Talks of CPA About Buying Life Insurance

Monday, October 11, 2010

Talks of CPA About Buying Life Insurance

You mean this kind of life insurance you should buy - and how much life insurance you should buy? Renowned author and CPA Stephen L. Nelson share some tips.

 Not everyone needs life insurance. The first thing to do, make sure you need it. Life insurance is really for family members or other relatives, designed to rely on their income.

Why you should buy life insurance

Purchase life insurance so that when you die, can your family live the same kind of life I now live. Strictly speaking, the life insurance is merely a means to replace their income in their absence. If you have no dependents (eg because you are single) or no income (eg because he is retired), you do not need life insurance. Please note that children rarely need life insurance, and almost never members and others who are not dependent on their income.

Life insurance comes in two flavors

If you need life insurance, you should know who comes in two flavors: long-term care insurance and cash value (also called "life" insurance). Ninety-nine of 100 cases, long-term care.

Life is easy to buy and understanding

Term life insurance life insurance is simple and straightforward. You pay an annual premium, and when you die will be paid a lump sum to the recipients. Term life insurance gets its name because you have to buy insurance for a specified period, eg 5, 10 or 15 (and sometimes more). At the end of the term, you can extend your contract or get another one. The main advantages of long-term care is that it is cheap and easy.

The surrender value is more difficult

The other flavor of life insurance is an insurance value in cash. Many people are attracted by insurance cash value, because it allows the so-called hold a portion of the premiums paid in recent years. Finally, the argument, and life insurance to the 20, 30 or 40, and get some money. Cash-value insurance, part of the bonus money remains in an account that you can borrow or reserve.

Sounds good. The only problem is that cash value insurance is usually not a very good investment, even if it has a policy for years and years. And it is a bad investment if it has a policy of only one or two years. In addition, analysis of a real monetary value insurance, it is necessary to perform sophisticated financial analysis. And it is in fact the biggest problem with the cash value of life insurance.

Although perhaps a handful of insurance policies with a good cash value are available, many, perhaps most, are terrible investments. And tell right from wrong, you need a computer and financial expertise to create something called the discounted cash flows. If you feel you need insurance cash value, it is probably advisable to use a financial planner, this analysis have to do for you. Obviously, the financial planner-someone other than the insurance broker who will sell the policy.

What is the bottom line? Actuarial present value is too complex to be treated for a financial product for most people. Also note that any investment option for tax deductible as a 401 (k), 401 (b), a franchise IRA, September / IRA, or Keogh plan is "still a better investment as part of an investment cash value policy. From these two reasons, I urge you to simplify your finances and increase your net worth for the survival of investment tax deductible.

If you decide to follow my advice and choose a life insurance policy, make sure that your policy is canceled and not renewable. You want a policy that under no circumstances, including the disease can be stopped. (You can not be knowing what is your health like in ten years.) And you want to be able to renew the policy, even if your health deteriorates. (You do not want to go through a medical examination each time is a term and you need to renew.)

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