Do you love someone enough to spend your hard earned dollars on a life insurance premium — month after month?
Because the real benefit of a life insurance policy isn’t for you. It’s for those you love… but after you’ve gone.
Life insurance is money paid to those who rely on you right now to provide a secure standard of living. They can lose this in a heartbeat.
Life insurance is money when needed the most… with no income tax or publicity.
Buying a life insurance policy is challenging because it isn’t an easy subject matter to begin with.
Most people get confused about how it works and whom they can trust enough to make the purchase.
And there’s a large number of companies and sales agents all clamoring for your attention.
This article will help to clarify a huge misconception about term life insurance. Also, I’ll introduce you to what many knowledgable professionals consider to be the best kept secret in a life insurance policy.
Buy term and invest the difference is a phrase touted by those … including many life insurance agents … who have absolutely no idea how much harm it’s implementation can cause.
The principle theory is you no longer need life insurance when you reach a certain age such as 55, 60 or 65.
Supposedly your kids have finished school and are doing just fine earning their own income. And you and your spouse are living comfortably on retirement savings and social security.
On the surface and to the naive, this might appear reasonable.
Now, it’s easy to pick apart this hypothesis, but let’s focus instead on the real problem with this scenario.
We are living longer than ever before. We may not be enjoying it very much due to poor health but, nevertheless, we’re hanging on.
Life insurance companies know this better than anyone. In fact, most of them now use age 115 has a factor when calculating life insurance policy premiums.
You hear about retirees who are forced to find work at McDonald’s or Wal-Mart. Have you ever joined a seniors chat room on the Internet and witnessed the concerns most of them have about running out of money before they die?
Many of these seniors are frightened to death. And what about the millions of babyboomers right behind them.
An intelligently purchased life insurance policy can be the saving grace for those you love the most.
Now, let me set the record straight. I have nothing against term life insurance. For over 24 years I’ve personally sold millions of dollars worth.
What bothers me … and what I believe to be criminal … is when term life insurance is sold under false pretenses.
Let’s use a simple example.
A 35 year old nonsmoking male in excellent health can buy a $500,000 term life insurance policy for about $700 per year.
The premium is guaranteed to be $700 for 30 years. Some companies will be a little cheaper and some a little more expensive.
The buy term and invest the difference advocate would compare this to a $500,000 whole life insurance policy at $3,650 per year. Once again, some companies will be higher and some lower.
Theoretically, you have $2,950 to invest each year for 30 years. I say theoretically because in the real world you would never consistently invest $2,950 each year.
Not the same way you would commit to a life insurance policy premium.
How do I know this? Call it human nature based on lots of experience.
But, let’s give you the benefit of the doubt and say you actually do invest according to this hypothetical plan. What rate of return are you going to make over 30 years? 5% … 8% … 10 percent?
By the way, this question opens up another can of worms. The psychology of investing. But, we’ll save that controversy for another time.
For arguments sake let’s assume you get an 8% compounded rate of return each year for 30 years. This comes to $360,920.41.
Okay… so now you’re 65 years old and you have $360,920.41. But guess what?
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