The Flexibility of Permanent Life Insurance

2006-07-09

Permanent life insurance is a forced savings vehicle by design. According to statistics, even the most affluent Americans have a tendency to spend first and save later. Esteemed financial advisor John Savage states that 98% of Americans “spend first and save last”. Only 2% of us have a dedicated savings plan. These figures support the old adage that people don’t plan to fail, they simply fail to plan. I have yet to meet a 60 or 70 year old American who had the discipline to buy term and invest the difference. The reality is that many people simply spend the difference. In theory the “buy term and invest the difference” works, but many simply just don’t invest the difference.

By paying monthly premiums on a permanent life insurance policy you are automatically increasing the cash value in the policy while protecting your family from financial disaster in the process. Provisions in permanent life insurance policies allow for the tax free growth of the savings and allow the withdrawal of funds tax free.

Life insurance has also played a major role in estate planning by providing a tax-free way to distribute assets to beneficiaries without paying estate taxes or waiting on probate. Affluent clients have also found that by using life insurance payouts they can pull funds out of their life insurance and postpone taking payouts from tax deferred 401k and IRA plans. By doing this, they postpone having pay costly income, estate and penalty taxes that may be imposed.

Planning your portfolio
When planning your life insurance portfolio, you need to choose a life insurance agent who is experienced in dealing with people in financial situations similar to yours. Each situation is different and if you choose the wrong agent, you could waste hundreds of dollars. Be sure to sit down and fully discuss your needs, product choices, and how the proposal fits into your goals.

When calculating your needs for your family or business, be sure to you and your agent do a comprehensive study of your goals and needs as they relate to bills, retirement income, educational needs, etc. Do not settle for a bland cookie cutter solution. Everyone has different needs and these should be fully discussed and evaluated. If you would like to do a quick needs analysis, feel free to use our online Life Insurance Needs Calculator.

This in no way should be used as a sole solution because it is impossible for us to take every single variable into play. And one missed calculation could be cost you in the long run.

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