One Policy For Life.
“How long do I need life Insurance? Should I buy term insurance or a permanent policy? What happens if I buy term insurance and I need coverage longer than expected? How much coverage do I need?”
These are the most often asked questions by people concerned about their personal life insurance.
“How long do I need life insurance?”
Does your family have sufficient liquidity today to protect your spouse and children? If not, when do you project to have sufficient liquidity or at what point in the future will you feel comfortable without sufficient liquidity? From experience, these points are likely to be further in the future than you project. If you know that your beneficiaries will always need liquidity upon your death, you need a policy with the option to be inforce until you decide, without ever being required to prove good health again.
“What happens if I buy term insurance and I need protection longer?”
It depends on when you realize that you need coverage for a longer period. With term, you must be aware of conversion deadlines or you may be left with nothing but the very worst options when you need it most. Typically, the guaranteed coverage period cannot be extended without current proof of good health.
“Should I buy term insurance or a permanent policy?”
Most people should consider a flexible premium, flexible duration policy with little or no surrender penalties. The amount of premium you pay is based on how long you set the policy to last. For 20 years of protection, the premium will be less than the required premium for the policy to last 30 years. Each year or two, review that decision and adjust the premiums as your goals change. This type of policy gives you the control to change the targeted duration period and the premium.
You can buy a policy with the advantages of term and the benefits of permanent insurance. What you must know to make an informed decision:
- It is likely that you will lapse inforce coverage, both term and permanent, in favor of a better policy. Statistics prove that more than 70% of written policies are lapsed within 10 years. That does not mean your need for coverage disappears or lessens. It simply means that it is in your best interest to own policies allowing you to take advantage of better ones in the short, medium, and long term.
- In a conventional term policy, your policy equity, or cash value is zero.
- In a conventional permanent policy, surrender charges in the early years can levy a penalty equal to or close to paid-in premiums. Upon surrender in the early years, there may be no equity to take with you. Why do people surrender in the early years? Some may find a better policy, with better features and better benefits while others may have a change in needs. You want to own a policy with a high surrender value to premium ratio beginning in year one.
- There are policies you can buy with no surrender charges or very little surrender charges. They are game changers. These policies provide immediate liquidity which grows tax deferred. The surrender value to premium ratio can be as much as 90% of paid-in premiums, as early as year one.
- Policies with no surrender charges offer flexible premiums and can stay inforce until you decide the policy is no longer needed. Depending on how you structure the policy, premiums can be as low as term or as much as a permanent policy, or anywhere in between.
That’s how you win in Life Insurance 2.0.
Ted Bernstein is a third-generation licensed life insurance specialist and nationally recognized industry innovation expert in alternative distribution strategies and life insurance product development with decades of speaking out and advocating for changes on behalf of consumers. He was the first to introduce life insurance without commissions or “no-load” life insurance in the mid-1980s and launch the first fee-based Life Insurance Policy Audit and Review service for trust companies and life insurance fiduciaries. A recent innovation, the Installment Payout Option, is a game-changing innovation. To learn more, visit www.lifeinsuranceconcepts.com or call 561-988-8984.