Other options to ensure spouse is covered

Q: I am a male who just reached 65. My health is good. I have been receiving over $3,500 per month tax free from an insurance company because of a disability. My insurance company has offered me a $250,000 buyout.

What I am concerned about is that if I don't accept the buyout, and I die in the near future, the disability payments end, and my wife would have a problem regarding income. Her Social Security payments would only be about $2,100 a month after I die. Although I have some investments, my wife would be not be able to maintain the standard of living we have now without some additional income.

I don't need the $3,500 a month to live on. I have enough assets so that our standard of living is fine, and I only need a small portion of the $3,500 I now receive to maintain our standard

of living. Should I accept the $250,000 buyout?

A: I don’t think the $250,000 buyout is generous, given your good health. I believe you have other options that are more attractive. When I reached 65 (17 years ago), I was faced with a similar problem. I was retired and no longer had life insurance coverage. I was receiving about $3,000 per month in pension payments and Social Security that my wife would no longer receive after I die. (Her Social Security payments exceeded mine, so she would not be eligible for widow’s benefits that would be greater than what she was already receiving.)

I recommend that you consider purchasing a 20-year term life insurance policy for $250,000. (Naturally, you could select a different amount of coverage.) When I turned 65, I was able to purchase a $250,000 20-year term policy for a little more than $200 per month. (The premium varies based on the health of the applicant.)

With that insurance, your wife would receive $250,000 if you die