Explore Longevity Insurance And You
Posted By tsauthor on November 25, 2010
Longevity Insurance Primer
The National Center For Health Statistics says average life expectancy is at an all time high 77.8 years. This has increased by 20 years with 1950 being the benchmark year for this statement.
To you and I the benchmark year may make little difference. We will either be alive or we won?t. If we are not breathing, we won?t need cash. If we are breathing, we will need capital.
If you are alive you need money, or at least it will be in your best interests to have money. In fact, it is in your best interests to get a guaranteed source of revenue to be honest.
Insurance companies understand this as well as anybody. Their primary goal is to sell us the annuities that provide us the payments we will need during our retirement years.
Longevity insurance is actually an annuity that doesn?t start making payments until a person reaches 75, 80, 85 or older. Insurance companies use annuities to make payments because that is the very description of the contract. It is a policy that makes payments to you later for a deposit today.
The intuitive person also understands that you can’t wait until you are 80 or 85 before you get longevity insurance. You get it, ideally, when you are between 50 and 55 with age 65 existing as the end of the road.
The reason you get it when you are [spin]young is the cost. As you might guess, the premium is considerably less when a person is young. For example, to receive $2500 per month at age 80 and buying the annuity at age 80 to provide this monthly amount costs almost $190,000.00.
However, if you want the same amount at age 80 but are only 50 years old, the premium is about $30,000.00. That is a huge difference in premium dollars. In fact, if you had that kind of money, you could invest the roughly $150,000 difference into several other policies that will grow additional income.
To be sure you have the best longevity insurance contract, you might add two riders. The first is a death benefit rider. The death benefit rider pays your beneficiary if you predecease the payout date. That way, this rider makes your annuity a life insurance policy. That is a fantasic thing.
The second rider is known as an inflation rider. An inflation rider keeps the monthly payments you receive in line with inflation. That is, the payments increase on a guaranteed percentage basis. This way the annuity owner won’t suffer reduced purchasing power.
Longevity insurance is finding favor with people who would have otherwise put their money in the stock market. The wild and unpredictable ride the stock market delivered investors over the last two to three years forced people to think over viable options.
Longevity insurance proves it is good for people in their later years because it will render the money they want. Besides, it comes with a guarantee that it will pay them for as long as they are breathing
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