Life Insurance: Can You Afford To Wait?
Critical choices, such as buying a home, getting married or having children requires deliberate and careful consideration. Indeed, the outcome of any one of these choices can irrevocably change your lifestyle for better or worse. But, delaying the decision to purchase life insurance may be an expensive mistake for you and your loved ones. Holding out just a few years can have a negative impact on several key areas of an insurance plan.
Whole Life Insurance: Financial Protection Plus Cash Value Build-Up
In its simplest form, a whole life insurance plan protects the people who rely on you for financial support – no matter what happens to you at any time. Aside from providing money to your loved ones to replace your earnings, a whole life insurance plan also offers guaranteed* cash value build up on a tax-deferred basis, provided that the plan remains in force. If available, cash value may be borrowed against to fund a son or daughter’s education, supplement your retirement earnings, or meet an emergency cash need. Keep in mind, policy loans accrue interest at the current variable loan interest rate and they reduce the complete cash value and complete death benefit by the amount of the outstanding loan and acquired interest on the loan. However these loans do not need to get paid back. In this case, the accrued loan value and interest will instead be taken out of the death benefit at your death.
The Effects of Waiting.
Since a portion of the rates paid builds up cash value each year, over the long run, cash value build-up can be considerably significant, especially since this cash value grows tax deferred. In most cases, the sooner you start paying policy premiums, the faster your cash value may grow.
A whole life policy is also qualified to obtain dividends, if and when announced by the company. Unlike cash values, there is no guarantee of dividends. In addition, past returns are not a sign of future returns. As a plan holder, you have several choices for the use of your dividends. For example, you can take dividend withdrawals in cash or apply the dividend returns to add more insurance coverage through the buying of paid-up additional life insurance. Paid-up insurance is also qualified for dividend returns, has cash value and requires no extra rates. Other dividend payment alternatives may be available. So, waiting to purchase insurance in this case can cost you the opportunity to increase the death benefit paid to your surviving family members.
Although you’re healthy now, you decide to delay buying a whole life insurance plan for five years. In five years, you may suffer an unexpected health occurrence, which may place your insurability in danger. In the worst-case scenario, if you were to die in the next five decades, the price of waiting would be the loss of death benefit your loved ones would not obtain.
Remember, buying a life insurance is a major choice. So, it’s important to take the time to gather all the necessary information and choose the protection that best suits your needs. While the choice is up to you, keep in mind that delaying your choice can prove to be expensive.
*Guarantees backed by the claims paying ability of the company.