This morning a man awoke to realize he had changed. It was only yesterday he was 28, single with a few grand in the bank and a nice car. Debt free, he lived with his parents and seemed to have the world in the palm of his hands.
This morning he realized he was 53, married with 2 daughters in their 20’s. One had two years left of college, the other had moved back home with her child which was now 2 years old. His mother-in-law had moved in which made 4 generations living under one roof.
He loves his life and realizes it’s time to begin reconsidering his financial plan all over again. When his daughters were young, he purchased a lot of term insurance. In fact, he carried $1 million dollars worth of term. He never purchased whole life insurance because he knew that he would put the difference into the stock market or some other investment which would do better than a whole life insurance policy.
As he reviews the previous plan, he realizes he never quite put the difference between the term insurance and whole life insurance premiums away. What he did put away didn’t earn the interest he had expected. There are many reasons for this…the stock market drop, interest rates were low at the banks, business was also a little slow.
This is what frustrated the man. He knew he could earn about 6% interest on his money if he had purchased a whole life insurance policy way back when. He also knew that if he purchased a whole life policy from the right insurance company it would have been possible to pay whole life insurance premiums for 10 or 15 years; stop ( at least 10 years ago ); and then let the cash dividends pay the premiums for the rest of his life.
But nooooooooo. He sold life insurance for a living. He understood financing. Certainly, he could buy term and invest the difference if anyone could!
Now, I’m going to be completely honest with you. At that time in my life, term insurance was all I could afford. If I could have afforded whole life I would have purchased it. Like the majority of people in our country, I’ve never been a good saver.
Now, here I am at a point in my life where I had hoped to begin slowing things down, but it doesn’t appear t be in God’s plan. If His plan is that my family and I continue to have good health and not a lot of money, I’ll take it. After all, my family would have been in trouble if I had died last night because the million dollar policy is long gone.
Now, it’s time to begin a new plan. You may be wondering, “Will he buy term or whole life this time?”
Actually, I’ll buy both.
The fact has always been and will always be “the only good life insurance policy is one that is in force at the time of your death”. The first rule to buying life insurance, however, is to take care of the need first. In other words, if the family needs $1 million dollars at a person’s death, $1 million of insurance should be purchased. If all one can afford is term, so be it. The person should buy term.
If one can afford $1 million in whole life, and they don’t save well, they should purchase all whole life. However, in my situation, I need to purchase some of each. I need $1 million again, today; and I need to force myself to put money away. Since I cannot afford all whole life insurance at my age, I’ll be smarter this time and mix it up.
The bottom line is “only 5% of the people in this country can live off of their savings”. This was true 30 years ago and it’s still the same today.