Life Insurance Options When Times are Tough
by Efin Advisor | March 17, 2009
“In hard economic times, investors look for ways to lighten their financial load,” writes life insurance advisor Peter C. Kat in this month’s Journal of Financial Planning.
Affordable life insurance can have a decisive role to play. Instead of buying higher-cost permanent policies that generate cash value, policy buyers can look to much lower-cost term insurance for savings while protecting their families against catastrophic loss. If cash value policies are acquired make sure they are low expense so you can have immediate liquidity if and when you need funds. When savings have amassed in a policy and cash is needed, investors may be able to withdraw or borrow from cash values of permanent policies.
Financial decisions can come under stress in difficult economic times. Yet, decisions about life insurance during such periods are vital to your family’s future. So keep these guidelines in mind. Term life insurance is much more relevant because of its simple, low costs. Low-expense survivorship universal life should be used for term insurance when estate tax liquidity is the problem. Static-priced universal life insurance with low to zero cash values shows its significant weakness when liquidity is needed, and is often rejected for that reason alone. Finally, the amount of early whole life and conventional universal life cash values can be improved by buying low-cost versions.
The Journal of Financial Planning is the official publication of the Financial Planning Association.
This is very interesting. I have been interested in the comparison benefits of permanent vs. Term life insurance. I am concerned that purchasing a term policy now may be good for a while, but will ultimately cost me more than if I invest in a solid permanent policy. I have gotten free rate quotes from a few different sources, and it looks like term is cheaper now, but may increase in a few years. For something as long term as life insurance I want the best solution over my life time- not just right now.
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I have actually found the opposite for some reason. The places that have given me free rate quotes have actually been preferring the permanent plans, maybe as part of their long term strategies coming out of this recession. Maybe someone here can shed some light on the issue. I am 25, single, and healthy- any reasons why I may be finding these anomalies in the system?
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I think more people should learn about the benefits of term life insurance, especially in these tough economic times.
You can usually get alot more life insurance buying a term life plan, than you can for the same money buying permanent life insurance.
And, since most of us save some money by the time we’re 60, you can buy a 30 year term policy and have the protection you need, while you need ti, without paying too much. Then just invest the difference from what you would have paid for a permanent life insuranc epolicy.
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I think one of the best options is term life insurance. It’s cheap and provides protection to people when they need it most–while they’re paying off their home and their children are dependent.
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