Search Articles
Browse Categories
The Sandwich Generation: Getting the Right Balance
By Brett Dries
Today’s “Sandwich Generation” has a unique financial burden. Many of today’s families not only have to provide for themselves and their children, but also for their aging parents as well. Where is a family to start when building a financial foundation to meet this challenge? Many people would 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 they need 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 a classic 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. And you don’t necessarily have to choose between them.
The Best of Both Worlds
You may be able to blend the affordability of term insurance with the 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 best suits your budget and current needs, while giving you future 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 mean 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 access available cash values by borrowing against them.* This can 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.
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 without cash value accumulation. After taking a close look at all the features and benefits of each, you may find that striking a balance between permanent and term insurance is the most appropriate place for you on the 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 future goals. It’s best to lay a foundation for your family’s future while young. Having an adequate plan in place is key to securing a brighter tomorrow.
*Loans against your policy accrue interest at the current rate and decrease the cash value and death benefit by the amount of the outstanding loan and interest.
Unrated
Comments
- No Comments Found. Submit Comment
|
Article Options |
Share your Opinion and WIN!
Take our quick survey & enter to WIN a gift certificate.