Whole life insurance looks deceptively simple: It provides coverage for as long as you live, and it guarantees premiums, cash value, and the death benefit. Whole life insurance companies also typically pay dividends every year, which can be applied to premium payments[…]
Life insurance is no stranger to articles talking about their pros and cons. However, a lot of articles talk about permanent life insurance policies. This includes Whole Life.
Whether it’s Whole Life or any other life product there are many myths and misconceptions. The article posted on Forbes goes over those myths and misconceptions in a very unique way. You can find the full article by clicking the link above but here is a summary of the article.
Myth No. 1: Whole Life Policies Do Not Need to be Monitored Due to Their Guarantees
A life policy is a financial instrument. Like any financial instrument, you need to review the policy to see how it’s performing. Don’t leave your financial future to chance.
Myth No. 2 Your Net Outlay Will Remain Level
Following the stewardship in the myth above, make sure you understand how dividends work when used to reduce your premium.
Myth No. 3: Limited Payment Periods Are Always Guaranteed
“While your policy can guarantee the maximum premium required every year, it may not guarantee the number of years of required payments.”
Myth No. 4: Whole Life Insurance Is an Investment or Retirement Plan
I have definitely presented using a permanent life insurance policy as a way to supplement retirement. There are certainly benefits to doing so. However, when the article talks about being wary of sales “schemes” around this concept, it’s troubling.
I do understand the context in which they make the statement. If a life insurance “sales’ person is presenting the options as a retirement account, be wary. Although borrowing money can supplement retirement, it is not the core purpose. It is the main reason why you have “retirement” accounts
Myth No. 5: Policy Loans Are Just Borrowing Your Own Money and Won’t Impact Policy Performance
Just like retirement accounts, the interest earned can change. Whether the insurance company adjusts the interest earn up or down, it could dramatically change the performance of the policy. This goes back to the first myth, you have to review your policy. You need to make sure the policy is staying on track to meet your financial objectives.
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