Life Insurance … Is It Time?
Have you been putting it off?
According to the insurance industry group LIMRA and the nonprofit Life Happens, 43% of Americans have no life insurance.1
Why don’t more young adults buy life insurance? Shopping for life insurance may seem confusing, boring, or unnecessary. Yet when you have kids, get married, buy a house or live a lifestyle funded by significant salaries, the need arises.
Finding the right policy may be simpler than you think. There are two basic types of life insurance: term and cash value. Cash value (or “permanent”) life insurance policies offer death benefits and some of the characteristics of an investment – a percentage of the money you spend to fund the policy goes into a savings program. Cash value policies have correspondingly higher premiums than term policies, which give you death benefits only. At first glance, despite these higher premiums, cash value policies may appear to provide a significant advantage over term policies based on the added investment benefits, alone—but, careful analysis reveals that these benefits only begin to tip in the investor’s favor after 10 to 20 years of monetary contributions. Term may be a good choice for young adults because it is relatively inexpensive. But there is an economic downside to term life coverage: if you outlive the term of the policy, you and/or your loved ones get nothing back. Term life policies can be renewed (though many are not) and some can be converted to permanent coverage.2
The key question is: how long do you plan to keep the policy? If you don’t want to pay premiums on an insurance policy for more than 10 years, then term life stands out as the most attractive option. If you are just looking for a short-term hedge against calamity, that’s the whole reason behind term life insurance. If you’re getting into estate planning, then permanent life insurance may prove a better choice.
Confer, compare and contrast. Talk with an investment advisor you trust before plunking down money for a policy. That professional can perform a term-versus-permanent analysis for you and help you weigh per-policy variables.
Citations.
1 – nerdwallet.com/blog/insurance/who-needs-life-insurance/ [1/29/16]
2 – fool.com/insurancecenter/life/life05.htm [8/2/16]
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary.Net Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, The Financial Advisor, The Financial Planner and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Stonecreek is located in Salt Lake City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, and American Fork City in Utah.
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