Jim Stacherski and his wife, Judy, were childhood sweethearts. When, as a young man, Jim went into the army, he told Judy that he could well be going to serve in Vietnam.
He told Judy that he didn’t want her worrying while he was away, and the relationship was ended. By the time Jim returned from service, Judy was already married.
30 years later, Judy and Jim both having lost their spouses, the phone rang at Mr. Stacherski’s house. It was Judy. The two then met after a three-decades separation, and 30 days later
the childhood sweethearts were married. According to Jim, “It was meant to be.”
After eight years of marriage, Judy had a mammogram and the news was devastating. Judy underwent a double mastectomy and it seemed for a time that all would be well. But the cancer returned. Judy was told that she had two months to live.
The Stacherskis reached out to their insurance agent because Judy was transitioning from her employer-sponsored plan to medicare. Judy had life insurance through a group
policy at work. The insurance agent asked whether this policy featured an accelerated death benefit. Judy, otherwise, would never have known. Most people’s
life contracts do not contain this feature.
The accelerated benefit attribute enabled Judy to use her death benefit to offset the financial devastation threatening the whole family. According to Jim, “If our agent
hadn’t called that option to our attention, I would have had to sell our house immediately. This money made our life together more comfortable. I was able to pay
all the bills, take time off work, and we were able to spend what time we had left together being together.”
Judy had been given two months to live. Jim says that she prayed to God for eight more years, and that is what Judy got. Judy Stacherski died on December 7, 2013. For eight
years the proceeds of a life insurance contract enabled the couple to live comfortably in their own home, for Judy to pass away in her own bed.
For many years the conventional wisdom has been that life insurance contracts ought never be treated as investments. Yet the conventional wisdom, to the extent that it was ever useful, is far from pertinent today. Indeed, it has always been the case that insurance products are only advisable given an individual’s unique circumstances.
The widespread understanding, retailed by financial advisers and CPAs, was that the product of choice in almost every situation is term insurance. Term insurance is like a rental car. It has a certain value for a delimited period of time, but the driver has no ownership rights. The purchaser of a 10-year term insurance policy is covered for some stipulated amount (let’s say $100,000), and if he or she doesn’t die during this ten years, the coverage lapses. The premiums paid during this decade go to the insurance company and that, as “they” say, is that. If the insured passes away during this time, the $100,000 benefit goes to the designated recipient. The insured, generally speaking, receives nothing.
A permanent life insurance policy runs from the date of inception until the death of the insured. It isn’t like a rental car. It is instead like owning a vehicle that actually appreciates in value over time. A fairly typical permanent life contract presently accumulates what is called a “cash value” at 8 % tax-free. This return is roughly equivalent to that for the S & P 500 (7.95%) since its inception in 1957. The difference, of course, is that the life contract’s cash value is not subject to taxation.
If one is going to carry life insurance at all, and it does seem like a good idea in most circumstances, a persuasive argument can be made for a permanent policy. The cash-value feature insures a return of premium that just isn’t available in a term product, lowering substantially the overall cost of the insurance protection. Moreover, in recent years life insurance contracts have been modified in a number of ways that clearly benefit consumers. For instance, there is an “accelerated” feature that permits up to 100% of the death benefit to be made available in the event of a chronic, critical or terminal illness. And it was this feature that saved the Stacherski home and enabled the childhood sweethearts to spend their last years in peace and with dignity.