Whole Life Insurance Worked for Me

Many people are convinced that buying term life insurance is the best option from the standpoint of both affordability and coverage. However, I bought whole life insurance a long time ago. The agent represented MONY, and at the time MONY was a very highly rated insurance company. I got married (first time) in 1978. My employer at the time provided bare minimum benefits, and I thought insurance to protect my young wife, who was still in school, was a good idea. It was a small policy for either $10K or $20K. In 1978 that was real money.

Then in 1986 I called the agent to tell him there was a baby on the way and wanted to talk about additional protection. The following discussions resulted in my rolling the original policy into a larger one for $150K. My first son was born in early 1987. Son number two arrived in late 1989.

I do not remember the amount of my monthly payments for this new policy, but they were not insubstantial. I also remember that as young parents we rarely had much money left over at the end of each month. In retrospect, the purchase of the whole life policy resulted in an enforced savings plan. Even though it was not a great investment, both my insurance coverage and cash value increased each year.

Our family went on with our lives. I continued to make payments on the policy, but the various employers I had during that time provided life insurance in multiples of my salary. I even had disability insurance. I saw no reason to increase my policies with MONY, even though the agent checked-in several times a year. In addition to his life insurance credentials, he also became a financial advisor and wanted to administer my Vanguard IRA. I declined.

One day, a new guy called. The previous agent was no longer with MONY, and MONY was now AXA.  We met, but all he wanted was for me to increase my life insurance coverage and let him administer my IRA. Again, I declined.

Let us jump to 2013. The reasons I had taken out the initial policies were gone. My kids were adults and on their own, plus I had been divorced from my first wife for years. My financial picture had changed (for the better), and I was newly remarried. My priorities were quite different.

From 1986 to 2013 the whole life insurance policy had accrued substantial cash value. At 60, I still planned to work for several years (I retired at 67), but the one puzzle piece missing from my financial picture was long term care.  I eventually spoke to an insurance agent who suggested using the cash value of my whole life insurance policy to purchase a single premium LTC policy with Lincoln Financial Group. The policy is designed to pay a specific amount over the course of six years. Care can be provided either at a facility or in my home. If I never need LTC, a death benefit will be paid to my beneficiary.

One disadvantage of the LTC policy is that there is no cost of living adjustment associated with LTC payout, meaning the purchasing power of the policy has declined. However, it is better than paying, if needed, 100% LTC services out of pocket. When we get to that stage, I will augment costs with payments from my Social Security benefits, my IRA RMDs, and investment returns.

Here is the summary. In the beginning, I took out whole life insurance to protect my family in the event of my early death. Now I have converted it to long term care insurance to protect my estate from some of the expenses of long term care. This just happened to work for me. The decisions I made were based on information and financial options that were available at that time. I am not advocating for this process to other HD readers.