I’ve read thousands of books and articles on financial planning. I’m still stunned at the number of books and articles that mislead people about which type of life insurance they should purchase. Many self-proclaimed experts will tell you to rent your term life insurance instead of buying permanent insurance (cash value).
It’s a simple idea. Is it a smart financial decision to rent or lease your home, car TV, jewelry, furniture or any other item you have for a long time? NO! Many people, even self-proclaimed gurus, agree that it is wiser to have these items. Why? Why? Because renting is often more expensive than buying.
Why do people tell you that you should rent your life insurance? Why is life insurance so different? The answer is simple: life insurance is the same. Contrary to what many people believe, it’s still much better to have your life insurance.
It is important to understand that most people who promote renting life insurance are also trying to convince you to make an investment with them. It isn’t that they don’t believe the things they are promoting, or that they are intentionally misleading you. It just means that everyone has an agenda, even people like me who believe permanent life insurance to be a viable option.
Look. Let’s be real. They want you to believe things that aren’t true. It is even more false today. You have the ability to invest in the new life insurance products today, but you won’t be able to get the tax benefits that permanent life insurance offers.
They may not be telling you many other things. These are just a few examples.
o First, renting insurance is not a way to make more money. You must also invest the difference. This is not often the case in real life. Permanent life insurance is something that many of us only will save when forced to. You don’t have to believe me. Look at the staggering amount of savings people currently put away each year. It is a mere 1% of their income.
o They want you to believe that the stock market can return 12% or more over the next 20-30 years. They are lying to you that this is the greatest stock market period in history. If you look at the history of the stock market, it would seem that an average return of 6% to 7.7% over the next 20-30 years would be extraordinary.
o They are not telling you that properly structured life insurance contracts are one of very few income-tax advantaged products still available. Why? Because cash values in life insurance are tax-deferred, and you can usually get the money out without paying tax. This is a significant advantage.
Let me ask: What if you could buy a properly structured insurance contract that would allow you to purchase the same investments that your broker is selling, but your money would not be taxable? And you could access your money tax free when you most need it: Assuming you have to get life insurance to protect your family, then why rent your life insurance?
Permanent cash value life insurance may be the right plan for you if you’re not saving enough money for your family’s future.