Permanent life insurance may not be so permanent.
If you’ve just celebrated your 100th birthday, then congratulations! You have made it into an exclusive (but steadily growing group) of centenarians. However, while your 100th birthday might be a reason to celebrate, it isn’t all good news. If you have a permanent life insurance policy you might be surprised to learn that your coverage actually expires when your reach the age of 100. So, what does this mean for you? Here’s what you should know about outliving your permanent life insurance policy.
As mentioned above, at the age 100, your permanent life insurance coverage will expire. At this point, your insurer will pay you your policy’s benefits at face value rather than as a death benefit to your beneficiaries. While this might not seem like a problem, there are some issues with this. Firstly, the face value amount of your policy might be considerably lower than your death benefit. Secondly, this face value payout will be subject to taxes.
When life insurance is paid out as a death benefit, the money is typically tax-free. However, when you receive a face value payout for your policy, you are taxed on the gains you receive as normal income. For most policyholders, taxing their payout as income will mean that at least part of this payout will be subject to a significantly higher tax bracket.
However, not all permanent life insurance holders need to be worried about their approaching 100th birthday. If you have a recently issued permanent life insurance policy (policies issued after 2001), then the maturity date for your policy is actually set at 121 years of age. Only those with an older policy should expect their coverage to expire at age 100.
This is what you need to know about outliving your permanent life insurance policy. Do you have further questions regarding your life insurance coverage? Then contact the experts at Udell Family Insurance. Our dedicated team is ready to assist you with all your insurance needs today.