Term Life Insurance Articles
Coordinating A Life Insurance Policy With A Retirement Account
2012-01-01
Although life insurance is a popular financial product, many buyers don't understand the most effective ways to use their policies when choosing coverage. Life insurance is just that--insurance, not an investment. The most effective way to use a term life insurance policy is to set it up to provide financial protection for a family until a retirement account has a chance to mature, as this will provide overall protection and a balanced and flexible financial plan throughout the life of the policyholder.
The first step is to set up a retirement plan, of course, which will typically mature when the buyer reaches the age of 65, although this is certainly negotiable. After the plan has been set up, the investor should look for a long term life insurance policy that will expire at retirement age. For instance, a 55-year-old buyer will typically choose a 10-year term life insurance policy. Note that if a policy is renewed, rates will rise unless they're guaranteed, as age is an important factor in setting life insurance costs, so it's best to buy a longer policy at first than two shorter policies.
Choosing coverage is an important part of setting up this type of complementary investment system. Although term life insurance policies are relatively inexpensive, it's important to avoid wasting money. Buyers with ample investments will want to buy minimal coverage, while buyers who haven't had any time to develop their portfolios might want more coverage, but it's rarely a good idea to purchase a policy that offers more than a few years' worth of income. Some buyers might even consider policies with payouts that gradually reduce, as these can be easy to coordinate with investment accounts and are typically extremely inexpensive, even by term life insurance standards.
Some buyers wonder whether a universal or whole life insurance policy can provide a substitute for a well-balanced term policy combined with a retirement account. Non-term life insurance policies actually do work as investments, but not necessarily as very good investments. A 401k, IRA or other type of investment account will provide a much better return than either a whole life or a universal policy, so it's well worth taking the time to pick an appropriate amount of coverage and to set up a true retirement account. While choosing coverage can take some time, if done early enough, this strategy can provide the best all-around protection for a family's financial future. Buyers should contact financial advisers if they're not sure which type of investment account to pick and buy a long term insurance policy as soon as possible for a solid all-around approach to retirement.
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Although life insurance is a popular financial product, many buyers don't understand the most effective ways to use their policies when choosing coverage. Life insurance is just that--insurance, not an investment. The most effective way to use a term life insurance policy is to set it up to provide financial protection for a family until a retirement account has a chance to mature, as this will provide overall protection and a balanced and flexible financial plan throughout the life of the policyholder.
The first step is to set up a retirement plan, of course, which will typically mature when the buyer reaches the age of 65, although this is certainly negotiable. After the plan has been set up, the investor should look for a long term life insurance policy that will expire at retirement age. For instance, a 55-year-old buyer will typically choose a 10-year term life insurance policy. Note that if a policy is renewed, rates will rise unless they're guaranteed, as age is an important factor in setting life insurance costs, so it's best to buy a longer policy at first than two shorter policies.
Choosing coverage is an important part of setting up this type of complementary investment system. Although term life insurance policies are relatively inexpensive, it's important to avoid wasting money. Buyers with ample investments will want to buy minimal coverage, while buyers who haven't had any time to develop their portfolios might want more coverage, but it's rarely a good idea to purchase a policy that offers more than a few years' worth of income. Some buyers might even consider policies with payouts that gradually reduce, as these can be easy to coordinate with investment accounts and are typically extremely inexpensive, even by term life insurance standards.
Some buyers wonder whether a universal or whole life insurance policy can provide a substitute for a well-balanced term policy combined with a retirement account. Non-term life insurance policies actually do work as investments, but not necessarily as very good investments. A 401k, IRA or other type of investment account will provide a much better return than either a whole life or a universal policy, so it's well worth taking the time to pick an appropriate amount of coverage and to set up a true retirement account. While choosing coverage can take some time, if done early enough, this strategy can provide the best all-around protection for a family's financial future. Buyers should contact financial advisers if they're not sure which type of investment account to pick and buy a long term insurance policy as soon as possible for a solid all-around approach to retirement.
