Buy Term and Invest the Rest – A Failed Theory.
Are you worried that your existing term life insurance policy is expiring without good options?
Maybe you still want and need a policy for your family or business only to find that now the premiums are much higher for a new one? You’re older and your health may not be as good, or both. How much do those things matter – you may be wondering?
If you are unable to upgrade your inforce term policy into something competitive and more permanent, you may have good reason to be concerned about where you go from here. You’re not alone. Millions of people in their 50’s and 60’s are realizing they still need and want life insurance. They feel unsure about the best way forward. As life insurance buyers, you were told you would not need coverage later in life. Maybe you heard the loud chorus echoing these flawed assumptions and drowning out more sensible advice about permanent protection. As a result, too many people bought term policies which are DESIGNED TO LAPSE before you reach life expectancy.
99% of term premiums are wasted - the policies are NOT INFORCE when we reach life expectancy.
There are solutions to consider if you are facing this problem. Time is a factor however, especially when it comes to the possible conversion options expiring in your policy.
Without knowing the future, it is impossible to “time” when our need for life insurance coverage goes away, if that ever really happens. Level term life insurance was typically guaranteed for 20 and 30 years. When you bought the policy in your 30’s or 40’s, you were likely told that term insurance was your best option. It seemed inexpensive because the premiums were low. But it’s designed to be disposable insurance without any value to offset the accumulated premiums.
“Millions of people were sold a theory, not a strategy. They were told they could beat the insurance company by investing the accumulated difference, each year, between the term premium and the premium for permanent coverage. That was a mistake for which life insurance buyers are paying today.”
Can Individuals Beat Insurance Companies?
Insurance companies have billions of dollars to invest while we, as individual investors, are investing much less. The insurance companies also have us beat when it comes to investing expertise and scale that individuals simply cannot match. When you bought term insurance, maybe you were told you wouldn’t need coverage once your kids were on their own or once you were retired. Over the past 25 years, term life insurance has been oversold which has led to a national coverage crisis. Most people past age 40 realize they want protection for life.
Term insurance is an appropriate type of coverage for young people with children who do not yet have the financial resources to pay for permanent protection. Or for anyone that has a short term need for a policy such as bank loans, key-person life insurance in new companies and and divorce agreements. The difference in cost
“Buy term and invest the difference” or “buy term and invest the rest” was a marketing technique that gained awareness through non-insurance professionals like Dave Ramsey, Suzy Orman and thousands of untrained insurance agents who promoted a product when they should have been customizing plans. Ramsey and Orman, still to this day, recommend term insurance for every person. Unfortunately for many, “buy term and invest the rest” proved to be nothing more than theory.
Because nobody invests the difference, they end up in the worst possible position: without coverage AND without “the accumulated difference”. Life insurance is a lifetime need. Ask anyone over 50.
If you would like our help or maybe just a second opinion, please complete the contact form on this page or any page on our site and we’ll be in touch. Or, contact Ted Bernstein at Life Cycle Planners or by email for a complementary consultation. Feel free to call us anytime at 561-869-4500.
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