Determining if Permanent Life Coverage Is Right for You
Unfortunately, far too many Americans fail to prepare for their eventual demise and it's their families that pay the price.
In fact, according to the Life Insurance and Market Research Association, while 85% of consumers agree that they need life insurance, only 62% have purchased a policy.
But buying life insurance can be complicated since there are so many different products - all of them with unique benefits that you need to know about before making a decision.
Permanent life policies include:
- Whole life
- Universal life
- Index-universal life
- Variable life
- Variable-universal life
While each type of policy differs in its details, all provide a death benefit plus cash savings. This makes permanent life insurance an attractive investment for many people, but it's not for everyone.
Before buying a permanent life insurance product, you should consider the following:
Permanent life may be more than you need
If you are single, have no kids or have grown children, you may not want to purchase permanent life and instead consider a term life insurance policy. These policies provide death benefits for a certain number of years and the premium is a lot less.
But, if you are married and have children, and if you have a lot of debt, you may be better off with a permanent life policy. That way, if you should pass away, your dependents would not only receive the death benefits, but also the cash value of the investment portion of your policy.
It's limited as an investment vehicle
The investment options in most permanent life policies are not as extensive and high-yielding as other investment products but hey still have their advantages.
If you want a higher return, you may want to consider buying a term life insurance policy and using the money you save to invest in other investment vehicles.
For example, a $1 million permanent life insurance policy might cost $13,900 a year, while a $1 million 20-year term life insurance policy costs $750.
If you invested the $13,150 difference the first year at 5% and let it grow for 20 years, you'd have $34,492. If you did the same every year, you'd have significantly more.
Its a good investment in the right situation
Your heirs pay taxes on the cash value of your permanent life insurance policy only after your death.
Permanent life insurance can be a useful investment for individuals with high earnings who have maxed out their other tax-deferred savings options.
Additionally, permanent life insurance can be useful for older individuals who don't have much in the way of savings but want to leave a monetary inheritance to their loved ones. Whether you prefer whole life insurance (with a fixed premium), universal life insurance (with adjustable premiums) or variable life insurance (allowing you to choose how the cash value is invested), talk to us about protecting your family from the inevitable today
For more information, feel free to Contact Neptune Financial to schedule an appointment.
Basic Understanding
This blog is being provided for informational or educational purposes only. It does not take into an investment objectives or financial situation of any individual, family, prospect, client, or prospective clients. The information is not written or intended as investment advice and is not a recommendation about managing or investing your retirement savings.
An individual seeking information regarding their investment or retirement needs should contact a financial professional.
Neptune Financial, and their financial professionals do not render tax and legal advice. Please consult your tax and legal advisors regarding your personal tax or legal concerns.
