Question: Should my uncle continue with Permanent Insurance, change to Term Life Insurance, or does he not need any life insurance (but see 4 beneath)?
My uncle is 60 years old, and intends to keep working beyond 65 as long as possible.
His wife's disability prohibits her from working. Still in school, his daughter will not start work until 2024 at the earliest. Thus only he earns income for the family: $40,000 CDN annually.
His (wicked?) insurance agent insisted that Term Life Insurance would be expensive at my uncle's age and thus suggested Permanent Insurance. In July 2014, he purchased Permanent Life Insurance (NOT a Participating Policy & NO dividends) payable for 20 years, with $125,000 as the benefit amount, and a monthly premium of $370. Thus as at 25-Mar-2016, he has already paid $360 x 20 months = $7200 to Sun Life.
His insurance agent confirmed that there are no fees for terminating the policy, and that as at 25-Mar-2016, the Cash Surrender Value is a petty $13.
kanetix.ca quotes a 20-year Term at $130/month.
Here are the reasons for my uncle's purchase:
My uncle is very healthy, but if he dies, then (see 2) his wife and daughter will have no income or money besides the family's total savings of $30,000. Thus insurance seems compulsory?
His total monthly payments (= 12 months x 20 years x $360 = $86 400) are less than his Benefit Amount, and thus this insurance seems profitable.
But he is not sure how to adjust for interest and inflation.