Life insurance is a bad investment, but investing in life insurance can be a good idea. I know that sounds like double talk. The key is what you do after you decide that you need life insurance.
Let’s say that you decided that you need to buy some life insurance to protect the things you care about. You can choose to pay the lowest available price. Typically, that’s 10 year level term insurance.
That might be a good decision depending on your circumstances. But after 10 years, the cost may go up as a result of you being older. In addition, you might not be in the same health as today.
Federal tax law allows us to “pre-fund” the cost of life insurance to keep the premium level, even if you keep the policy permanently. Many times, you can even pay it faster if you want, as fast as over 7 years.
Why would someone want to pay more?
The extra money that you put into the policy is really saved to pay your premiums in the future. Just because you pay a level premium doesn’t mean that your chances of dying won’t go up over time.
A permanent policy can help to budget the money as a level amount. This is similar to how some power companies allow customers to pay a level bill every month rather than having huge bills in the winter.
There are advantages to saving inside your life insurance policy:
Sometimes, term insurance is the best idea. But sometimes it isn’t. Even if you have a term policy, many of them can be converted to a permanent policy. Check with an agent who can tell you whether you have that option.
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