Today's "Sandwich Generation" has a unique financial burden. Many families have to provide for themselves and their children, but also for their aging parents as well. How can they possibly make time for both? Will the kids get lost in the mix? How will their retirement savings suffer?
Where can a family to start to build a financial foundation to meet this challenge? Many people agree that life insurance is the first step. But faced with the day-to-day reality of paying the bills, how can a young, growing family get the protection it needs and manage to fit the cost into their budget? Well, the answer may be a matter of getting the right balance.
Permanent vs. Term Insurance? Why Not Both?
For decades, families have struggled with the question: "Should we purchase term insurance or is permanent insurance the better buy?" Term insurance is attractive for its initial lower premiums, while permanent insurance (for example, whole life insurance) offers the benefits of a level, fixed premium and guaranteed cash value accumulation. There's no simple, easy answer because one kind of insurance is not necessarily "better" than the other, and they are certainly not mutually exclusive. Now, you don't necessarily have to choose between them. You can have them both.
The Best of Both Worlds
You may be able to blend the affordability of term insurance with cash value accumulation of permanent insurance. Your agent can talk to you about how you can initially purchase a term policy with a conversion feature - one that lets you "convert" your term policy to permanent, cash value life insurance when it's more affordable for you, often without further evidence of insurability.
You can also purchase a smaller whole life policy and a term policy - with a conversion feature that you can choose to exercise. This allows you to choose a combination that suits your budget and current needs, while giving you more flexibility to meet your changing goals. It's an ideal way to get all the coverage you need and the cash value accumulation you want, at a price that's right for you.
Time Passes, Needs Change
The only thing certain in life is change. Over the years, your family may grow, and you'll want to adjust your plan accordingly. More children means more responsibility, and you'll want to be sure that they're adequately protected. Looking to the future, you'll want to be prepared to help fund far reaching goals such as your children's education, possibly a new home and, eventually, supplement a comfortable retirement. A great advantage of the "package" concept is its flexibility. It can change as you change. The term portion of the plan can be converted into value-building permanent insurance. You can convert it all at once or over time. When fully converted to a permanent plan, you'll take maximum advantage of tax-deferred cash value accumulation. You can generally access these funds on a tax-free basis to help you cover vital needs.* In addition, if your policy is with a mutual insurance company, the permanent insurance may be eligible to earn dividends when declared by the insurer. (Dividends are not guaranteed.) You can use these dividends in a number of ways to enhance your plan. *Loans against your policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.
Your Place on the Spectrum
You can think of your insurance options as a spectrum. On one end is permanent insurance, with its guaranteed protection and cash value accumulation. On the other end is term insurance, which offers financial protection, a lower initial premium, but no cash value accumulation. After taking a closer look at all the features and benefits of each policy, you may find that striking a balance between permanent and term insurance is the most appropriate place for you on the life insurance spectrum.
Lay the Foundation Now
"Don't put off until tomorrow what can be done today," is the old adage. It's true, procrastination can hinder a person's progress towards achieving future goals. It's best to lay a foundation for your family's financial future while young. Having an adequate insurance plan in place can be the key to securing a brighter tomorrow.
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