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Case study: Protecting a young family

In many respects, this is the story of a typical Silicon Valley family. The husband/father is in his mid-30s and holds a senior management position in a high-tech firm. His annual income approaches $200,000. His wife, also in her mid-30s, stays at home with their four-year-old child. The couple anticipates having another child when the economy improves.

They met recently with their agent, Les Gee from San Jose, California, who educated them on their permanent life insurance needs and discussed the cost of a final illness, probate fees, as well as concepts such as charitable giving and estate planning. He also pointed out the items that needed temporary coverage such as funds to insure the education of their child(ren) and their mortgage. "We identified the things they wanted to cover permanently and what were basically shorter term needs," Les explains.

"Les is a very honest and forthright agent," says his client. "We've grown to trust him over time because he deals in facts and real information, as opposed to sales gimmicks." Clearly, this was why when Les began to talk to them about the value of permanent insurance, they listened.

Overall, the family determined they needed $2 million in coverage for the husband. This figure would be sufficient to maintain current living expenses, including the mortgage and car payments, and cover outstanding debts — as well as provide funds for college educations for two children. Of the $2 million, the couple knew they wanted $500,000 of permanent coverage. Their solution was to purchase a $2 million 20-year term policy with a plan to convert $100,000 to permanent coverage during the first year and another $400,000 during the next three years.

"They understood term was a temporary solution for many of their needs and when they saw the premiums at the end of the 20-year term policy, they knew it was important to convert to permanent coverage," says Gee.

The conversions will be attained age conversions, which means the premiums will reflect the client's age at the time of conversion, and the sooner they are converted the less expensive the insurance will be. The client converted $100,000 immediately on delivery. "We want to convert the $400,000 as quickly as possible," say the clients. "We feel a real sense of urgency to get that done and know our permanent protection is in place. We love the flexibility and the fact that we were able to customize our insurance program to fit our needs. This whole process has given us great peace of mind, and we're happy to be doing business with New York Life because it's a mutual company, without shareholders to answer to. We know we?re their top priority."