I have a basic term life insurance plan that pays my beneficiaries a given amount of money upon my death. I pay quarterly premiums and it is fairly inexpensive. Every so often my life insurance company makes an offer of a new deal. I just received a premium payment notice and there was an offer for an additional travel accident rider. What is that? When I purchase the travel accident rider for just a few pennies more a day, if I die in an accident involving traveling in an airplane, automobile, golf cart, or bicycle, my beneficiaries receive twice the amount of the basic life insurance payout.

This sounded good to me, so I called my life insurance company to ask them for more details.  Agent “Carol” came on the line. The first thing she did was to review my current plan with me; I had forgotten I’d already purchased an accidental death rider some time ago, but the rider I have is different from the new one being offered. How are they different?  Carol explained to me that the rider I have is for accidents in general; the new one specifically covers accidents incurred while traveling. Potentially, my beneficiaries could reap three times the basic life insurance payout if I purchased both riders. In other words, if I fall down the stairs and die, my beneficiaries collect the basic insurance payout PLUS the general accidental death rider payout.  If I am riding a bicycle down the stairs and I fall off of the bicycle and die, my beneficiaries collect the basic insurance payout, the general accidental death payout, AND the travel accident payout!  

While I was mulling over the idea of purchasing the travel accident rider, Carol went on to say that a drawback to my current term life plan is that the premiums go up as I age. Another drawback is that my plan expires when I turn 80. What!?  If I die before I’m 80, my beneficiaries get the payout, but if I live to age 80 and the plan expires, not only do my beneficiaries not get any money, but all of those life insurance premiums I’ve paid over the years are wasted. It’s kind of like auto insurance in a way; you pay for it and keep paying for it, and you hope that you are never in an accident where you have to use it.  The only thing is, auto accidents don’t affect everyone, but death is pretty much guaranteed. 

Carol suggested that I consider converting my term life to a whole life insurance plan. What is the difference between whole life and term life?  Whole life insurance has no age cut off and you can live to be the age of Methuselah and your beneficiaries get the money whenever you, not your policy, expire. Also, once you are on a whole life plan, the premiums stay the same for the rest of your life and do not go up as you age. Intrigued, I thanked Carol and she put me on hold to wait for a whole life agent. While I waited on hold, a question popped into my head:  What if I’m driving a golf cart on the green when I have a heart attack and fall out of the golf cart and roll a ways down the hill, and then the golf cart runs over me and I die of a combination of heart attack and injuries sustained from the fall and the run-over, would both the general accidental death and travel accident riders kick in?  I didn’t have a chance to ask Carol this, as suddenly agent “Bob”, the whole life expert, came on the line.

Bob explained to me that the information Carol gave me about whole life insurance is basically correct; however, there is a drawback. Given my age and my health status, if I converted my policy now to whole life, my insurance premiums would be three times the amount I now pay for term, yet my beneficiaries would still get only the same basic amount as my current term plan when I die.  In other words, I should have bought a whole life insurance policy when I was 7 years old and in perfect health, in order for the premiums to be affordable. Because I was feeling balky about paying such high premiums for a whole life plan, Bob did a cost analysis comparison for me between my current term life plan and the proposed whole life plan and concluded that it would be the most cost effective for me to convert now to a whole life plan and then die by age 75.  So much for living as long as Methuselah.

Well, I’ve been ruminating on all of the life insurance information agents Carol and Bob gave me. I’ve pretty much decided that I’ll stick to my current term life insurance plan because it’s cheap, at least for now. I figure I can take all of the money I would have spent on expensive whole life premiums and stick it into a savings account at the bank; even at the current interest rate of .5%, it’s better than giving the insurance company all of that money, and if I don’t spend it my beneficiaries will inherit it when I die.  Also, Bob made a major miscalculation in his cost analysis: he didn’t take into account the general accidental death and travel accident riders that are available for my current term life plan.  If I play my cards right and luck is with me, when I die my beneficiaries could actually get three times the amount of life insurance money they would have gotten from a whole life plan.  This may take some strategizing, however. If you stick around long enough, you may see me at age 79 riding a bicycle down the steep stairs leading into the Boston or New York subway systems, or perhaps risking something more exotic such as the one hundred and thirty five old and treacherous Spanish Steps in Rome. Or maybe I’ll just take up golf. Life’s a gamble after all, isn’t it?

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