Broker Check

Top 10 Roadblocks to Wealth Building: #9 Term Life Insurance

| January 16, 2020

Term life insurance may be an effective way to begin a personal life insurance portfolio. This product allows you to insure your full and complete Human Life Value, which is an essential element of achieving overall Financial Balance®. Term Life Insurance is temporary coverage, designed to protect your todays and provide protection against the possibility of an unexpected death. However, when using this type of life insurance as part of a term and invest the difference wealth building strategy, all factors and costs must be considered.

It’s more common to think of term life insurance as being cheap, but term insurance that you pay for over an extended period of time can end up costing you millions of dollars.

Three costs associated with term life insurance:

  1. The premiums that you pay out of your pocket. If you don’t die, those premiums are gone from your financial picture forever.
  2. The use of money that you lose by having paid those same premiums to begin with.
  3. The most significant and devastating impact of term life insurance ownership is the loss of the death benefit itself.

Lost Opportunity.

The likelihood of a death claim being paid in the first 10 to 20 years of any life insurance policy is very remote. For a male 40 years old, over a 25-year period, there is greater than a 96% likelihood that he will reach age 65. And what that means is that there’s a 96% likelihood that all premiums will be lost. When that happens, when that loss occurs, not only are the premiums gone, but the investment opportunity on those premiums will also be missed. You’ve been taught that you’ll no longer need life insurance at some point and time in the future. There is a common misconception that when your kids are grown and you get to retirement, you can drop your life insurance protection because you’ll no longer need it.

Fact: The best time to own life insurance is while you’re retired.

The presence of life insurance while retired can increase your retirement income as much as 40% per year, every year of your retirement life. Life insurance in retirement allows you to have an improved level of access and enjoyment to your other wealth, such as your savings, investments and 401(k) portfolios. If you know that when you die, your spouse, children, grandchildren and benevolent causes are all taken care of and satisfied (thanks to a life insurance claim being paid) you can then spend your other wealth – both principal and interest.

Term life insurance has a cost.

If you live a long life, term insurance will have long since disappeared. You’ll be left you to bear the cost of premiums, lost opportunity on those premiums, and in the absence of a
death benefit, you’ll have limited availability and access to your nest egg when you retire.

2019-85513 Exp: 9/21