Looking for a life insurance policy? Then, be careful... because life
insurance is difficult to understand. It's easy to be conned into
buying something under false pretenses.
Recently a prominent life insurance company together with several of
its agents paid a huge fine because it permitted the sale of a life
insurance policy disguised as a retirement plan.
Little attention was paid to what a life insurance policy is truly designed to provide.
Life insurance is not an investment for your benefit. It's guaranteed
income tax-free cash paid to someone you designate in the event of your
death.
If you deeply care for someone and want to protect them, then buying a life insurance policy makes sense.
Are you the primary bread winner in your family? Well, your lost income
could have horrible consequences and jeopardize the ability of those
you love to continue to enjoy their standard of living.
The only way to guarantee an immediate replacement of this money is with the intelligent purchase of a life insurance policy.
Notice I didn't say term life insurance, low cost life insurance, or whole life insurance.
Because to your loved ones... this doesn't really matter.
Over the years I've delivered millions of dollars of life insurance benefit to the families of deceased bread winners.
And no one has ever asked me what type of life insurance policy it was. They were just extremely grateful to get the money.
Term is the cheapest, but it's unlikely the death benefit will be paid
since the life insurance policy will probably lapse before you actually
die.
Right now the premium may seem cheap compared with other types. But what happens when you're older?
Term life insurance premiums can be level for a specific number of
years, but when that number of years is up the price will skyrocket to
a point you won't be able or willing to pay.
Whole life insurance provides a lifetime level premium until the policy
is literally paid-up. This could be 10, 20 years ... or when you reach
age 65, 85 or 100.
One type of life insurance policy is not necessarily better than
another. But it's critical you understand what you are buying, how it
works and your net cost.
After all, if the policy isn't in force when you die you have thrown your premium dollars right down a rat hole.
By the way, don't fall for that line about buy term and invest the
difference. Anyone who cons you with this bunch of malarkey doesn't
have a clue how to intelligently evaluate the purchase of life
insurance.
You should consider universal life. This type of policy can guarantee
the death benefit up to age 115... regardless of the performance of the
underlying investment.
Although more expensive then term life insurance, universal life is far less costly than a typical whole life insurance policy.
But be careful because some universal life policies are sold by
focusing on projected interest rates rather than contractual guarantees.
If you are considering the purchase of a whole life insurance policy
from a mutual company that declares annual dividends, ask the agent for
a hypothetical illustration using a dividend forecast at least one
percent less the current rate.
In the past when long-term interest rates were higher, mutual companies credited very handsome dividends to their policies.
But today with long-term rates still depressed, it's unlikely a life insurance policy will perform as illustrated.
In summary, pay close attention to the guarantees of whatever life
insurance policy you decide to buy. Also, make sure you know the credit
rating of the life insurance company.
There is nothing wrong with term life insurance, but understand your
options about converting to a permanent plan. This could be critical if
you become uninsurable before the policy expires.
Remember... you may never get a second chance to make the right decision.
