We would probably all agree that if we had the benefit of 20/20 vision hindsight, we may well have done things a little differently. At the same time, you’d be right for thinking it’s good to carry few regrets through life.
For over 32 years I have been advising clients like you about their life insurance. You probably won’t be surprised to hear that every now and again, a client will tell me they are feeling a bit of pressure from the increasing costs of their insurance.
“Peter, I think I’m over-insured.” And I have a response to that. I tell them that in all my years I have never received a single complaint or negative comment after a benefit is paid to the recipient.
The reality is that clients can experience something called “premium creep”. They are feeling burdened by the cost but almost every single one would like to keep their cover.
Let’s face it. Life is full of trade-offs. These clients enjoyed the least expensive of premiums earlier in their lives. You sometimes hear the argument that when people need their life insurance most, that’s when they can afford it the least. At the age of purchasing their cover, they have high debt levels, high dependency, with often young families, and in many cases are living off one income. To ensure they have sufficient cover to meet their family’s needs, usually requires them to use yearly renewable or premiums that increase annually with age. Simply because they provide the highest cover with the smallest premium today.
As you can imagine, as a family’s financial position improves and their children become less dependent, the need for financial protection reduces. It all stands to reason.
That said, if there’s a need to hold onto cover for the longer haul (and there are reasons for this for some people), level premiums may be more suitable or even perhaps a mixture of the two options. Holding a policy until death, whenever that may be, could be a pretty good strategy for passing wealth down to family and fixed or level premiums might be entirely appropriate for this particular purpose as an example.
The message here is that we all need to be clear in our objectives, understand our options and our advisers can be of great assistance in helping to develop a sound plan. And that’s absolutely on the level.