posted by Chris | Contain your joy as I complete the life insurance topic! I am frequently asked about term insurance vs “permanent” insurance. Permanent insurance policies can be Variable Universal Life (VUL), Universal Life (UL), and Whole Life.
As we discussed last week, term insurance is pure insurance. It is the cheapest type of insurance as it contains no ‘savings’ or ‘cash value’ component. Many pundits on television are quick to tell their viewers that they should always buy term insurance in lieu of permanent insurance and invest the difference.
The difference that they are suggesting that you invest is the cost of premiums of term vs permanent. While it can be a substantial difference, the trick is actually investing the difference. I have found, quite frankly, that most people don’t invest the difference – they spend it on stuff.
The major difference between permanent and term insurance, in my view, is the cash value that is (hopefully) created during the life of a policy. The cash value is designed with the option of “borrowing” it out of the policy with a loan provision. Loan provisions have different nuances within the policies but people use the cash value as a means to finance their retirement.
Variable Universal Life
1. Variable insurance products and mutual funds are sold by prospectus only. Before investing, carefully consider the investment objectives, risks, and charges and expenses of mutual funds and variable insurance products and their underlying variable investment options. This and other information is contained in the prospectuses for mutual funds and variable insurance products and the underlying variable investment options. Obtain these prospectuses from your agent/registered representative or contact the appropriate distributor listed above. You should read the prospectus carefully before investing. Variable Universal Life is not suitable for all investors and before investing should consult their financial advisor.
2. Due to the financial regulators (above), even the mention of Variable Universal Life mandates several more paragraphs of coma inducing disclaimers. Therefore, talk with your planner or search the internet to understand its strengths and weaknesses.
Fixed Universal Life
1. Think of it as life insurance and a savings account in the same place. The insurance company will pay you an interest rate on the funds that are not used to pay the cost of insurance.
2. You have some leeway with your funding of the policy premiums.
Whole Life
1. Think of it as life insurance and a savings account in the same place. The insurance company will pay you an interest rate on the funds that are not used to pay the cost of insurance.
2. A fixed premium is paid on a timetable that you have chosen.
The uses of insurance policies can include asset protection, business planning, estate planning and retirement planning. As mundane a topic as insurance planning can be, please understand that it can has many benefits that you may need to explore with your financial planner or insurance sales person, attorney and your tax advisor.
Insurance may not be exciting – but to your beneficiary it may just be invaluable.
Christopher J. Conner
Certified Financial Planner TM
Certified Fund Specialist
Managing Director
5200 W. Newberry Road E-7
Gainesville, Florida 32607
352-225-3132 (Fax) 352-225-3784
Cell 352-281-4646
A Few Other Posts by Chris:
* Shaken, not Stirred: Thoughts on Market Volatility
* What the Dow Jones Industrial Average Means to You
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Advisory Services offered through Jonathan Roberts Advisory Group.
Securities offered through J.W. Cole Financial, Member FINRA/SIPC
Any statements expressed with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance may not be statements of historical fact and may be "forward looking statements." Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through the use of words such as "expects'", "will," "anticipates," "estimates," "believes," or that by statements indicating certain actions "may," "could," or "might" occur no representations, warranties, or guarantees as to the accuracy or completeness of this information. This is not an offer to purchase or sell securities. Past performance is not an indication of future results.
Thank You . I've lived to 54 years and no one has ever explained that to me . I kinda knew anything from TV was going to be bunk but now I understand . If I only had some money to spend ........
w3ski
Posted by: Henry | July 12, 2008 at 12:14 PM
Yeah, Chris knows his stuff. I ask him questions all the time, and he always has a clear explanation.
Posted by: Deb | July 12, 2008 at 11:15 PM
life insurance can give everyone a piece of mind.It's just a matter of 'building the right and strong barricade' for your family protection and security and preparing for their future.
Posted by: No Medical Exam Term Life | July 15, 2008 at 11:28 PM