“While some people understand life insurance as a “necessary expense” others overlook the valuable role insurance plays in creating financial security.”- Brian Swerdlow
For most of us, discussing life insurance ranks right up there with talking about bunion surgery or debating the merits of a high fiber diet. In other words, it’s not that interesting, and there are a ton of things we’d rather be doing instead of wondering how much life insurance we need. Yet, no product can do more than life insurance to bring you and your family peace of mind when it comes to protecting your financial future.
Having the right types of life insurance can help protect your income and assets while you are still working and after you’ve retired. Even if you have a substantial emergency fund, you should still consider having adequate insurance in place to supplement those funds. In addition, life insurance can help you create an instant legacy for your loved ones, provide money for final expenses and pay off your mortgage and other bills.
Some types of insurance, including specially-designed whole life and other permanent insurance such as indexed universal life (IUL), provide what are known as “living benefits.” When these policies are designed appropriately, they will give you fantastic flexibility, use, and control of your wealth and help you create a predictable income stream. An example of a living benefit is the cash value in a policy that may be used to purchase big-ticket items, such as automobiles, cash-flowing businesses, even homes.
Term vs. permanent insurance
Many Americans continue to subscribe to what is sometimes called BTID, or “buy term and invest the difference.” It’s a theory that says it’s better to buy term insurance instead of costlier permanent insurance like whole life or universal life. You calculate the money you’ll save and then invest that difference in stocks, mutual funds, or other equities. BTID seems a sound enough theory. However, in reality, only a fraction of people who take a buy term and invest the difference approach ever invest the difference.
Cash value whole life or indexed universal life insurance may be modified to enhance living benefits, and are increasingly popular cash management and financing tools. Properly structured, these kinds of permanent insurance may allow you to bypass banks and become your own source of financing. For this reason, buying a permanent life insurance policy could be a sound decision, even for younger people. If you want to discover more, you should consult an insurance agent who specializes in this particular type of policy.
The bottom line: If you are someone who cares about protecting your assets as much as possible or who wants to discover alternative ways to grow your money sensibly with less risk, you should look into life insurance. It is a tool that the savviest investors leverage in creative ways to protect wealth, purchase cash-flowing assets, and leave legacies for their loved ones.