Pioneer Financial Consultants - Life Insurance: Term vs Cash Value

We'll get you a weather update at the top of the hour here and thank you to Northwood's Realty for making that possible.

But first, it is Tuesday.

It's past 8.45.

That means it's past time.

We check in with Matt Krieger of Pioneer Financial Consultants.

Good morning, sir.

Good morning, Gray.

How are you doing great?

As always, fine weather means a fine day for me, at least for what's left.

We've got some cold evenings coming up later this week, but we've also got a financial situation that we need to prepare for no matter what that means for each of us.

So we check in with you each Tuesday.

What have you got for us this week, Matt?

Yeah, so this week, Gray, I'd like to talk a little bit about life insurance.

It's a part of your financial picture that's very important that often time gets overlooked.

And also on top of that, September is life insurance awareness month.

So we haven't talked about life insurance in a while.

So I figured we'd talk about that and the difference between term and cash value life insurance.

All right.

Policies.

No, I think that's super.

That makes a lot of sense off the back of that conversation we had last week about retirements.

life insurance seems to go hand in hand with that preparation for the potential future.

Always a topic when you're talking to pioneer financial consultants.

People can go back and listen to that last week's conversation on our website or on your Facebook page, but we'll circle back to that.

Let's talk life insurance.

Yeah,

so which type of life insurance is better for you?

Term or cash value?

Know that insurance buyers have been asking this question for generations.

And I can certainly attest to that, that this comes up in many appointments.

Which type of life insurance is best for a particular person?

And of course, everyone's situation is different.

But when choosing between

these two fundamentally different alternatives, you'll need to think about the amount of coverage you need, the amount of money you can afford to spend, and the length of time you need coverage to

continue.

referred to as peer insurance.

Term policies provide life insurance coverage for a specified period of time.

You can typically buy term insurance for periods ranging anywhere from one year to 30 years, and sometimes longer.

And if you die during that policy period, your beneficiary or beneficiaries receives the policy death benefit.

If you don't die during that term, your beneficiary receives nothing.

And at the end of the specified policy term, your coverage simply ends.

Know that you may be able to renew your policy without a physical exam, but that would be at a much higher premium at that point, again, once that policy ends.

Know that once you reach a certain age, which is usually aged 70 and older, you may find it difficult to get term

insurance coverage, and if you can, the premiums will be very expensive.

There are several variations of term life insurance.

You can buy a level death benefit or a decreasing death benefit with premiums that increase annually or that are leveled for the period of years.

Again, that could be five years, 10 years, 15 years, 30 years, and a lot in between there as well.

So that is term insurance now switching gears to cash value insurance cash value insurance often

called permanent, is often called permanent insurance, and is life insurance that is designated to have you pay a levelized premium throughout your life.

In some cases, you may fund a cash value policy in a way that the cash value can be used in later years to pay future premiums, as long as you continue paying your premiums by whatever means, whether that's cash value or

through the cash value or continuing to pay it out of your checking account.

Cash value life insurance continues throughout your life, regardless of your age or your health.

And as you pay your premiums, a portion of each payment is placed in the cash value account.

During the years of the policy, the cash value payment contribution is a large portion of each premium payment.

And as you get older, the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases.

The cash value continues to grow, tax deferred, as long as the policy is enforced.

You can borrow against the cash value

but unpaid policy loans will reduce the death benefit that your beneficiary will receive.

And if you surrender your policy before you pass away or cancel your coverage, you'll be entitled to receive the cash value minus any loans and surrender charges.

Know that there are many different types of cash value life insurance policies available to you, including whole life, variable life, universal life, and variable universal life.

So those two gray are really the two main types of life insurance.

And on the cash value side, as you can see, there are a lot of different types of cash value policies.

But of course, the next subject is making a choice.

Which one is right for you?

And term insurance coverage typically costs less than cash value insurance coverage when you're younger.

But because the cost of a term policy is based on your age,

the cost may eventually exceed that of cash value if you continue to renew your term policy.

In contrast, these factors are taken into consideration when cash value insurance premiums are set.

And as a result, certain cash value policy premiums typically remain the same throughout the life of the policy.

And in some cases, the choice may be clear.

For instance, your insurance need may be so large

that only the only way you can afford to meet it is by purchasing lower premium term insurance.

Or you may need coverage only for a few years, again, making term insurance the logical choice.

But if you can afford to pay higher premiums and you need long term protection, you may want to at least consider cash value insurance.

And know that in some cases, you may want to have both types of life insurance coverage.

For instance, if you want to have some life insurance at the time of your death, which is a very common discussion that we have, Gray, people do want to leave something for beneficiaries.

And if that's the case, you might consider buying the bulk of your life insurance as term and a smaller portion as cash value.

And when you're

need for life insurance decreases, the term policy would be discontinued, and the cash value policy kept.

It's also possible to buy a term policy that is convertible to a whole life policy later on.

So there's a lot of different variables that are out there gray.

And as you can see, every situation, just like a lot of things in the financial world, is really dependent on your situation.

And there's certainly not a one size fits all.

Right, what I'm hearing is you've got kind of a more simple option, but not necessarily a

as flexible and then you've got a more complex or even expensive option, but even that might not be true and you might want to do both.

And of course that question is going to come to mind, can I afford life insurance?

But that's always should be met with the kind of the same question put differently.

Can you afford not to have life insurance and other end of life care?

I'm sure this is, if I'm coming in to put a will together, for example, I'm thinking this is the natural conversation to follow along with retirement like we were talking about last week.

So all of these together,

that one big reason to talk to pioneer financial consultants like we do every week.

Matt, I'm going to get this archived and we can send it to you so you can put it on your Facebook page.

But how do people get a hold of you if they need more info?

Yeah, so our phone number is

715-748-3231.

And get a hold of Pioneer Financial Consultants sooner rather than later because as with every savings investment and planning, more time is more flexibility no matter what type of life insurance you may be picking.

Matt, thank you so much for making these complex topics simpler.

Absolutely.

Anytime and enjoy the nice weather we have today.

Likewise.

We'll chat with you again next week.

That's Matt Krieger from Pioneer Financial Consultants.

And again, you can listen back to this conversation and our previous conversations in the 98Q podcast section of the website, 98Qcountry.com, and on the Facebook page for Pioneer Financial Consultants, where you'll also find a lot of quality info in that simple posting style that'll naturally lead to the conversations you should be having with yourself.

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