Try a Life Insurance Combination Approach
Life insurance, like many things in life, comes in many shapes and sizes. Primarily though, there are two types. First is term insurance, which is really “temporary” insurance. It lasts for the length of time that the policy is set for. So if you have a 20 year term, after 20 years, the policy is over, but you have the ability throughout the life of the contract to convert it to a permanent plan.
The second is permanent life insurance. There are several styles of this insurance such as whole life & universal life. The primary difference between the two is that the permanent products build “cash” value inside of them, where term policies are just pure benefit.
Sometimes it’s hard to justify owning term insurance because it’s similar to car insurance, in a way. You have to have car insurance to drive, but what if you’re an excellent driver and you’ve never had an accident your whole life? Well basically, you paid for the coverage but you didn’t need to use it since you didn’t have an accident (or in the case of life insurance, pass away) during that time frame.
Consider a combination approach to life insurance. To justify owning the term, look at the amount of premiums you would have paid for that policy over 20 years. Then consider doing a smaller amount of permanent insurance, to build enough cash value to equal the amount you paid out for the term. In essence, you can justify the fact that while you paid for the term, you basically got that money back in the cash value that was built up into the permanent policy. So it’s as if you got the term for free!
In the end, you can justify the permanent policy not only because it paid for the term over time, but most folks want to make sure they don’t burden their families with funeral expenses. Since you purchased a smaller permanent policy death benefit to begin with, when the term runs out, you’re still left with the face amount that will help your extended family members pay for those funeral expenses.
Clients don’t like feeling insurance “poor”, basically owning too many policies, but in this scenario, you’re actually insurance rich! You used one policy’s cash value to justify the extra coverage you needed earlier in life with the term policy. It seems like a win-win approach.
About the author: Mark Yurkovic has been in the life insurance business for over 12 years, and holds CLTC, LUTCF, and CES designations. He enjoys building remote control boats, and playing instruments including the piano, guitar, banjo, and mandolin. Mark would love to discuss life insurance options and work towards finding the best policy fit for your family. You can contact Mark at 1-800-651-1953 or MYurkovic@Pivot.com.