The fixed premium in whole life insurance gives many people a fear of commitment. But, it doesn’t have to be this way. You need not approach whole life insurance with apprehension. The annual premium is not the massive financial commitment it appears to be.
If buying whole life, don't buy a policy that commits you to 100% of the premium each year it's due.
We’ve discussed paid up additions many times in the past. Even so, I want to hammer home a short but important point. Paid up additions add both financial security and money to your whole life insurance policy.
What I mean by financial security is a distinct lack of commitment.
For any level of monthly income, a lower mortgage payment affords greater financial security. If your mortgage payment consumes less of your income, you have more disposable income. Your finances are more secure.
Minimizing cash flow requirements places your company in a better situation. What is my point? The paid up additions rider on a whole life insurance contract is discretionary.
That’s right. You do not have to pay paid up additions if you don’t want to or can’t at a certain point. If you do not pay the paid up additions, you reduce your total premium in the given year. The only negative impact is less money in the policy. That’s better than facing a possible policy lapse because you missed the premium payment.
There are a multitude of benefits of owning life insurance. But, please heed my warning here. Buy policies that incorporate paid up additions. Avoid situations where you must pay the entire premium or face seriously negative consequences.
The available policy options that afford significant funding flexibility in a cash flow crisis. You will end up with more cash than you would with a regular whole life policy. You will also have greater financial peace of mind. If you face a bump in the road, send a smaller check to the insurance company and carry on.
If you’re still not convinced, we can help with that.
Brandon launched the Insurance Pro Blog in July of 2011 as a project to de-mystify the life insurance industry. A specialist in the design and application of life insurance cash accumulation features, Brandon is one of the foremost authorities on the subject of coordinating life insurance cash values in a financial plan.