How to find value in life insurance

A simple definition of value is what you’re willing to pay for something you want.

When it comes to a new jacket or purse or car, doing that math for yourself is pretty straightforward, even if all the features and benefits get glossed over for how cool it looks or how it makes you feel.

Determining the value of life insurance is a little less intuitive. This guide can help.

Price alone, your estimated premium in life insurance lingo, isn’t enough to go by. Here are some deeper questions to explore with your financial professional when comparing policies:

• Do premiums or benefits vary from year to year?

• How much do the benefits build up in the policy over time?

• If it’s a cash value policy, how is growth determined and what is the possible upside opportunity?

• What impact does interest have on growth over time and on loans taken from the policy?

• Is your premium protected from a market downturn?

Remember that no one company offers the lowest cost and the strongest benefits at all ages for all kinds of amounts of insurance. Consider these other factors: 

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How quickly does the cash value grow? 

 

Some policies have low cash values early on that build quickly later. Other policies have a more level cash value build-up. A year-by-year projection of potential values and benefits (called an illustration) can be very helpful. Ask your financial professional to give you a policy summary or illustration that will show the benefits and premiums for selected years.

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Are there special policy features that particularly suit your needs?

 

One policy may have some features you need that a similar policy from another provider does not.

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Ask yourself what you value and what you don’t

 

When it comes to determining what will provide you maximum value, one consideration is to think about what you don’t need. Features and benefits that you don’t think you’ll use are likely going to cost you more than you need to pay.

What is considered a great policy for one customer may not be a perfect fit for the next.

Finally, whatever policy or policies you land on, ask your financial professional how you can customize your coverage with riders (including some and declining others) to get the most bang for your buck.

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