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First, lets figure out permanent, (whole-life or universal-life), insurance. We take $40,000 and divide it by 0.08. This equals $500,000 in permanent insurance. Permanent, (whole or universal), insurance you keep till you die. So we're going out and getting a $250,000 whole-life policy and a $250,000 universal-life policy. We split these up because it will give us more flexibility with half the policy down the road.
For the Term-Life insurance, we're going to add up the bills we have now. As we figured above, that comes to $165,000. For this $165,000, we'll purchase a 20 year term policy. Now, you're probably asking, "why do we get both? Permanent and Term?" Okay, let’s say that same 35 year old person we mentioned dies at the age of only 45. That $165,000 Term policy will then pay off all outstanding bills, loans, etc.
Then, the $500,000 Permanent policy will be cashed out leaving the beneficiary $500,000 to live on or to invest. Keep in mind that this beneficiary/spouse is estimated to live another 40 years. If you break that $500,000 down into 40 years of living expenses, that comes out to only $12,500 per year. All of a sudden it doesn't sound like too much does it?
But, what if that same person in our example lives to be 70 years old? The Term-life will have of course expired but, by then, chances are you will most likely have all your bills paid off. Now it would be time to cash in the Universal half of the permanent insurance. You would still be left with $250,000 Whole-life policy for final expenses and the spouse to live out their remaining years with less concern about finances.
HERE IS A LITTLE TRICK THAT WORKS MORE TIMES THAN YOU WOULD THINK.
Let’s say you get 5-10 different quotes from insurance companies. The quotes range from $500 to $600 per year. (Remember, insurance companies are thinking of you as a potential life-long customer.) They want you badly!
Now, out of the five best quotes you've settled on, you send a copy of the lowest quote to the four highest insurance companies you have on your list. Nine out of ten times you will get an answer from at least one of them that will beat that lowest bid. The more quotes you originally get the greater your chances of getting that lower quote. COMPETITION IS THE KEY!
Also, when contacting these insurance companies for a quote, be sure to ask them how many 'underwriters' they represent. Ask them to send you multiple quotes. That way, contacting five insurance companies can sometimes get you 10-20 or even more quotes. Let them know right from the start that you are comparing may different life insurance companies.
Once you have your list narrowed down, ask all the remaining insurance companies what else they're going to do for you. From helping you fill out applications, filling in beneficiaries, and any other forms that may be necessary.
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