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Smart Money
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Q. What kind of life insurance should you have? Term, Permanent or Universal Life?
A. This question has been at the center of controversy for decades, and unfortunately, you will not find a definitive answer here. The reason is, the answer to this question is in your heart, not in any textbook or company manual.
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Ask yourself these questions and maybe you will find the answer your looking for:
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Q. Do I want to die with my life insurance in force?
A. If Yes - Permanent, No - Term
Q. Do I want to get some, or all of my premiums back if I ever want to cancel my insurance?
A. If Yes - Permanent, No - Term
Q. Do I need life insurance for more than 15 years?
A. If Yes - Permanent, No - Term
Q. Do I even need life insurance?
A. Remember, life insurance is nothing more than instant estate creation and/or replacement. If you have 2 million dollars cash when you die, half of it will go to the Government. If you're comfortable with the remainder of your money going to your family, then you don't need life insurance. But if you want to replace your estate taxes for your family, then you should have enough insurance to do so. The same goes for the opposite situation, if you have little or no estate to leave behind, yet you have many debts and obligations, you may want to help your family out by having adequate life insurance.
Q. Can you afford to pay the extra costs associated with Permanent or Universal Life insurance policies??
A.? If Yes - Permanent, No - Term
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Q. Are you being advised to buy term and invest the difference by someone who is passionately denouncing cash values?
A. It has been my experience that anyone who only recommends one solution to a problem probably doesn't have the qualifications to adequately fulfill a persons financial concerns. It is true that term insurance is the best solution to some peoples insurance needs, but not everyone's needs are the same.
If someone is trying to fit you into their companies product, instead of fitting the companies products for your personal needs, then I see a big problem with that sort of financial plan.
In my opinion, you can die just fine without any life insurance what so ever. It is your family, or dependents that may want you to be insured. When I sold my first $1 Million policy, I was so excited, I came home and told my wife? I sold a million dollar policy?I was so happy! She was too, after all, I was going to get paid handsomely for the sale. She went to work the next day and told her co-workers that I sold a million dollar policy. One woman piped in ``Nobody needs a million dollars of life insurance." My wife came home that evening and told me what was said. I instantly agreed with my wife's co-worker. Nobody NEEDS a million dollars of life insurance?Just as nobody NEEDS a Caddilac, or a speed boat, or cellular telephone. But people don't always buy just what they need. They buy what they want to have based on what they can afford to have. My client wanted a million dollars of life insurance because he loved his family, wanted them to be financial secure should anything happen to him, and quite frankly, thought he was worth a Million Dollars.
You can generally buy a combination insurance policy, where you have a base amount of permanent insurance with a term insurance rider attached to it. This keeps premiums low and affords a greater flexibility for future changes to your policy. |
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Q. Should I buy Mutual Funds or GIC's?
A. Again, the answer is in your heart. If you are the type of person who has a LOW risk tolerance, then maybe you're? a GIC kind of investor. But if you can ride the highs and lows of the stock market without losing any sleep, then Mutual Funds could be right for you.? Historically, Equity Mutual Funds have outperformed GIC's.
Q. What kind of fees and charges should I expect to pay when buying an investment?
A. Nobody works for free, however, more and more companies are selling No-Load Mutual Funds. Unfortunately, some of these companies charge an application fee to buy a No-Load fund. I think that sort of defeats the purpose of a No-Load fund. Many insurance companies sell No-Load funds without any other fees attached. This is possible because the agents use Mutual Fund sales as a way to offer a full service to there clients. The companies are not interested in making boat loads of money from Asset business sales. Hence you can find some excellent Mutual Funds in Insurance companies without paying fees or charges. (other than the annual Management Expense Ratio witch ALL Mutual Funds have)
Banks charge service fees, redemption fees and offer very little in the way of expert advice. Some Mutual Fund companies are well established, but charge a hefty price to buy into there adequately performing funds.
Brokerage house's offer a wide variety of funds to choose from, but also charge hefty fees or Front and Rear End Loads. |
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