by North of Boston
I am wondering if I could call upon the wisdom of The Totebag regarding a question I have about my life insurance. I would also be interested in having a general discussion about life insurance. It’s not the most thrilling topic, I know, but it’s one that I imagine is on the minds of many of us.
Like many people, I bought term life insurance before my first child was born. When I was expecting my second child, I increased my coverage (from $700,000 to $1,000,000). There was no in-depth analysis that went into choosing those amounts – I just sort of did a rough, back-of-the-envelope estimate of what seemed sufficient. I am now nine years into a 20-year policy, and happily, I am still alive and well (knock on wood).
My insurance agent called me the other day to point out that my term policy is convertible to permanent (whole-life) insurance for one more year. Not surprisingly, he extolled the virtues of permanent insurance, and encouraged me to consider converting part of my term policy to whole-life
In the past, I would have dismissed this suggestion out of hand. Whole-life insurance is expensive, and I’ve always assumed that the dollars spent on it would be better invested elsewhere. But now I’m wondering whether whole-life insurance could be a decent part of a diversified financial portfolio. My husband and I have significant exposure to equities in our retirement accounts, so maybe the unspectacular-but-steady returns of a whole-life policy might provide a good complement to those investments. Down the road, in our old age, he and I could borrow against the cash value of the policy if we needed to, essentially giving us another source of tax-free retirement funds (in addition to a couple of Roth accounts that we have). If we didn’t end up needing the cash value, we could leave the policy, intact, to our kids.
Is there any merit to these ideas, or are they just the sales pitch of an insurance agent who is looking to earn a big commission?
Totebaggers, would you ever think about adding permanent life insurance as part of your financial portfolio? More generally, what kind of life insurance do you have? How much do you have? What were the factors that you considered in deciding what kind and how much insurance to buy? Do you feel you are adequately insured, or is adding insurance on your to-do list for the new year?