What if You Need More Life Insurance Down the Road?
-Some Thoughts on Automatic Benefit Increases from Ed Meyer
Think about this… salaries, houses, family sizes, and education costs increase over time, just to name obvious examples. With those changes comes a need for more life insurance. Automatic Benefit Increases (ABIs) can address two entirely different situations:
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What if your health has deteriorated by the time you decide you need more insurance? By then, the only premium rates available to you may be a lot higher. Or you may be uninsurable and unable to increase your insurance at any price. ABIs ensure that your coverage can increase every year, even if your health has deteriorated. They protect your “insurability.”
What if you already know you’ll need more insurance in the future? Say you need $500,000 now and probably $1 million 10 years from now. You could take one of several approaches:
- Be conservative. Buy $1 million of coverage now, while your health will still allow that. It would entail paying for some coverage in the early years that you really don’t need quite yet.
- Take a chance. Buy $500,000 now, and hope your health will let you qualify for another $500,000 in 10 years. In fact, your need will probably increase gradually over 10 years, so this might not be the best approach, even if your health remains good.
- Use ABIs under this insurance plan. Buy $500,000 now, and use your annual ABIs to gradually increase your insurance to $1 million over 10 years. Or buy $1 million and let it go to $2 million automatically.
ABIs provide good balance between (a) paying now for only the coverage you need now and (b) being assured you will be able to increase your coverage, for 10 consecutive years, regardless of what happens to your health.
ABIs could be the most valuable feature you have ever seen in any life insurance product. Chances are good you won’t find them in other group or individual policies.
Ed Meyer is founder and president of Meyer and Associates, which has administered alumni/ae insurance programs since 1973. He designed the first Automatic Benefit Increases, for alumni insurance programs, in 1987.