Be mindful of the messenger that positions certain products or services as “always” bad or “always” perfect. The fact of the matter is there are no “bad products” or “perfect products”. The right product is one that aligns with your goals and objectives.
The Institute of Financial Wellness believes when it comes to financial decisions; “Never Say Never – Never Say Always…It Depends.” There is a lot of misinformation about permanent life insurance and this article helps clarify when they make sense and when they don’t!
4 Reasons Why it May Make Sense
- Permanent life insurance (properly funded) will not expire like term life insurance and it ensures a death benefit is paid out to a beneficiary. This is essential in various situations. For example, you buy life insurance in lieu of selecting a survivorship benefit on a pension plan, or you require a death benefit to be paid upon the death of someone with a large estate and need the insurance for estate liquidity (funds to pay the estate taxes that might be due). In both these cases a death benefit must be available at some point and term life insurance may expire before the need occurs.
- Certain features or “riders” on a permanent life insurance contract may be very useful. For example, many permanent life insurance policies allow the death benefit to be used while the insured is alive if they need long-term care assistance.
- Permanent life insurance builds cash value that grows tax-deferred and can be accessed for retirement income, college tuition, or other reasons, on a tax-free basis. Moreover, because the cash is being sheltered with an insurance wrapper it may be better than having money in non-qualified accounts that could affect your qualification for certain assistance, like financial aid for college expenses, or prevent your social security from being taxed.
- It is a very efficient way to leave money to your family or favorite charities. The policy acts as a “permission slip” to spend and enjoy all your money in retirement because you made certain you leave a tax-efficient legacy.
4 Things to Consider as to Why it May NOT Make Sense
- The biggest reason permanent life insurance may not be the right fit is that you can not make the premium payments in the early years and canceling it causes large penalties. It is very important not to overcommit on the amount of premium you need to put into the policy.
- You buy the permanent insurance policy in lieu of getting enough term insurance and get less death benefit than you need. If something unforeseen happens (you die while you are still needed to provide for your family) having an inadequate amount of coverage could leave your family in a difficult financial position.
- You “underfund” the policy. Permanent life insurance often has flexible premium payments and while you think you are paying the proper premium and the insurance is certain to be active you don’t realize the policy is likely to lapse in the future because there is not enough money inside the policy to pay the costs of insurance.
- You simply do not understand how the policy works. This is critical because if you start a policy and need to be committed to it for a long period of time it is very important to see the value it provides. If you do not, there is a high likelihood you will not keep up with it and this can cause you to pay penalties and be disappointed.
Remember, be mindful of the messenger that positions certain products or services as “always” bad or “always” perfect. The fact of the matter is there are no “bad products” or “perfect products”. The right product is the one that aligns with your goals and objectives.
The Institute of Financial Wellness believes when it comes to financial decisions; “Never Say Never – Never Say Always…It Depends.” This is certainly true regarding annuities!
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Please remember, be mindful of the messenger that positions certain products or services as “always” bad or “always” perfect. The fact of the matter is there are no “bad products” or “perfect products”. The right product is the one that aligns with your goals and objectives.
The Institute of Financial Wellness believes when it comes to financial decisions; never say “Never” never say “Always”…It Depends.
Rees Bridges brings a unique value to the IFW as both a highly accomplished creative professional and a successful financial services executive to serve in his role as Senior VP, Marketing & Communications.
Over the last decade Rees has served as the lead marketing & communications professional for a Fortune 500 Financial Services firm. He oversaw all advisor marketing strategies, client communications, and the entire firms branding and marketing initiatives.
Rees continues to pursue his passions as a creative professional & musician for over 30 years, with an impressive profile and reputation as a designer, performer, teacher, and studio musician. Here is a little secret: He serves in the role as an international clinician for Mapex drums, Paiste Cymbals and held the record for world’s fastest drummer between 2006 and 2007.
Rees grew up in London, England and currently resides in Miami, Florida. When not at work, he enjoys spending time with family and friends, traveling, and indulging in his passions for music and creative pursuits.
