This is where boomers and seniors often get confused. The agent who works for a commission is likely to “push” the higher premium permanent life products and there is tremendous sales rhetoric to help them do this. Is this the best kind? It depends.
First lets talk about the general design of the life insurance products: there are basically only two:
Term and permanent.
Term insurance has the following characteristics 1) generally the least expensive, 2)has pricing set for a limited period of years, usually 10, 15, 20 or 30, 3)has no “cash value”, 4) is by design intended to expire after the initial term, 5) is often ‘convertible’ into a permanent plan with no evidence of insurability.
Permanent life insurance has two unique characteristics that distinguish it from all other insurance products. While term insurance is “pure protection” at a cost for a period of time, permanent insurance is 1) first intended to stay in force until you die, and 2) can be designed with an ‘investment component’. The investment component has a number of variations that can be very confusing.
Since it is designed to be permanent, the death benefit has an estate value. This death benefit can be an “asset” that is passed to ones survivors or a charity. Thus, not only is the current protection in force, but can be continued into old age. Older policies ( issued before the 2000’s) would ‘mature’ at age 100 and now with increased life expectancy, many polices can be continued until age 120 and some even state the policy can be maintained under certain conditions, until “death of the insured”. This is different than protection against an unforseen, premature death.
The second aspect that differentiates “permanent” from term is the aspect of the ‘cash value’ and this is where controversy abounds. The original cash value products were simply intended to provide some value after many, many years of premium payment, should the insured choose to surrender the policy. But, in the last 20 or 30 years, the life insurance industry has exploded with the number of products and “investment’ characteristics, styles and features, making a simple comparison of two ‘permanent products’ so complicated that it truly requires a professional to get the facts of the matter. Then to make it even more difficult for the Boomer to accomplish this seemingly simple task, our choice of ‘professionals’ all have some self-interest ‘skin in the game’. The Stock broker wants to promote “buy term and invest the difference” thus allowing more money to be with his firm in the market and most brokers are also insurance licensed, the life agent pushes his product against others; the CPA offers an objective, tax oriented, numbers crunching view, but often is not trained in the nuances of the product and often will charge a hourly fee or refer you to his agent. So the boomer who is concerned with passing assets to future generation, or maintaining life insurance protection into his old age providing income for a surviving spouse at his death to produce the standard of living desired, or who has a permanant policy bought decades ago and feels it is no longer needed, is left with some challenges.
We offer a comprehensive fee based solution to this dilemma with a professional policy evaluation service. company evaluation, product projections and market analysis. We offer all the possible solutions without the sales pressure of a straight commission agent or broker selling their agenda.