People who are in the process of signing up for a life insurance plan should always look at the "guaranteed" section of the policy information provided by the insurance company, says Claudia Buck of the Sacramento Bee.
Buck, in answering a question sent in by a married couple, said looking at a policy's "non-guaranteed" section can show more optimistic results. The couple said they were nearly 70 and looking into a $200,000 life insurance policy that would pay out $800,000 tax free to their children. Buck said this is a survivorship plan, which could be useful because the cost is lower. However, she said regardless of the price, it's still important to read the fine print.
"Assuming normal underwriting costs, in order to pay an $800,000 death benefit on a $200,000 premium, the insurance company will need to earn about 8 percent a year," Buck said. "This seems generous in today's low-interest environment."
A survivorship life insurance plan would pass the estate from the first spouse that dies to the other spouse. After the second spouse dies, the insurance policy would pay the beneficiaries, who can use the money to replace assets lost and other expenses. The company said this could be useful for saving money, children with special needs and charitable gifts.