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Show ni w w t - f- v r First of a Series MONEY AND YOU: fxk v ' ' American families Jose thousands of dollars in protection each year to save a few pennies : By WILLIAM SHELTON President, Life Undcrwriteri Aoctation of lot Angola I. I f ' ' ' r ixmeot protection" valueTrf insurancer;? This rider would, with the whole- Iife policy, equal about $25,000. in" i protection, guaranteeing Linda the extra $100 a month she needed,The $15AmgfltL- -, The rider cost nearly $4 a month more," yet would nearly double Linda's income. i This package . had a few more assets. First, it gave Linda $60 a month during the blackout period between the time the youngest, was I8and the time Linda reached 62. (It may not sound like much', but ask a widow what a difference $60 makes.) . Second, by putting the mortgage insurance into this package, it cost about 20 percent less." Third, it would let Tom add a new rider to insure the rest of the family; This gave Tom $2,000 of "wife insurance." For if Linda died, whojwould carejorthe kids? . ,';., It also' ave each child $2,000 in term insurance until age 25 to cover final expenses if a child died. And if Linda and Tomvhad more children, each would gettheMme benefit free. The price was aohutT $1.60 a month. ' Last, for 60 cents a month, I "wrote in a clause which waived ' premiums on the insurance ;if Tom" became ill and unable to work. The total bill would be about $25 a month. Sure it might mean eat- social-securi- X .'"..--- ' decreasing term. It provides, extra income until the children, are 21 and shrinks, with each passing year. It is a cheap way to boost the r J month until the children were grown. Linda would have $750 a year to help during, the social-se- - curity blackout.! Tom, if he livedrhad the basis of a financial program.. He had a ' source' of ready cash for. borrow- 73 ihg, and $900 a year as the back- - -- s - Jng -- . X hamburger- some evenings, but here's what it would give : A total of $50,000 insurance initially, which would decrease as the family got older. If Tom died, Linda's income would "be '..$350 a the 40 years until Tom was 65 would cost him nothing. The divi- dends would pay for it. Then I showecfTom a trick. There could be a clause .written which would add the dividends into the policy at in- terest. At 65, Tom would havejjiot ' $6,060, but about $11,000. To the whole life, he could add a family-income rider This, too, is tainly the plan' would change as the family's life changed, But now there were no doubts. , . My second example, Herb Smith, had he had opened his shop two years before. He was working on it one. night, when he asked me somejjues-tion- s that led to a later meeting. Herb's shop netted $9000 a year. He was' 35, .his wife Lois was 34. They had three youngchildren. takencjrje-4tf-aytrileT- ty . anjrTetirement plarirOerf; in $7,500 to HERB the. shop and was now paying back $210 a month. He had $10,000 in NSLI (service life insur ance kept from army days). He also had a $5,000 y policy, which is like whole life except the premiums are higher because the policy is up jn 20 years.: paid HAD BOEEOWED 20-pa- - life If Herb died, the would just cover his business debt. 20-p- ay Lois would have little cash ; it takes time to sell a business. "I figured on my service insu- rance for that," Herb said. "Don't do it," I cautioned. "What ; . , . ' makes service insurance so valuable is that, if it's paid out in income payments, itkpays more than any private company pays. Turn it into cash on death, and you've thrown money away." "I know I need insurance," said Herb. "But I need investments, too. . ' - . In. two years the term would convert to retirement-incom- e insurance. This gives protection. It also has lots of savings. These are paid out starting at 65 in guaranteed income for life. Otherwise, IH never have anything much when, I retire." I came up with the following plan which suggests some of the tricks life insurance can be made to" turn : . We would first convert Herb's 20- -, pay life to ordinary whole life. He would have the same protection and pay $51 a year less for it. We would also get back $1,800 in the cash value that, built up--plus $1,000 in "accumulated .dividends and interest. At once, we would knock. $2,900 off his bank oan-flis payment lessthan $100 a month from the current $210 a month. And he would "save a Wad of interest. (This was would-drop-t- -l- gsibl&Jbecaase-ira- ' It was expensive, however. What would pay for it? Herb already was paying $210 a month to the bank. We had cut that to under $100. This would pay for ,any new insur ance with plenty of cash to bool In.two.years even the $100 payment would1 stop.xTo, buy $32,500 of "re- - -- - tirement-incom- e o I : T""r ; r'- divi-- sayonly" "because, without the stocks or property, Herb wouI6Tget" an income after 65 that really surprised nim: $423 a month plus his social security $7,350 a year in all. And if he died before 65, Lois would, now haye a decent income during the socialrsecurity blackout years. "I know the family will be all right. And. I also know the business is doing more than feeding us; it's feathering a nest." ' Aren't both Tom Johnson and Herb Smith putting an awful lot into insurance? Sure they are if view you take the that insurance is nothing more than a prudent man's hedge against untimely death. But properly used, insurance is r much- - more It's theinsuring-- of financial capital in the working years;, it's the insuring of a decent," independent retirement in an age when we have a lot of miles left after 65. It is, in fact, life insurance if you put it to work in a plan. 'OW," HERB TOED ME, . ed -- - eosts y s - montlvor Jess, if dends are deducted. , up cash value so much faster than ordinary insurance.) Now it would take only $2,100 . of the $5,000 policy to payoff debts. Lois, by accepting income from the service insurance, would get $41.50 a month fronTit' for life. But this; still left her 'in trouble. We then took the $51 saved qn premiums and bought mortgage insurance. Now Lois would have the house clear. Next we figured Lois' income, Social security, pays no more for 10 children than for two. So there, would be only $250 a month for the fatherless family of four plus the $41.50 from the service insurance. Herb wanted to give them more inr come with term insurance. But I showed him that he would have, nothing to. show for it if he lived. The solution? 'J r v I advised $32,500 in convertible term insurance. It cost $23 a month. This would' give protection during the two years it would take to pay off the business loan and get the shop on its feet, Thus,. with social security, Lois would get $423 a month to live on till the middle child was 18, $367 until the youngest was 18, and $150 a month till she reached the age of 62. . insurance only $125 a ; -- Next week: "HOW MUCH ARE YOU WORTH?5 .i Ffimily Wtekly, January 3, 1965 |
