For me there was really nothing to come to grips with. I’ve seen the new 60 become 65 and the new 65 become 70 and I’ve seen the government tweak social security so that the longer you don’t take it the more money you are paid (per month), or put another way the quicker you take it the less money you get. I can’t say that I’m all that upset about the idea of retirement running away as fast as I get there. At my age if you’re still running and still working and, at least for me, still having fun, no harm, no foul.
But that’s me and for those like me we are going to see business owners working well past age 70 and even 80 and for that reason it’s prudent now to take a look at what that means for our business life insurance. This is not to say longer working years are only a reason for executives, CEO’s and business owners to review their life insurance. We all should remembering that one of the primary reasons for life insurance is income replacement and if you’re continuing to work because the income is crucial then reviewing life insurance should be a part of that thought process.
The good news is that life insurance is much kinder to us old, er, seasoned folks in that better products and better prices and even better underwriting for those of us whose parts are starting to get loose, well, those are all there to help with the new need and new challenge. For a lot of us this may mean reassessing needs and shuffling the thinking on our current coverage around so term lengths again match up with needs. I know I probably didn’t talk everyone into layering or staggering their term life insurance, but for those of us who did it can work to our advantage now. Personally I have some 20 year term life insurance that I will be dropping at age 65 when it comes to the end of its’ level premium guarantee. It was my personal policy designed to take me to the old 65. I have two other policies that go to ages 75 and 82. The one to age 75 will change ownership and become a business policy and the one to age 82 will become my new income replacement policy. By age 70 my wife and I should have sufficient assets that it will be possible to drop some of our life insurance, but I may not. It would kind of tickle me to leave her with some extra spending money.
For those who haven’t followed this forum most of their adult lives and have missed some of my better attempts at advice, all is not lost. Because actuarially life insurance companies know we’re living longer, we are able to reassess and still get reasonable term lengths in our 60’s and 70’s and if need be, even in our 80’s. It can really lend some extra meaning to key person insurance or buy/sell life insurance when we know we can get coverage that will match our useful years of service in our companies. I had partners in a company who kept going quite a bit longer than they anticipated and at their ages 70 and 78 they purchased life insurance for a buy/sell agreement. The business had grown to a point where in order to buy out a deceased partner’s family the only option other than life insurance would have been to liquidate the company, a much smaller yield. The older partner died at age 83 and the surviving partner was able to cut a check to his partner’s wife for $1.5 million. Gotta love it when it works just right.
All good news right? What about when the bank requires your CEO to carry life insurance as collateral on a business loan and their health is actually such that getting approved for a new life insurance policy probably isn’t happening? If they took my advice on layering they might have a policy that they can collaterally assign to the bank. In the absence of that we do have business life insurance that can provide the coverage by excluding the health issue that concerns the other insurance companies. This can be used as a temporary fix if traditional insurance will be available soon as we can get it in force within a week of being contacted, or it may be that it will be covered for the length of the loan. So, yah, good news. Even when the appearance is not insurable we can provide your creditors what they need to feel comfortable loaning money to seasoned business people.
Bottom line. While retirement and useful working years may be changing, life insurance is still an affordable and extremely valuable tool for both personal and business insurance. If you have questions or want to discuss what your ongoing life insurance needs might be, call or email me directly. My name is Ed Hinerman. Let’s talk.