Permanent life insurance policies CAN level out the high cost of term life insurance in later years. This is accomplished by intentionally overpaying the cost of the insurance in early policy years, premiums that are paid in excess of the true cost of insurance cost build policy cash values. The build up of cash value hedges against the extremely high cost of life insurance at older ages. Your cash values are credited with a competitive rate of interest that is very attractive compared to alternative safe investments, such as bank CD’s. However unlike Bank CD’s, all interest and growth (which is not withdrawn) from a Permanent life insurance contract is tax deferred! Use our power of tax deferral calculator to see how much more money you earn when your interest and growth is tax deferred! Permanent life insurance cash values offer safety, asset management and many other tax advantages.
Not all needs for life insurance are permanent, term life insurance is more suitable in many situations such as income replacement, mortgage cancelation, getting kids through college, etc. Most term life policies increase drastically in later years and are canceled as a result, however there may still be a need for some level of life insurance to remain in effect after the term life has expired. Therefore it is important to evaluate and separate your temporary (Term) and Permanent needs for life insurance, so that you have a proper allocation to each.
In addition many insurance carriers have recently developed permanent life insurance policies that offer LIVING BENEFITS. These policies include ‘Accelerated Benefits’ for Long Term Care and/or Chronic Illness. These policies are designed to pay benefits not only at death, but if funds are needed prior to that time for Long Term Care or Chronic Illness expenses. These policies are becoming the product of choice to fill the need for Long Term Care, as the Traditional Long Term Care insurance industry has been plauged with rate increases and a shrinking market. With a Traditional Long Term Care policy you could pay premium for many years and suddenly die. Unless you purchased a Traditional Long Term Care policy with a ‘Refund of Premium at Death’ rider your premiums would be lost. When you combine a Permanent Life insurance policy with Long Term Care – sometimes referred to as Hybrid policies you have the best of both worlds. If you need Long Term Care you have the funds for it, if you die your beneficiaries receive the death benefit – but in any case someone will get the benefit of all the premiums paid into the policy – guaranteed!