Many of our clients at Paramount will use a blended approach when they buy life insurance. They have short term needs for life insurance and feel they have long term needs as well. The term will allow them to buy the face amount that they need during their years of highest need and the permanent will give them lifetime protection. For example, one client needed 5 million dollars of death benefit as that is what we calculated as her human life value. She has twins that are 2 years old and figures that she needs maximum coverage until they are out of college. She estimates that they will be done with college in about 20 years and can afford at that point to lessen her coverage. She would like to have some permanent coverage to have the option to leave that to her kids and grandkids potentially and possibly for supplemental retirement money. To make it fit within her budget, she got a 4.5 million dollar 20 year term and bought $500,000 of dividend paying whole life insurance. This will meet her needs as she sees them right now. Obviously, people’s needs change over time and she may decide she wants to convert some of that term over time to more permanent.
It is important to look at short term and long term needs when looking at your life insurance situation. Also, it is important to look at the life insurance company’s conversion options when you buy term. Make sure that they have good conversion options (universal life and/or whole life) as that will allow you to convert to permanent insurance with no extra underwriting. If the company doesn’t have a good conversion option you should apply with another company.