From Kiplinger · · 2m
Five questions to ask before you buy life insurance
Life insurance is no longer just a payout after you die, and the questions you ask before buying decide which one you get.
In brief
Life insurance is no longer just a payout after you die, and the questions you ask before buying decide which one you get. Start with what you want the policy to do, then pick the product that does it. Not the other way around. Originally reported by Kiplinger.
Protection was never the whole story
Most Americans still think of life insurance as something that pays out after they're gone. That's true, but it now sits alongside retirement income and wealth transfer.
“That's still true, but it's no longer the whole story.”
11,000 retirees a day
Roughly 11,000 Americans hit retirement age every day, per the Alliance for Lifetime Income by LIMRA, and trillions of dollars are starting to move between generations.
Three questions families now ask
How do I make savings last, how do I fund a longer life, and what do I leave behind? One policy, used well, can touch all three.
Insurers changed the products
Carriers are building policies that are less market-sensitive and more capital-efficient for the owner. Buyers should judge them by the same standard.
Ask what the policy is for
Term covers your family during working years: cheap, simple, often the right first step. Permanent policies like indexed universal life build cash value you may tap later.
“Start with what you want and let the product follow.”
Ask how cash value grows
Some permanent policies tie growth to an index with a floor that limits losses. Others carry direct market exposure. Know how yours behaves in a bad year, not just a good one.
Ask what you get while alive
Many permanent policies let you borrow against or withdraw the cash value. Riders can release part of the death benefit early if you face a chronic or serious illness.
“A life insurance policy is not only for after you're gone.”
Living benefits cost something
Loans and withdrawals shrink the cash value and the death benefit, and can trigger taxes. Make your adviser show you the tradeoff in numbers.
Ask how it fits the plan
Weigh the policy against your 401(k), IRAs and Social Security timing together. It can protect a spouse, cover inheritance taxes, or replace income lost when a partner dies.
Ask what you want to pass on
The death benefit is usually income-tax-free to beneficiaries and arrives when families need it most. Decide what you want to leave, then check the policy is built for it.
“Life insurance has long been one of the most efficient ways to transfer wealth.”
Who is telling you this
The author runs business growth for Prudential Individual Life Insurance. Useful questions, written by someone who sells the answers, so price the advice accordingly.
The one thing
Start with what you want the policy to do, then pick the product that does it. Not the other way around.
