by Archie M. Richards, Jr.
January 15, 2007

Jim writes, "I have a term life insurance policy of $100,000 which has cost me $291 a month for more than 10 years, totaling about $50,000. In September of this year, the premiums will rise to over $3,000 a month - way more than I can afford. I've been diagnosed with prostate cancer that has spread to my bones, and I've been given a life expectancy of about two years.

"Do you know of any insurance company that would provide a decent return on my policy? I'll be 75 in November 2007 and am looking for cash for my wife. If I die before September 2007, she'll receive $100,000. But after September 2007 I'll have to relinquish the policy altogether because it'll be too expensive. When I die after that, my wife will get nothing."

I'm so sorry about your predicament, Jim. You could search for "term life insurance" on the Web and call some of those companies. But I doubt you'll find one willing to issue a policy at an acceptable price. Before agreeing to insure you, the company would find out about your two-year life expectancy. It wouldn't accept the possibility of paying out $100,000 in two or three years when it's received only $400 a month or so in the meantime. Even after three years, the premiums would amount to only $14,400, and the company would then have to pay $100,000, for a loss of about $85,000.

Insurance companies aren't in business to lose money. If they were, none of us could obtain insurance at all.

Here's what I'd do if I were you. Based on the knowledge you and your wife have of your health, the two of you should make the best judgment you can as to whether you're going to survive past September 2007. If the answer is no, keep your current policy.

If the answer is yes, drop the policy now. Then decide how much you can afford to invest. Let's say the answer is $400 a month.

Open an account with the brokerage firm Foliofn. (www.foliofn.com, 888-973-7890) and arrange for the company to withdraw $400 a month from your bank account. Invest it in Vanguard Total Stock Market (VTI), representing almost all publicly-traded U.S. stocks.

If the account grows at 10 percent a year, your wife would have $10,500 in two years and $16,700 in three years.

I may be wrong, of course; the account may lose value instead. But I expect the U.S. stock market in the next two years to grow faster than 10 percent a year. At 15 percent, your wife would have $11,100 in two years and $18,000 in three.

None of these numbers are anything like $100,000. But at least your wife would get something.

Let's say your wife does not approve of your dropping the policy. But you drop it anyway and then die before September 2007. For the rest of her life, she would probably feel resentful about the $100,000 she'd lost.

Therefore, make sure your wife participates in the decision. After all, she's the beneficiary. Perhaps she should make the decision herself.

In matters of life and death, it's important to make the best decision you can and then not look back. If the decision turns out to have been wrong, your wife would just have to say to herself, "I did the best I could. It was the right thing to do at the time. Given what I knew then, I'd make the same decision again."

There's something else that's even more important than money, Jim. I know nothing about your family, of course. But I hope you grow closer to the people you love than you ever have before. I hope you say to them the things you wish you'd said but never did. May your doing these things make this one of the most satisfying years of your life.