No Load Life Insurance
Life insurance may not be a popular topic to think about but we must think about our future and that of our loved ones because the unthinkable will happen—eventually. However, life insurance isn’t just unpopular because of what it implies—but also because it is very complicated and there seem to be an unlimited amount of choices. No-load life insurance policies are options to consider but are they worth the additional risk and uncertainty?
Benefits
The big benefit of any no-load life insurance policy is cost-savings. A “load” is essentially a commission earned by an agent or representative. On variable or permanent life insurance policies where you can invest part of the premium into mutual funds or similar investment vehicles, a load or commission may be due when the benefits are finally paid or the policy is cashed-in. While this may add to the expense of the policy and ultimately lower the benefits, there are some very good reasons to consider against saving a few dollars by choosing no-load life insurance policies:
- May purchase inadequate coverage
- May choose wrong type of policy for your particular needs
Coverage
No-load life insurance policies are kind of like the “self-serve” options of the insurance industry. The companies do provide a pre-determined level of customer service for those who purchase no-load policies but there is not the level of advice or consultation that accompanies a policy that has commissions built-in to the premium price. Determining the true amount of coverage you need for you depends upon a number of factors that need considering, including:
- Present income level
- Retirement/investment goals or needs
- Present and predicted financial situation and needs for beneficiaries in the event of death
The biggest fear that many buyers have is not purchasing enough protection for their loved ones but it is prudent not to get more coverage than necessary as this will add undue costs. No-load life insurance policies are very common and many companies offer application/approval processes online. These applications allow buyers to choose the amount of coverage they want but precious little instruction as to how to best determine how much is really needed. However, it is important to note that some insurance companies do offer no-load policies with an excellent level of information and resources available to help a buyer make an informed choice…but remember, the choice will need to be made and it is much easier with some advice from an agent.
Decisions
The type of life insurance policy a buyer chooses is a very difficult choice as there are seemingly an infinite number of possibilities. However, whether loaded or a no-load policy, life insurance buyers have to make a couple of key decisions:
- Is the policy only needed for a short time?
- Will the policy also be used as an investment?
- How much time will be required to manage the policy?
Some people truly only need the lower-costing term life insurance (life insurance for limited amount of time with coverage amount determined by policy-holder) while others would benefit from the investment aspects of a variable policy. The question of which policy would be best for any particular buyer may be answered by a competent agent but this is not an option on most no-load life insurance policies.
Cost
The cost advantages supplied by a no-load plan may outweigh the advantages provided by commissioned policies but only when the buyer is fully-versed and well aware of all the variables associated in making a decision. For those who have done their homework or have already worked in the industry, then a no-load life insurance policy is probably the best choice. For the rest of us, however, the risks associated with getting the wrong type of coverage can outweigh any potential savings.
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