25 February 2014 0 Comments

Don’t Make This Mistake

Screen Shot 2014-02-25 at 2.28.47 PMDon’t get me wrong; permanent life insurance can be a very important part of an individual’s financial plan.  I own permanent life insurance.  With that said, the most costly mistake people make when it comes to buying life insurance is to buy permanent life insurance prematurely.  If you are young and in your early years of building a career and taking on responsibilities, committing yourself to a substantial premium for permanent life insurance may be premature.

When you buy term insurance the premium charged is only for the risk being assumed by the insurance company.  If you drop the policy, it’s similar to dropping your car insurance; nothing is lost.  Oh yes, longer duration term overcharges in the early years to allow for a level premium that undercharges in the later years.  But, that is nothing compared to the early overcharge in a policy that not only levels the premium over your lifetime, but also builds cash value.  Cash accumulation in permanent policies may look attractive, but unless you keep paying your premium every year for at least 15 years you might take a big hit!

When you commit to a premium for permanent life insurance that appears affordable at the time, but that you later discontinue as it takes a back seat to other obligations, it can be very costly.  Even when you have the ability to continue with the planned premium, so often another agent comes along who convinces you that his plan is much better.  So, you drop one policy and start another.  That’s another potential way to lose.

If you are in your early earning years, looking to provide security for a family, start with term.  Wait a few years to better assess your earning potential and to determine the correct amount of life insurance needed.  Buy term; it will give you the amount you need and will guarantee your future insurability.  When you get to a point of financial stability and are planning for the years leading into retirement, you can consider converting some of your term to a permanent plan of insurance.

In my opening paragraph I said the premature purchase of permanent life insurance was the most costly mistake people make.  I was wrong.  Not protecting your family with any life insurance is the most costly mistake.  Have you made that mistake?  Isn’t it time you did something about it?

Next…the secret way life insurance companies make money.

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