Jonathan Pond s Quick Guide for SBLI Customers Why it Might be a Smart Move to Convert Your Term Insurance to Whole Life Coverage

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1 Jonathan Pond s Quick Guide for SBLI Customers Why it Might be a Smart Move to Convert Your Term Insurance to Whole Life Coverage Courtesy of GET-SBLI

2 I encourage you to speak with your insurance agent or an SBLI representative about how SBLI can help you secure life insurance coverage that is ideally suited to your particular stage in life. Best wishes for a wonderful financial future. Jonathan Pond Jonathan Pond is a paid spokesperson for SBLI GET-SBLI The comments and opinions expressed herein are solely those of the author and do not reflect the assent of SBLI or its officers, agents, or employees. SBLI and The No Nonsense Life Insurance Company are registered trademarks of The Savings Bank Life Insurance Company of Massachusetts, which is in no way affiliated with SBLI USA Mutual Life Insurance Company, Inc The Savings Bank Life Insurance Company of Massachusetts, Woburn, MA. All rights reserved.

3 Converting a Term Life Insurance Policy into a Whole Life Policy Do you know that it s usually possible to convert your term life insurance policy into a whole life insurance policy? Most policyholders are unaware of this feature, which, for many families, can be a very smart move. Converting your term life insurance policy into a whole life policy can be a valuable tool in your retirement planning...and it s one with guarantees, a real advantage in today s uncertain economy. Here are some reasons why you should consider converting your term insurance policy into whole life: Life is uncertain permanent insurance provides certainty in an uncertain world. There may be circumstances later on in life when life insurance coverage will be very helpful to your survivors, even though you may believe that your coverage needs will be reduced or eliminated in the near future, for example, when your children are out of college. The cash value buildup is tax-deferred and may come in very handy later in life to help meet ever-rising living costs or to fund some extras that might otherwise be unaffordable, like a dream vacation. The certainty of creating a legacy with life insurance for a surviving spouse or partner or your children can empower you to enjoy a more financially comfortable retirement. Permanent whole life insurance will provide a lasting legacy to a surviving spouse or partner or younger generation family members. 3 Not all term life insurance products contain conversion privileges to whole life insurance. To determine if your contract has conversion privileges, refer to the specific provisions of your contract or contact your carrier directly. This guide is meant to provide guidance to those customers who have a term product with conversion privileges.

4 4 Adapting to a Changed Economy The economy has changed and so have the strategies that families use to protect their financial futures and achieve financial security. Threats to our financial security will persist, but there are ways to minimize them. New approaches to personal financial planning are essential. We seek new ways to protect what we have and make prudent money decisions in the future. We yearn for certainty in an uncertain world. Therefore, we seek more safety, simplicity, and predictability in our financial lives. Safety involves opting for financial strategies that will protect your financial future. Smart consumers will also prefer to simplify their financial lives, preferring understandable strategies to the complex. Finally, after all we ve been through as a result of the Great Recession and its aftermath, we will prefer more predictability in our financial futures, particularly financial products that offer guarantees. The Important Role of Whole Life Insurance The need to add to resources that will be available later in life or after death has increased as a result of the losses sustained during the recession. Also, families are seeking surer ways to build up their savings either to help pay bills later in life and/or to have something to pass on to heirs. $$$ The premiums on whole life insurance usually remain the same and provide your loved ones with protection throughout your lifetime. Also, the policy builds cash value every year, which can be withdrawn during your lifetime to help pay unexpected bills or meet other financial needs. Term life insurance doesn t always last a lifetime. Certainly, term life insurance will provide dependable coverage for a period of time. Some policies end on a specific date while others continue, but the premiums may increase or the protection may decrease. In these events, when your life insurance expires, you and your loved ones might be vulnerable. Converting from Term to Whole Life is Easy With the conversion provision in many term life policies, you may have an opportunity to expand your coverage in accordance with your changing life circumstances and financial needs. Term life insurance is often initially purchased at a young age because the premium costs are relatively low. Later

