Term Life Insurance at Best Rates – Making the Decision

A lot of people refrain from buying term life insurance at best rates, despite low premiums because of the lack of returns and low cash value for the money spent on the policy. If you are one of those people who prefer purchasing a permanent policy such as variable universal life insurance or whole life insurance, you need to rethink your decision. When you consider the cumulative costs of expensive policies and compare them with the cash value you receive, you might find reasons to regret your decision.

Term life policy or permanent life policy?

Permanent insurance policies might not actually as rosy as they seem to be. If you probe deeper, you can find several loopholes that make these policies more lucrative to the insurance company and the agent than to you. Buying insurance is not all about making a choice between term life and whole life. It is about buying a policy that satisfies your needs. You need to consider three major factors before you make the final decision.

Identify your needs

Identifying your needs is important because you should not buy a policy that offers coverage that is more or less than your actual requirement. It is not recommended that you buy an expensive whole life policy if the high rates force you to buy low coverage. You should not buy high coverage that you don’t need because term life insurance charges lower rates. In both cases, you receive negative returns.

Before you buy a policy, sit down with a notepad and calculator, decide the optimum amount that your family might need in case something happens to you and stick to that amount when you purchase a policy.

Identify the optimum policy term

This is simple logic. Permanent life insurance policies are expensive because they stretch until the end of your life. Term life insurance policies at best rates are cheap because they cover a limited period of your life and the chances are high that your family will not need the insurance amount.

When you decide the term, you need to think about a very important aspect. Do you need life insurance after you retire? The answer to this question depends on your responsibilities. Are your children likely to be independent? Does your spouse have an alternate source of sustenance? Will you still have loans that need to be repaid? Will your home or property still be mortgaged? Do you have an estate that is valued above $5million for which taxes need to be paid?

If you are likely to be free of responsibilities, there is actually no point buying an expensive permanent life insurance because the money is really not required. You don’t have to think about cash value here. Term life insurance at best rates is adequate if you want the cost of your funeral or other minor expenses covered.

Compare benefits vs. costs and consider term life insurance at best rates

Permanent life insurance offers good cash value because the premiums that you pay are invested and a share of the revenue earned on those investments is transferred to your policy. However, investments are not without risks. So, in case the insurer’s investment fails, the cash value you receive suffers. You might even have to pay additionally to make up for the loss. Permanent policies are always accompanied by lots of fees and expenses.

The costs you incur could end up being much higher than the benefits that you receive. Spending the same amount in a Roth 401 (k) plan could give you more benefits while costing much less. You could buy a cheaper term life policy and use the money for further investments that give you good returns.

So, think about it and make a good choice. Cash value can be a deceptive temptress.