1.) Don’t be intimidated by the fee structure-
The fees associated with life insurance actually decrease over the long term, and can even be considerably less expensive than those charged by an advisor, or a mutual fund. According to an article in Forbes, mutual funds are actually charging on average 2.75% because of trading costs, which don’t have to be reported. In the article, “Busting the Biggest Myth of Modern Finance,” after 20 years, a dividend-paying whole life policy fees equated to what would be a mutual fund with annual fee of .50% in a side by side comparison. As a matter of fact, a mutual fund with a “little” annual 1.5% fee could cost as much as 8 times more than a life insurance policy over time! Don’t let the fees distract you from buying cash value life insurance.
2.) Do consider the “living benefits”-
Many people don’t realize that life insurance can provide access to your death benefit to pay for heart attack, cancer, stroke, Alzheimer’s, and even long term care. Almost 70% of bankruptcies and foreclosures are related to medical expenses. Does your policy provide living benefits protection?
3.) Don’t undervalue yourself and your spouse-
What is your life really worth? Don’t underestimate the full potential of your earnings power. If you have a life insurance policy worth $ 200k, then in essence you are saying that if I die my life was worth only $ 200k! According to numerous statistics, over 58% of the people feel they are under-insured. Furthermore, often there is insurance on the primary bread winner, but nothing on the stay-at-home spouse, who is working just as hard to take care of the family. According to salary.com, the cost to replace someone to take care of child care and other house responsibilities would be over $ 100,000 per year. Also, your spouse runs the same risks of needing “living benefits” protection as well.
4.) Don’t believe in buying term and “investing the rest”-
Mainly because you won’t!! Research has shown that less than 1% of people actually end up investing the rest.
5.) Don’t buy life insurance over the internet-
Most people don’t realize that it doesn’t cost you any more commissions to work with an insurance specialist. With all the products available, and numerous planning possibilities, why wouldn’t you work with someone to design an insurance program that is tailored to meet your specific needs?
6.) Do consider a cash value policy-
Guess who is the largest purchasers of cash value life insurance…banks and corporate America. If it’s good enough for them, then it might be good enough for you to consider. It’s not a short term play, but cash value insurance can increase dramatically over the longer term..10, 15, 20 years. Historically, a equity index universal life policy has averaged as much as 8% a year. It tracks it’s performance against the S&P 500 index, which traditionally has been a good place to consider investing a portion of your money. Also, because of the way the product is designed, it doesn’t lose money if the market goes down. As a matter of fact, during the stock market correction in 2008, it didn’t lose anything! Cash value life insurance can provide tremendous flexibility. It can be used for numerous financial goals such as college planning, retirement, asset protection, and even tax reduction strategies.
Life insurance gets a bad rap, but it stems from a lack of education. It can be a great way to cover a lot of financial bases, provide diversification, and protect you and your family.