Fill out the forms yourself and be careful.
There are a lot of old WOL policies out there, although they are usually pretty small.
If you have an old WOL policy from a well known company that doesn’t cost too much, and you have a spouse, it may be better to keep it going. The premiums don’t rise as you get older but life cover increases with bonuses, so they make good funeral policies.
As they have a cash value, they can double as small emergency funds too.
Commonly the husband was insured, so wives needs to make sure the premiums get paid – so when the husband dies, the wife gets the cash (don’t they always).
For men, if you are insured and your wife dies first, and if you don’t care about leaving money to your children or funeral costs, cash the policy in and have some fun.
If funeral costs would hurt your finances, then perhaps it’s worth paying a few dollars per month to have that cost covered. Always READ the fine print – what is covered from day one ? Maybe not much if acceptance is guaranteed.
You can also put a lump sum of say $10,000 into a funeral fund – ask your chosen funeral home what they recommend. Just remember that once the money is in the funeral fund, you usually cannot get it back.
Old investment policies – don’t waste money
There are still quite a few of these floating around. In most cases they are so loaded up with fees and other impositions that they are not really worth keeping. E.g. buy-sell unit price spreads of up to 5% which is the equivalent of a 5% entry fee on every new dollar saved.
A word of caution though, if you have life cover included and you have medical ailments of any kind, you may not be able to get new cover elsewhere - so think hard before you cancel this policy. However if it is serving no purpose and costing you money:
- Write to the insurance company and ask them what the premium is, what is the life cover, and what is the current cash value?
- Ask them what you might get on maturity or at say age 65?
- Once you receive their answer, review your overall life insurance needs.
- You can then make an informed decision on whether to keep the policy or get rid of it.
- If you do cancel it, invest the proceeds into a better plan and keep saving the same amount or more.
Ivan had 11 life polices
I first met Ivan 17 years ago, and in our first interview I discovered he had 11 life policies with 7 different companies. He was still paying considerable premiums even though he had just retired and had no need for life insurance.
We wrote a string of letters for him to the life companies, to try and figure out his best way to get minimum premiums in and maximum value out - 5 years conversion to endowment was one option we used.
Over the next few years, one by one, all the policies matured, and brought in some $80,000 which added nicely to Ivan’s lively retirement.
However I am sure Ivan would have come out far better than that, had he paid more attention to the policies on an annual basis.
Insure your big risks.
Save and build emergency funds so you can carry the small risks yourself.
Use a broker if you have more than an ordinary house, car and boat.
Good health that lets you earn is your biggest asset, so consider insuring it.
Get qualified advice on income protection.
Declare all pre-existing health events and conditions.
Once you are over 50, life and medical insurance costs rise.
Work on eliminating them by building a bigger emergency fund.
But don’t be hasty and cancel them too soon.
Insurances cost plenty so don’t waste money - review them annually.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media & on line – see www.acfs.co.nz
His second book is due out in June 2014 & is entitled “The Great NZ Work, Money & Retirement Puzzle”.
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge