“A guaranteed 500k for only 120k seems a bit too good to be true” – My mom is skeptical about a universal life plan. Is it really worth it to take the risk?

Hi Money Minder,

Okay, so here’s the deal. My mom (let’s call her Mama M) thinks term life insurance is just throwing money away and she wants a guarantee that she’ll get something back when she kicks the bucket. I’ve already tried to change her mind, so let’s not go there again.

We’ve ruled out whole life plans because Mama M doesn’t like the idea of running out of premium money before she kicks the bucket. Fair enough.

But now we’re looking at this guaranteed universal life plan with a $500k death benefit. Supposedly, Mama M only has to drop $121k in premiums over 10 years, and after that, she’s off the hook for good. Sounds too good to be true, right? The catch seems to be that she can’t miss a premium payment, or the whole thing goes up in smoke.

So, before we sign on the dotted line, is there anything else we should be thinking about?

Cheers,

Response from THE MONEY MINDER:

Hello There,

It’s understandable that your mom is seeking a guaranteed return on the money she puts into an insurance plan. The guaranteed universal life plan you’re considering does seem promising with its $500k death benefit for $121k in premiums over 10 years. However, it’s crucial to carefully evaluate all aspects of the plan before committing.

One critical factor to consider is the financial stability of the insurance company offering the plan. Ensure it is reputable and has a strong track record of fulfilling its obligations to policyholders. Additionally, thoroughly review the terms and conditions of the policy, especially regarding potential hidden costs, fees, or clauses that could impact the coverage in the future.

Another important aspect to assess is your mom’s current and future financial situation. Confirm that the premium payments are manageable and won’t strain her finances. It’s also advisable to project her financial needs and obligations in the long term to ensure that this plan aligns with her overall financial goals and objectives.

Lastly, be diligent in understanding the implications of lapsing in premiums, as that could jeopardize the entire policy. Make sure your mom is aware of the consequences and has a plan in place to ensure timely payments to maintain the policy’s integrity.

Taking a cautious and thorough approach in evaluating the guaranteed universal life plan will provide you with the confidence to make an informed decision that aligns with your mom’s financial well-being.

Farewell from THE MONEY MINDER.