Here’s where you can get a whole helping of my opinion that has grown and matured and reformed and settled since I sold my first whole life policies in 1978.
Both whole life and universal life are meant to be permanent insurance. They are meant to be there until you die because they are covering a need that never goes away. A very simple example of a need that never goes away is burial insurance. It is almost always a whole life policy and should absolutely be guaranteed to be there when it is needed.
A larger example of the need for permanent insurance is an estate preservation policy, a policy designed to provide the money to pay estate taxes. That need is there until the death of the owner of the estate. In the case of a married couple the ownership passes to the surviving spouse when the first one dies. When the surviving spouse dies, taxes come due. This is generally covered by either a whole life or universal life second to die policy. In the absence of insurance, most of what a couple earned and worked for could go to the government and not their heirs.
Generally speaking I think universal life is the better product. It is more affordable and can be guaranteed to stay in force longer than anyone has ever lived. The thing I really like about it and the reason it is more affordable, is that it can be structured to accomplish it’s mission without massive amounts of cash value buildup.
Life insurance building cash value really catches a lot of attention. The instant image for most people is having your cake and eating it too. With very few exceptions, the cost of building that cash value is much too high. In a later blog I will provide some actual scenarios to back up my opinion.
I believe everyone should have some amount of permanent insurance. Call it final expense money. Call it burial insurance. I carry $50,000 of permanent insurance so that, when all the term insurance is gone and we are living on our retirement, if I don’t wake up some morning my wife won’t need to borrow money or liquidate assets until she has had time to put together a plan. I call it bridge money. It builds a safe bridge from my passing to her plan.
I will cover this more later, but when you are looking at permanent insurance, always, always make the agent show you the guarantees in the policy. If it isn’t guaranteed past age 100, send the agent back to the drawing board or find another agent. The last thing you want is a permanent policy that wasn’t guaranteed and believe me, there are plenty of them out there. Millions of policies currently in force are not guaranteed to do what the agent said they would. Make them show you the guarantees.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.