurer

Dear Insurance Adviser, We purchased a term life insurance policy nine years ago. We just found out that it comes due in 2013 and will not be worth anything -- plus our monthly payment will go from $49.98 a month to about $640 a month. I am so upset right now. We just paid about $30,000 for nine years, and once the 10 years are up, we basically do not have anything. My husband is 68. What do we do? -- Term-in-hater

Dear Term-in-hater, Here are some facts that may help you feel better about your decision nine years ago.

For starters, you haven't spent anywhere near $30,000 on term life insurance in the last nine years. You have spent only about $5,400 ($50 a month times 12 months times nine years). It appears that either you need new batteries for your calculator or a refund from your high school math teacher!

Term life insurance is typically sold with a price guarantee of 10 years, 15 years, 20 years or 30 years. Since you had the policy nine years and the price guarantee ends next year, obviously you bought a policy with a 10-year guarantee. Nine years ago, your 68-year-old husband would have been 59 years old. If you had purchased a more expensive permanent whole life policy, you probably would have spent $30,000 over the last nine years for the same amount of coverage. If your husband had died during the last nine years, your term life policy would have paid the full death benefit and would have cost you the least amount of money upfront compared to other policies.

It is a fact that when the price guarantee ends on a level term insurance policy, the premiums skyrocket. That's because the only people who continue the policy beyond the price guarantee period are those who can't qualify for a new level term policy. The good news is that even with the higher rates, the policies are still a good deal for someone who cannot otherwise get life insurance. Another plus is that most of these term policies contain the right to convert the term insurance coverage to a permanent whole life policy with level premiums for the rest of your life.

As for where you go from here, my advice is to meet with a professional life insurance agent to determine your life insurance needs. If you're collecting pensions or Social Security, for example, your circumstances may have changed from nine years ago. If you do need life insurance, a good agent can help you determine how much you need, how long you'll need it, and which type of policy is best suited for you. If your husband can no longer qualify medically for a new policy, your agent will be able to work with you to help convert your existing policy to a permanent policy.

All the best.