When considering life insurance people often forget to evaluate it like any other investment. What ‘you get for what you pay’ sometimes is all they focus on. The primary purpose of life insurance is protection at death, but failing to consider the growth of the policy over the years is equally important. This is what makes investing in whole life insurance more of an investment if you consider the potential cash accumulation inside the policy.
Not all life insurance policies are created equal when it comes to cash accumulation over twenty, thirty or more years. Evaluating your life insurance policy like you would your other investments helps you determine which type of policies from various carriers are the best for cash value growth and protection.
A lower premium policy will provide you with death protection coverage but little or no cash value growth and a death benefit that will remain the same throughout the decades the policy is in force provided premiums are paid consistently. But a higher premium policy will generally increase the death benefit and cash value and provide an additional cash resource to use for retirement funding or other purposes. Which policy would you prefer?
Four factors for you to consider before settling on the lower premium policy:
The Cost of Insurance- Is a way of determining the net cost of life insurance for the insured. The total amount the insured gets back from the insurer is deducted from the total amount the insured has paid to the insurer to calculate cost.
The Premium Outlay- Is the payment amount required to maintain the life insurance policy. Premiums can generally be paid annually, semi-annually, quarterly, or monthly.
The Cash Value- Is also called cash surrender value or surrender value, and is the cash amount offered to the policy owner by the issuing life carrier upon cancellation of the contract. The cash value can also be borrowed against to fund other things like retirement or education costs, allowing the policy to stay intact and still provide a death benefit.
The Death Benefit- Is the amount paid to a beneficiary upon the death of the insured. In cash value life insurance, this number should always be increasing as the cash value inside the policy increases.
All of these items are used to compare policies to help evaluate what is the better value for the cost, coverage and cash value accumulation over the life of the policy. Remember that cash value life insurance is an investment in protection and cash accumulation and should reflect in the life insurance illustration. I am here to help you by providing you with life insurance comparisons so you can make an informed decision before you invest in whole, or cash value life insurance.