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Detailing the drawbacks of permanent life insurance

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Leo Almazora | 06 Feb 2019, 12:21 AM Agree 0
Such policies can make sense, but there are many instances wherein the sales pitch does not suit the customer
  • Sarah Wyse | 06 Feb 2019, 01:21 PM Agree 0
    I do agree with Leo's point that permanent life insurance is not a good fit for everyone. As a certified financial planner for the last 16 years, I see all financial pieces, like investments and insurance, as pieces of puzzle that can fit together to create a whole satisfying picture.

    Simply speaking, term insurance is for temporary need and permanent insurance is for permanent need. Needs are the primary reason for purchasing insurance. For many families, the need does NOT necessarily go away when one retires. To preserve the estate for their loved ones, like my husband and I are doing, we purchase a joint-last-to-die life insurance policy, which is a very economical way to purchase a permanent policy. This will help my children to handle the estate in an orderly manner, as the payout would be tax free. The need will not going away and term insurance will not suit the need.

    Many young professionals are looking at whole life insurance with guaranteed 10 or 20 year premium paying options, as an attractive insurance and saving option. Most insurance companies have dividend paying history going back 100 years. Although not guaranteed, the odds looks far better and smoother than many investment out there. Also, the worst case scenario is no dividend for the year, rather than a negative 40% return. Most insurance companies paid out a dividend every year!! So I think you should take a look. The gain is very attractive as you know exactly how much the premium would be, guaranteed black and white in the policy. I encourage to take a closer look before writing them off. This could indeed be a good long term insurance and saving piece for a young person to consider, depending on their circumstances.

    To clarify, my business encompasses both investment and insurance. My gauge for what kind of insurance to recommend would be based on the following formula: Need + Budget = Solution (assuming good health).

    Thanks for reading and God Bless!
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