Douglas Eze has found that many of his clients didn’t have a clear understanding of just how much life insurance can do for them until he highlighted these key benefits.
The Different Types of Life Insurance
As the founder of Largo Financial Services, Douglas Eze delivers financial advice to clients from many different demographics. Among younger clients, he sees significant confusion over just what life insurance is and the role it can play in a wealth strategy.
Most people who aren’t familiar with life insurance, in general, are probably only thinking about term life insurance. This is an agreement that’s for a set term, whether that’s ten, twenty, or thirty years.
Throughout the term, the insured makes monthly payments to the insurance company. If they were to die during the course of that term, their beneficiary would receive the payout from the insurance. Policies differ, but this is generally in the range of $100,000 to $1,000,000.
The reason that the payments for term life insurance are so low compared to the large payouts is that very few policies lead to claims.
Eze explains that the reason that the payments for term life insurance are so low compared to the large payouts is that very few policies lead to claims. In general, term life insurance is used by young people looking to provide a safety net for their family in the case of an unexpected death.
This means that policyholders are young and healthy and probably won’t die during the term. After the term expires, the policyholder will be able to either renew the policy or convert it to a permanent policy. In the case of renewal, the monthly payments are likely to be much higher because they are now older and quite possibly less healthy as well.
Permanent life insurance policies, on the other hand, do not have a point at which they end. Instead of being only insurance against sudden death, they also serve as an effective savings vehicle with multiple benefits.
Versatile Permanent Life Insurance Policies
Eze says that many of his younger clients haven’t considered that permanent life insurance can be used for so much more than death benefits. He points out that, as a savings vehicle, permanent life insurance has marked advantages over many other investments.
If term life insurance is like leasing, then permanent life insurance is more like owning a house. These policies allow for the insured to build up equity over the course of their life. While the payments are higher than term life insurance, this value doesn’t simply disappear at the end of the term.
Permanent life insurance policyholders don’t have to wait until their death to take advantage of their insurance. Every monthly payment will include a portion that is put towards savings that build interest over time, and this wealth can be leveraged.
Not only does this type of savings provide the same tax-deferred growth as an IRA or 401(k), but they can also be accessed tax-free through loans from the insurance company against the accrued balance. This means that policyholders can take full advantage of the wealth they’ve built in their policy.
These policies have other benefits as savings vehicles as well. They provide competitive interest rates while maintaining liquidity, use, and control. Permanent life insurance policies are exempt from collections by creditors.
Financial Advice That Explores Every Avenue
Eze believes that many financial advisors overlook the potential of permanent life insurance for their clients and that many could benefit from the security and versatility of these policies.
Largo Financial Services is fully licensed to provide services in all 50 states and the District of Columbia. Anyone looking for reliable financial advice can reach out to Douglas Eze today for a free consultation.