Top Reasons For Life Insurance

**FINANCIAL MISTAKE: Selecting an Inappropriate Life Insurance Policy for Your Needs**

**Term Life vs. Permanent Life Insurance**

Choosing the right type of life insurance is crucial and should align with the specific risks you aim to cover. Understanding whether your insurance needs are temporary or permanent is essential.

**Term Insurance** is designed to provide coverage for a specified period, making it a more cost-effective option, especially at younger ages. However, as one ages, it may become increasingly unaffordable. Notably, most term policies do not result in a payout, as individuals often outlive the guaranteed pricing period. Group policies typically see rate increases every five years, while individual policies can offer guaranteed rates for 10, 15, 20, or even 30 years.

Term coverage is best suited for mitigating temporary risks. It is often advisable to consider a blend of term and permanent life insurance to comprehensively address your needs.

Situations where term insurance may be deemed appropriate include:

♦ To settle a mortgage in the event of an owner’s death prior to its full repayment.

♦ To compensate for the lost income of a spouse while raising children or funding their college education.

♦ To safeguard a spouse against the unexpected death of a primary earner before reaching the anticipated retirement age, thereby ensuring that retirement savings remain on track to meet financial goals.

**Permanent Insurance** offers a lifelong coverage option, although some policies may have a maturity date, such as age 95, which could potentially arrive before the individual’s passing. Most permanent policies are designed to accumulate some form of cash value. This cash value feature often allows policyholders the flexibility to take out loans or to withdraw a cash value at some point, although this may result in policy termination.

There are two primary varieties of permanent insurance: Whole Life and Universal Life (commonly referred to as Flexible Premium Life).

**Whole Life insurance** typically represents the more costly option. It guarantees cash value accumulation, and the premiums are generally fixed, assuring they will not increase over time. With fixed universal life insurance policies, there is often the potential for a higher death benefit.

**Universal Life insurance** provides lifelong coverage at a potentially lower cost compared to Whole Life. However, it’s important to approach this option with caution, as some policies may necessitate higher premiums later to maintain coverage. Additionally, premiums are flexible, allowing for adjustments in payment amounts while still securing the same death benefit. Premium projections at the time of policy issuance are determined by:

1. Assumed interest rates applied to policy cash values.

2. Present costs associated with insurance.

Historically, many policies were structured based on lower projected interest rates or insurance costs than what ultimately materialized. Consequently, individuals with universal life policies may face significant premium increases if they maintain their policies over an extended period. In many cases, these policies can be exchanged for products that offer no-lapse guarantees, ensuring premium payments are fixed until at least age 100 or 120.

Do you fully comprehend the details of your life insurance policy? A policy review could be highly advantageous for you.

For a complimentary life insurance quote or policy review, please click here.

Alternatively, you may reach us at 901-754-2040.

*Please note, we are not stock brokers or financial advisors, and do not provide investment advice.

Refer to our Professional Disclaimer for more details.