“Many people understand life insurance is a “necessary expense” but often overlook the valuable role insurance plays in enhancing their financial security.”- Brian Swerdlow.
By Brian Swerdlow
For many Americans, talking about life insurance is right up there with discussing our hernia surgery or listening to Aunt Mabel drone on about her hydrangeas. It’s not that interesting, and there are many things we’d rather be doing instead of wondering how much life insurance we need. However, no financial product can do more than life insurance to bring you and your family peace of mind when you must protect your financial future.
Having suitable 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 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.” Designed correctly, these policies 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 when you use the cash value in a policy to purchase big-ticket items, such as automobiles, cash-flowing businesses, and even homes.
Term vs. permanent insurance
Many Americans subscribe to what is sometimes called “buy term and invest the difference.” (BTID). The theory says it’s better to buy term insurance than costlier permanent insurance like whole or universal life. You calculate the money you’ll save and then invest that difference in stocks, mutual funds, or other equities. BTID seems like 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.
You can modify cash value whole life or indexed universal life insurance to enhance living benefits. These types of policies are increasingly popular cash management and financing tools. Properly structured, permanent insurance may allow you to skip dealing with 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. It would help if you met with an agent specializing in permanent insurance to discover more.
The bottom line: If you care about protecting your assets as much as possible or want 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 creatively to protect wealth, purchase cash-flowing assets, and leave legacies for their loved ones.
