Life Insurance Concerns & Myths

Here are a few myths and misnomers.

Buy Term & Invest the Difference: This money motto has been around for over 50 years. It’s based on comparing term life insurance costs to whole life insurance premiums. By subtracting the difference, you have money leftover to invest. But invest in what - market risk investments that are taxable outside ERISA retirement plans? Generally speaking, whole life insurance is a great bond alternative that accumulates tax deferred and is distributed via policy loans tax-free. You could also purchase domestic or foreign indices that have a hedge position against market loss. Today’s cash value life insurance is not your grandfather’s life insurance and “buying term and invest the difference” is an antiquated platitude, which few do. They spend the difference.

Employer Provides Coverage: It’s a great benefit to have, but not a benefit your dependents can live on. Two to three times earnings are almost always inadequate to protect a family. Employer coverage is a good start but not a complete life insurance plan.

Life Insurance is Outside My Belief System: Life happens everyday. But for some people life always happens to others and never to themselves. They somehow imagine themselves immune to the unforeseen tragedies that take place in everyday life. It’s a form of hubris and denial. And if you have those character features in your personality you’re likely to be financially unprepared for the unpredicted and unpleasant experiences of loss in life.

Life Insurance is a Lousy Investment: Compared to what? Like all financial products - there are good and bad. The best cash value life insurance policies in each crediting category have low costs and a good internal rate of return history. This mantra perpetuates a myth that is as old as the hills and dumber than living in the dale.

Life Insurance is Unnecessary When You’re Older: News flash! The fifty-five and older crowd spends more premium that everyone younger combined. And it’s not just final expense insurance. It’s for estate planning. It’s legacy planning. It’s charitable planning. It’s for tax-free income. It’s spousal insurance for the surviving spouse to fill the gap when Social Security benefits are reduced. If you’re older and in good health you can do a lot for those you love with a good life insurance product.

You Have to Die to Win: Yes the tax-free death benefit doesn’t do a thing for you, but it does a lot for everyone you love. It can even create an estate, for very little cost, to perpetuate your family’s prosperity and your charity’s ongoing mission.  You are gone, but others live a better lifestyle because of your passing!