Ask people their opinions about life insurance and you’re bound to receive a varied array of responses. What you’ll hear will range from it being a waste of money, to it being the best long-term investment anyone can make. The truth, as with most money-related issues, is somewhere in between the extremes of cocktail-party opinions. In fact, for some people, coverage doesn’t make financial sense at all, while for others it does indeed represent an excellent way to maintain insurance coverage and a source of savings in one instrument, a life insurance contract.
Like corporate stocks, bonds, precious metals, commodities, and other kinds of assets, the standard insurance policy comes with a set of pros and cons, most of which depend on your particular situation. Review the following advantages and disadvantages, and then consider whether life insurance is worth it and suits your current lifestyle. For the vast majority of working adults, moderate amounts of protection make good monetary sense.
Pro: You Can Sell a Policy for Cash
You can sell a policy via a life settlement for cash and use the money for anything you wish. To understand the details about how these transactions work, review a simple online guide that explains the entire process. Selling is often a great idea for folks who realize they either purchased too much insurance or who no longer need policies after beneficiaries die.
Con: Coverage Can Be Expensive
While term is usually a bargain, based on what you get for the price of premiums, whole life can be pricey. Plus, there are so many variations upon variations of contract types, as well as seemingly endless provisions and add-ons, that it can be a challenge just to decide whether you’re getting a good deal or not when faced with the initial purchase decision. Knowing how to save money on life insurance, in general, will help you ask the right questions and make the best choices for your goals and budget.
Con: It’s Easy to Over-Insure
Young professionals often over-insure or buy far too much coverage based on erroneous estimates or assumptions about future income levels. It’s common for people in their thirties and forties to downsize policies, or sell them outright for cash. For someone who’s 25, for example, it’s nearly impossible to predict income growth for two or three decades into the future. Death benefits are often geared toward income replacement, which make the math problematic at the very least.
Pro: There are Guaranteed Issue Options
If you’re in poor health but want to cover final expenses, and perhaps have a small death benefit left over for loved ones, guaranteed issue life policies can be a convenient option. Expect high prices and a two-year waiting period for coverage to go into effect. But once it does, death benefits can be as high as $35,000, which is more than enough to cover the cost of an average funeral. The guaranteed issue is ideal for older adults who have no other coverage, are ill, and want to remove the financial burden of cremation and funerals by buying a small policy. There are no medical exams and no health questions on the applications, so even if you have a terminal illness, you can still be approved.