5 on, many policyholders decide to upgrade their coverage to whole life insurance to help them meet their long-term needs. While the premiums required to convert will probably increase, you gain the comfort of knowing you will always have life insurance protection so long as you continue paying the premiums. Important facts to consider: When you pay your premium for a whole life policy, a portion of the money goes to buying the policy s death benefit, but some also goes into the cash value account. The policy may also pay dividends that makes the cash value grow as the years go by. You can convert your existing term life insurance to permanent life insurance, regardless of your occupation or health. No medical exam is required. You don t have to convert all of your term life policy into whole life. If you convert a portion of the policy, you may be able to keep the remainder of the term coverage in force, depending on your contract. You should discuss your options with your insurance agent. Of course, if you don t already have a term life insurance policy or you are unable to convert your particular term policy, you can always acquire a whole life policy that will help meet your future insurance needs. For most term life policies, the premiums increase as you get older. However, once you acquire a whole life policy, the premiums are likely to stay the same for the rest of your life. So if you are considering converting from term to whole life, you might save money by converting sooner rather than later. Part of the process of deciding on future life insurance needs is a needs analysis where you consider your family s financial needs in the event of your death. But equally important is deciding how long these needs may last. If the need is for the rest of your life or an indeterminate period, you should consider whole life insurance. Your insurance agent can guide you through this analysis. 5 Converting a term life policy to a whole life policy provides a level of flexibility that will help insure a more secure financial future for your loved ones.

6 6 Advantages of Whole Life Insurance with SBLI of Massachusetts As long as scheduled premiums are paid and there are no loans or withdrawals, the policy cash value will grow over time. Policyholders can borrow from the cash value on a tax-favored basis, but doing so would reduce the cash value and the death benefit, if the loan is not repaid. The increases in cash values are not correlated to the investment markets, and thus can enhance your financial security. With the uncertainty in the job market, owning permanent life insurance provides another layer of protection that could come in handy in the event of job loss. The money earned in the policy is tax deferred, which means that as long as it remains in the policy, you don t pay taxes on it. Moreover, your loved ones don t pay income taxes on the policy s death benefit. Please note: any interest paid as part of a death benefit is taxable, which is the case for all life policies. A Smart Move Converting your term life insurance policy into whole life with SBLI can add an important component to you and your loved ones long-term financial security. Safety Whole life insurance offered by highly rated insurance companies like SBLI provides cash value and death benefit guarantees. Simplicity You are never burdened with future decisions about how to invest the cash value or worries about how the economy will affect your SBLI policy. Predictability With whole life insurance from SBLI you know that the premiums you pay will never increase and the benefits will be there for you and your loved ones, as long as your policy is in good standing with your insurance company.

7 CASE STUDY #1 Change in Family Circumstances Necessitates Permanent Insurance Marcia and Phil Anderson took out level term life insurance policies when their children were very young to provide protection until they graduated from college. When the kids were young, Phil and I followed the common advice at the time to buy low cost, level term life insurance that would last until the younger child reached age 21, at which time the family s life insurance needs should diminish. But, as so often happens, their outlook has changed. Phil notes: We were not out of the woods after the kids got out of college. If either of us died thereafter, we wouldn t have enough coverage to provide adequately for the surviving spouse. So it occurred to us to consider converting a portion of our term insurance policies into whole life. That way, the coverage would last throughout our lives and the cash value could come in handy if we need extra money after we retire. CASE STUDY #2 Looking for Certainty Amidst an Uncertain Investment Environment 7 Many families, including the Siegels, have had to endure financial reversals due to the long recession and slow recovery. Diane Siegel sums it up this way: We ve been hit with losses in our retirement accounts at work, low interest rates on our emergency funds, and stagnant salaries. I have concerns about our financial future, and John and I are looking for ways to provide better security and certainty with our investments. An acquaintance mentioned that converting term insurance into whole life insurance could provide them with both security and certainty. Here s John s read of the situation: We never thought of using life insurance as an investment, but even at our ages it makes a lot of sense. We need life insurance protection because of our financial setbacks. While whole life coverage isn t cheap, our policy has a very attractive cash value buildup. Diane and I are also comforted by the certainty associated with whole life insurance. Other kinds of cash value life insurance don t offer that kind of certainty. Call us old-fashioned, but our days of taking a lot of risk with our investments are over GET-SBLI

8 Why Converting Your Term Insurance Policy into a Whole Life Policy is a Smart Move Whole life insurance has always made good sense as part of a life insurance program, but never so much as in these times of economic and financial uncertainty. I encourage you to speak with your insurance agent or an SBLI representative about if and how you may be able to convert. Jonathan Pond Jonathan Pond is a paid spokesperson for SBLI GET-SBLI