By Gregory L. Hoernschemeyer, CLU
Due to the current COVID-19 environment, recent market challenges, and many of us working out of our homes, we are all a bit more stressed emotionally and perhaps financially. Many of our clients have asked how cash values in their life insurance policies are weathering the storm. Permanent life insurance products have traditionally maintained their value through tough economic times because they are designed with that very goal in mind.
Permanent life insurance can provide peace of mind through tough economic times by providing access to cash values for whatever needs arise: to pay unexpected medical expenses by leveraging an accelerated benefit rider, which provides a portion or all the death benefit prior to passing away. If a client dies, the death benefit provides families financial protection to maintain their standard of living. In difficult economic times like these, permanent life insurance demonstrates its value.
Clients may be wondering, is it too late to buy permanent life insurance and how have the volatile market and global pandemic impacted the life insurance industry? Although we are experiencing turbulent times, it’s never too late to prepare. It is highly unlikely this is the last global health crisis; in recent history we have weathered MERS, swine flu and the avian flu. And we will likely experience another bear market or two along the way. In other words, there’s never a bad time to make permanent life insurance part of your financial plan.
Life insurance can lock in your insurability. If your health declines in the future, you’re protected. Conversely, if your health improves, you may obtain a rate class improvement via re-evaluation.
Cash value growth in a permanent life insurance policy is tax-deferred; your asset grows without an impact on current taxable income. In addition, if you need to access policy cash values in the future, you can do so on a tax-free basis by utilizing withdrawals and loans. Proceeds can be used for multiple needs. For example, to offset debt, pay education costs or supplement retirement income.
Depending on the policy you purchase, many insurance companies offer features that provide early access to the death benefit to help offset the costs of a terminal illness, a chronic illness or long-term care needs. The death benefit provides funds to your family, business or any other beneficiary at the end of your life. This money can be used to offset living expenses, help smoothly transition a business, pay medical bills, pay any taxes due or for any other needs a beneficiary may have.
Life insurance is generally not thought of as an asset; however, it is a unique asset that is vastly different from other assets because of its benefits and features. These benefits and features cannot be replicated by other assets: stocks, bonds, precious metals, real estate, etc. Life insurance is designed to protect your family and business against the many financial challenges that can occur over a lifetime.
Perhaps it’s time to take the next step; it is never too late to prepare for the future.