If there’s one thing the ongoing economic crisis has taught consumers, it’s the importance of emergency cash reserves. But it can be difficult for consumers to justify setting aside cash when so many routine expenses come their way. Some insurance companies have decided that the best way to sell life insurance is to promote the dual benefit of the whole-life or permanent plans – survivors get a payout as a death benefit and plan holders can tap the funds to cover cash emergencies.
Currently, 63% of consumers have life insurance. Some policy holders have purchased term life insurance. These plans pay out only if the holder dies during the ‘term’ of the policy. Permanent plans are more complex and can be used as an investment strategy. Depending on the details of the plan, the policy holder may be able to borrow against the amount invested. In other cases, holders can cash in the plan for the total amount invested. The benefits of permanent life insurance plans include:
- Low risk
- Tax advantages – used as another investment angle when 401k limits are reached
- Minimum returns of 3–4% annually
In the past year, demand for whole-life (permanent) policies has increased 6% while term life policy demand has dropped 7%. Industry experts attribute this change to marketing campaigns that have been initiated by Massachusetts Mutual Life Insurance and other large companies.
Some financial planners have always recommended term life insurance to clients because it is a cost-effective way to obtain coverage. But for wealthier consumers and those looking for a better investment strategy, permanent plans are an attractive option. And insurance companies are marketing their offerings and increasing educational campaigns to help consumers understand the differences between types of coverage.[Sources: Life Insurance May Be Untapped Resource in Tough Economic Times. National Association of Insurance Commissioners. 4 Jan. 2012. Web. 13 Jan. 2012; Andriotis, AnnaMaria. Investors Look to Get Whole Through Insurance. Wall Street Journal. 6 Dec. 2011]