Forex Articles

For the majority of people buying life insurance today, term life insurance has become the default option, primarily because it is inexpensive and uncomplicated. People who buy term insurance tend to think in terms of a temporary need for protection, such as when their children are still dependent, after which they can simply cancel the coverage. There is also an assumption that people spend that time accumulating their own capital so that they can eventually self-insure against premature death. If things go as planned, then term insurance was the best option for them. But there is always the possibility that things don't go as planned, and the need for life insurance coverage continues beyond the term of the policy. Depending on the circumstances, term life insurance may turn out to be the worst option. These are three reasons why you may want to avoid term life insurance as a protection vehicle.

When you are young and just starting a family, there may not be much to consider beyond providing enough protection to get the kids through college. For most young parents, a 25-year term policy is sufficient, but there are many circumstances in which the need for insurance may last well into the future.

• You have a special needs child who needs medical and financial assistance.

• Your spouse leaves the workforce and is unable to earn an income at the level needed to support herself.

• You start a business, which requires life insurance to protect the family's interest in the business.

• You expect to inherit a lot of money and need life insurance to protect your estate.

• You expect to carry a mortgage or debt into the later stages of your life.

Life insurance planning needs to include all of life's contingencies based on a family's unique circumstances and a clear vision of what the family wants to achieve. If permanent life insurance is the better option for your life insurance needs, the best time to buy it is when you are young and healthy.

Some people are more at risk of developing health conditions that may prevent them from obtaining life insurance coverage in the future, or the coverage may be prohibitively expensive. For example, if your family has a history of diabetes, there is a higher likelihood of you developing the condition. With a term policy, your insurability is only guaranteed through the end of the term. If you develop a health condition that makes you uninsurable, you cannot get more coverage if you need it. One option is to continue making payments on your term policy, but the insurance premiums eventually become very expensive. With a permanent life insurance policy, your insurability is guaranteed for life as long as you continue to pay the premium.

Many of the same reasons people prefer to buy their homes rather than renting hold true for life insurance. They like the fact that home ownership provides tax benefits, builds equity and, at some point, they will own their houses outright. The same is true for permanent life insurance. Permanent life insurance plans, such as whole life, universal life and variable life policies, afford policyholders several unique tax benefits, such as tax-deferred cash value growth, tax-free access to cash values and tax-free death benefits. Permanent insurance also builds equity. A portion of each premium payment is allocated toward cash value, and with many types of policies, the cash value growth is guaranteed. Some plans pay dividends, which can accelerate cash value growth. Over time the cash value growth may be sufficient to pay the premiums on the policy, so, in essence, you own your policy outright.