Money Talk: Insurance Options for Overweight Husband
Question: My husband doesn’t qualify for term life insurance because he is overweight and pre-diabetic. Although he’s working on getting in shape, I’m afraid something might happen. I should add we have a 3-year-old daughter, and he is the main breadwinner.
What would you suggest we do to ensure we are covered if something were to happen?
Answer: Just because your husband was turned down by one insurer doesn’t mean others won’t accept him.
Even people who are obese or who have diabetes can find coverage, so your husband shouldn’t accept that he’s uninsurable.
Look for an independent agent or broker who works with several companies rather than a captive agent who works for just one or two. A fee-only financial planner may be able to help you find a good agent.
The planner also could recommend an appropriate amount of coverage.
Your husband also should investigate any coverage he might have through his job. Many employers provide a base amount of coverage as a benefit (frequently $50,000 or one year’s pay) and often allow workers to buy additional coverage without requiring medical exams.
The downside of employer-sponsored group life insurance is that he may not be able to buy as much coverage as he needs.
He may need 10 times his annual salary, for instance, but his group policy may max out at five times his salary. Also, the policy may not be portable — it may end if he’s laid off or quits, for example.
The best strategy will depend on the costs he faces. But one approach may be to buy as much employer-provided coverage as possible and supplement it with an individual term policy purchased on his own.
If his health improves, he could boost his individual coverage while buying less of the employer-provided kind.
Question: You recently wrote an interesting piece regarding the “file and suspend” strategy for Social Security benefits. I liked the possibility of getting a lump sum if I should need the money downstream.
But when I checked with Social Security, I was told that the lump sum maximum was six months of suspended payments.
Am I missing something?
My understanding was that I could collect all the suspended payments if need be. Is there a specific code I could reference to our Social Security office to clear this matter up?
Answer: You’re not missing something. The Social Security representative you talked to is confusing retroactive benefits with the reinstatement of benefits that were voluntarily suspended.
When you file for benefits after your full retirement age (currently 66), the maximum lump sum you can get is six months’ of missed benefits.
When you “file and suspend” your application at or after full retirement age, however, you can end the suspension at any time and get a lump sum for all the benefits you missed.
Unfortunately, the misinformation you received isn’t unusual.
Financial planners around the country have reported running into Social Security reps who insist that only six months’ of benefits are available to people who file and suspend, which isn’t true.
The procedure is outlined in the Social Security Administration’s “Program Operations Manual System” under “GN 02409.130 Voluntary Suspension Reinstatement.”
It is also described in plain English on Social Security’s site: “If you change your mind and want the payments to start before age 70, just tell us when you want your benefits reinstated (orally or in writing).
Your request may include benefits for any months when your payments were suspended.” The ability to file and suspend, then change your mind, is an important protection for those who understand the important role Social Security plays as longevity insurance.
The smartest course is often to let your benefit grow to its maximum amount, taking advantage of the “delayed retirement credits” that increase your benefit 8 percent annually between your full retirement age (currently 66) and age 70.
If you should later find yourself in need of the money, you can get a lump sum payout for the missed benefits back to the day you filed and suspended, if you want.
But opting for the lump payment means you lose your delayed retirement credits for that period. In other words, if you ask for a lump sum dating back to your initial filing, your monthly benefit is reset to the smaller amount you would have gotten then.
Liz Weston is the author of The 10 Commandments of Money: Survive and Thrive in the New Economy . Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, Calif. 91604, or by email at liz@lizweston.com. Distributed by No More Red Inc.
