Reduce Cost But Keep Life Insurance

Hannah's husband had skin cancer six years ago and has been clear since then. As a result, their life insurance will be double. Do they stick with the standard term life insurance or go with something else?

QUESTION: Hannah in Michigan and her husband are considering term life insurance. He had skin cancer six years ago and has been clear since then. As a result, their life insurance will be double. Do they stick with the standard term life insurance or go with something else?

ANSWER: Let’s do 15. When he’s been cancer-free for a lot longer, you’ll probably be able to buy more insurance when he’s older cheaper than you are now. You’re probably not going to keep this policy. You can cancel and change it as long as you can get another policy and he doesn’t get sick again—he doesn’t get another melanoma. As long as he stays clean—cancer-free—then every year that happens, it should be a better rate even though he’s getting older. Like five or 10 years from now, you’ll probably buy another policy, and you may anyway.

I would not buy the 20- or the 25-year in your case. I would buy a 15, and that will get your costs down—somewhere around $800,000 or $1 million—I don’t think it’s going to matter that much because I don’t think your cost is going to be that heavy. We’re talking about probably spending between $500 and $800 a year to have an $800,000 or $1 million policy on a 34-year-old who’s been cancer-free for seven years.

Overall, I’m going to go with what you’re saying, but let’s just do a 15-year taking a $750,000 or $1 million—somewhere in there—and let’s get him some coverage and get you the rest of the way out of debt and get your wealth built up. The next time you visit this subject, you’re probably going to get different answers.

Here’s what’s happened. Two things happened. One is in your case, he’s going to be further and further away from the cancer date. That should make a difference. The other thing that happens is there’s a term insurance war out there. They’re continually updating the statistical evidence where people are living longer and using that to justify rationally lowering the prices. I noticed that I bought some policies at age 50 that were cheaper than the same amount was at age 40. The market had gone down. In your case, not only are you going to see some of that but you’re also going to be further and further away from that cancer date, which should make a difference ultimately. I don’t think 20 years after cancer they’re going to come back and still write you up as a cancer patient.

I’m going to run you on a 15-year term at $750,000 to $1 million. Then get yourself out of debt. Get yourself straightened up and then make your decisions a little bit later.

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