Whole Life Insurance Denver
Whole Life Insurance Denver
The difference between term and permanent, or denver whole life insurance, is that a term policy is for life coverage only. Once the insured has died, the face amount of the insurance policy is paid to the designated beneficiary. Terms may be bought for periods of 5 to 30 years. Whole life insurance Denver combines a policy with an investment component that may be in the form of bonds, money market tools, or stocks. This type of policy builds cash value over time that can be borrowed against. There are three types of whole life insurance, which are traditional whole life policies, universal and variable. The common factor with whole life and term insurance policies is that the monthly payments will not change as long as the policy is in effect.
Fixed or Adjustable
Premiums for whole life insurance denver are very affordable for persons under the age of 50 who are in decent physical health. For persons over 50, the premiums begin to increase. The same applies to this age group looking to buy whole life insurance; however, it is safe to say that shoppers 60 and over have no choice but to buy a whole life insurance Denver policy. Many insurance companies refuse to sell a term policy to anyone over the age of 65.
Here is a realistic example of the difference between a term policy and a whole life policy.
Samantha is a 35-year-old nonsmoking female who has a choice between a $250,000 whole life policy with a $3,000 annual premium. This policy has renewable term coverage with a 20-year fixed premium of $350. At the end of the first year, the whole life policy, assuming it paid
5.7% annually, tax-deferred, would have a cash value of zero (the cash value is the amount the insured received when the policy has been cancelled). However, let’s say had she instead invested $2,650 (the difference between $3,000 and $350) in a mutual fund that averaged a total return of 10% annually. Samantha would have $2,841 at the end of the first year. That is, when she figures in the accounting for taxes on the earnings at a 28% rate. If she were to continue this over the next decade, Samantha would accumulate more than $46,000 in after-tax savings in the mutual fund. Using the same period, the cash value of her policy would have been less than $32,000.
This is not to imply that whole life insurance is a bad idea. Affluent persons may use whole life insurance Denver when planning their estate by setting up a trust that will pay estate taxes from policy proceeds. People in their 40 or 50s that are starting or have young families, whole life insurance Denver should be seriously considered.
One of the challenges with buying whole life insurance is that it is best to consult a professional that will properly assess lifestyle needs. The reason being is that whole life policies seldom yield a noticeable return unless they are held for at least 20 years. So people needs to understand that in order for this to be a reasonable investment, they should be prepared to make continuous payments for many years.
The key to owning a whole life insurance denver policy is the rate of return, once the fees and charges are subtracted. An unbiased analysis can determine whether the fees and charges configured into a policy has
the potential to allow a decent return. This type of analysis will also present the minimum amount of cash value that a person can gain from a policy at a specific milestone.
A common scenario is a person that has faithfully paid into a whole life insurance denver policy they purchased from a friend-of-a-friend many years ago. However, after much thought, they are having second thoughts and considering switching over to term life insurance because it is cheaper.
Before making any sudden moves, they should first take into account the amount of money invested over the years. They should find out the cash value after fees and taxes before surrendering. At the time of the policy signing, the insured should have received a report, or illustration, that shows the surrender value at a given time. If this is not within immediate reach, they should contact their agent and inquire. It is best to have the facts before making such as drastic decision.
It is common for policies to start building a noticeable cash value by their 12th or 15th year. So cashing in after only 10 years could be a waste of money. The next factor to take into consideration is whether you can still get a reasonable rate by switching to term life. Chances are strong that your medical history will have to be
re-assessed. Persons over the age of 50, smokers, or those with major health issues, may find themselves better off holding on to their old policy. Making a tax-free transfer of the cash value of your old policy is one measure to consider.
If a person were looking for a whole life or a term insurance policy Denver that they plan to keep for at least 20 years, it would not hurt to take a good look at the insurance company. Having an insurer that is still around when the insured has passed on or looking to cancel is vital to their investment. Contacting a business credit agency like Standard & Poor’s or Dunn and Bradstreet is a good start when it comes to a company’s claims-paying ability.
The good news is that it is easy for a consumer to find out the credit worthiness of an insurance company. By using the internet, reports are free or low-cost. While anyone may contact the company directly and inquire, it is best to seek an unbiased resource. It is best to go with an insurer that rates an “A” or better. While some
agencies may use a different letter grading system, the most financially stable insurance companies have an “AAA” rating.
When buying a report, make sure that it is within the last six months and be cautious of ratings found with online quote service, which may be outdated.