WhichType Of Life Insurance Policy Is Best For You?
There are basically two types of life insurance…permanent life insurance and term life Insurance. Permanent life insurance is the type of insurance you keep for as long as you live. There are two parts to permanent insurance. There is the saving element, which term life insurance does not have, and there is the death benefit, which term life does have.
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The supporters of permanent insurance suggest that this type of insurance will give you peace of mind because of the cash accumulation feature involved. Term insurance has no cash value…
I will not dispute this with them but I will suggest that, more often than not, you can do much better with your money, that is if you are disciplined enough to save your money yourself and keep it saved until you find a worthy instrument to invest in. A good example is real estate.
There are a couple of life insurance companies, however, whose investment performance over the past 50 years are way above the rest. Their policy owners receive a healthy return on their money…if they own permanent life insurance.
True peace of mind comes from knowing that you were able to accumulate this money for yourself and…you have sufficient term life insurance to protect your family in case of your premature death.
More companies are designing term life insurance policies which you can keep for longer periods of time. You can buy 20 year term policies, 30 year term policies. I even saw one that lasts to age 90.
The supporters of permanent life insurance claim that no other financial instrument by itself can take care of your death benefit needs and also provide a loan value…or collateral value for a loan. There is some truth in that.
They suggest that you cannot miss a premium payment with term insurance whereas with permanent life insurance the loan value can be used to make a missed premium payment. There is some truth in that also.
They suggest if you wish to stop premium payments the accumulated cash value can be used to fund a paid up policy for a reduced amount of insurance. True again.
The cash value can be used to purchase extended term insurance …that is insurance for the full amount for a limited period of time. Also true.
The cash value of a permanent life policy can be used to purchase an annuity which will give you a monthly income for the rest of your life.
All these things are true about permanent life insurance but you can do all these things by investing in say mutual funds if you are disciplined enough to accumulate the cash for yourself. You will more often than not end up with more money than the permanent life policy would have provided.
You will not need a loan if you saved the cash otherwise, you will not miss a premium if you accumulate the cash, you will not stop paying premiums as long as you need this term policy because you will always have ready cash.
There is such a policy as a single premium life insurance policy which is in fact a paid up life insurance policy. You put a lump sum in the insurance company and it just stays there and grows. You also have life insurance built into this policy. You never put anymore money into the insurance company in the form of premiums. This is similar to an annuity but…the death benefit for the single premium policy is considerably more.
If you are disciplined enough to accumulate the money for yourself you can buy your own annuity and accumulate considerable cash through that annuity.
So you be the judge…term life insurance or permanent life insurance. Which is best for you?
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