Monday, March 12, 2007

Why Buy Term and Invest the Difference?

Why buying term and investing the difference makes more sense than cash value life insurance?

1) You can afford more protection for lower premiums in the beginning.
2) Most term policies contains provision to continue coverage until age 100.
3) Paying less premiums in the beginning allows you to free up money to save money elsewhere.
4) This enables you to find the right savings vehicle to meet your objective.
5) By keeping insurance and investments separate, you have more flexibility on how to spend your money. You can change your life insurance or your investments without either one of them affecting the other. For example lets say you pay $50/month for $500,000 policy and invest $50/month into a Roth IRA. You can lower your coverage to pay less premiums and invest more money or you can stop investing and get more coverage.
6) You control how and where your money is invested.
7) You maintain full access to your savings and investments.
8) If you die during the level term, your family gets the death benefit and all your savings and investments.
9) If you outlive the level term, you probably won't need as much coverage at this point because you are near retirement. The most logical choice would to pay less premiums and invest more money.

For most families, buying term and investing the difference is the best way to protect the family. Take a look at some of the real life examples below why term insurance is better.

1) Husband dies in a car accident. Prior to meeting him, he had no life insurance. My company gave him a $250,000 policy. His wife and his 2 kids now has $250,000.
2) Husband dies from a brain tumor. Prior to meeting him, he had $150,000 coverage. My company gave him $500,000 coverage. His wife and 4 kids can maintain the same life style, even though the husband is not there anymore.
3) Wife dies from cancer. Prior to meeting her, she had $50,000 coverage. My company gave her $150,000 coverage. Her husband and one child now has $150,000.

I can go on and on of the number of term policies my company paid out. I am thankful to be working at this company and I love that I can help and change people lives for the better. I'm not going to say which company I work at, but many of you can guess which company I represent.