10 July 2014 0 Comments

Why buy life insurance if you don’t need it?

shutterstock_112236749Not everyone needs life insurance.  If you are single with no one dependent on your income and your liquid assets are more than sufficient to meet final expenses, then you really don’t have a current need for life insurance.  However, the operative word in that statement is current.  Is it possible that some day there may be a significant other and possibly even children who will suffer if you die prematurely with no life insurance in force?  Is it possible that someday you will want to earmark funds at your death for a particular purpose best accomplished with a life insurance policy?

Even if there is no need today for life insurance and you are currently in good health, you may want to insure your future ability to obtain insurance.  This can be done by purchasing low cost term insurance that is convertible. Term insurance gives you pure death benefit for the duration of the term selected.  The conversion right allows you to exchange that term policy for permanent insurance without providing evidence that you are still insurable.  So, if your term policy was issued with a preferred premium, the permanent policy will also be issued in that premium class even if you have suffered a heart attack or cancer since the term policy was issued.

Some agents might suggest that term is not the best policy for a single person.  Buy permanent insurance, they argue, while you are young and can afford the premium.  I have, in fact, written how Indexed Universal Life is a great alternative to a Roth IRA.  This is true, but the catch is that you must commit to paying a premium over many years for this to work, so if you do decide on this approach, don’t over commit to more premium than you believe you will be able to afford over a 15 year period of time.  If in doubt, start with term and convert as you become surer of your long range financial picture.

The key to making the correct decision is to work with an agent who is not biased toward any particular type of policy and who will take the time to explain all of your options.

Is term insurance offered by AARP a good deal?  That’s what I tackle next.

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