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A Little Known Secret about Life Insurance
Thinking about a life insurance policy is something that a lot of people feel uncomfortable dealing with. After all, death is not a subject matter that most folks want to dwell on. However, a small paradigm shift might make it easier for you to deal with this important subject and take some needed action.
Why Buy Life Insurance?
Although you might get a sense of satisfaction knowing that you're providing a secure standard of living for the people who rely on you now, the policy really isn't for you. The best reason to buy a life insurance policy is that it will take care of the people you love after you're gone. Unless you protect them, their lifestyle can be gone in a heartbeat.
When you buy a life insurance policy you will provide money when they need it the most. And their money will be tax free.
How Does Life Insurance Really Work?
A lot of people are confused about how life insurance actually works and whom they can rely on when it comes to buying what they need.
You've probably run across the phrase "buy term and invest the rest".
This refers to buying a policy that covers you for a specific amount of time. The idea behind the phrase is to that you will take the difference between what these low-cost premiums cost and what you would pay for a whole life policy, and invest it.
The proponents of this philosophy feel that you will no longer need life insurance once you've reached a certain age, maybe 55 to 65 years old. In theory you've done well at your job so you're earning a nice income. The kids should be finished with school and out of the house and you've saved money for retirement. Plus you'll be getting social security.
Looks good on the surface, but there are some problems with this concept.
The biggest problem is that if any one of your streams of income falls apart - as so many people now know can happen - the sense of security you once had can crumble like a house of cards. In addition, life expectancies have increased. Did you know that most life insurance agencies now use 115 years of age as a basis to calculate life insurance premiums?
What happens if you haven't invested well or the market crashes? What happens if inflation takes off and devalues your savings? Do you want to be forced to work at Wal-Mart or Burger King to try to make ends meet? And what will happen when you're gone? Who will take care of your survivors?
Even if you did everything right, when you reach the age that your affordable term policy expires, your spouse will be without coverage that they might need. And, what was once an affordable policy could be a bear to replace.
Let's presume, for a moment, that you bought a quarter of a million pound term life insurance policy when you were 35 years old and, for the next 30 years you paid premiums of about 350 British Pounds per year. If you're still around at 65 (and nowadays the odds are that you will be), you've got a rather unpleasant surprise in store.
At age 66, the annual premium on a BP 250,000 insurance policy can be in excess of ten thousand pounds. And by the time you're 70, it will be more than twice that amount. Do you really think you will pay that amount?
And, even if you invested wisely, your survivor will have to pay capital gains on your investments.
There's got to be a better way, right? And there is.
A Little Known Life Insurance Secret
The little known secret is to buy a universal life insurance policy that comes with a guaranteed death benefit. Your beneficiaries will receive this benefit no matter how the investment side of the program performs. A universal life policy has a higher premium than a term policy, but it is less costly than a whole life policy.
If you look into this option be certain you have an unconditional death benefit guarantee. And, with a policy like this, when you reach 65 years of age you will have the option of cashing the policy in. If you go this route, you will have been covered for the past years and would lose maybe one or two percent of what it actually cost you.
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