Three big advantages of having life insurance, in my opinion, are:
1) It provides a fairly quick cash payment to your beneficiaries at a time of great sorrow, stress and financial need.
2) The funds are income tax free and do not have to go through probate.
3) Leaving life insurance speaks from the grave of what a responsible and loving person you were.
Three disadvantages are:
1) You need to keep track of the how many policies you have and let others know where they are at.
2) You need to make sure the insurance company knows your current address. (and bank, if auto withdrawal), or you could lose your policy by missing payments
3) People sometimes do not understand the advantageous features of their own policies.
The advantages of life insurance can be significant if applied correctly to the planning need in behalf of the policy insured’s beneficiaries. The tax advantaged features and the economic leverage of life insurance is unique among financial products. In addition, a TAMRA compliant non modified endowment policy can generate tax free distributions as long as the policy is kept in force for the life of the insured.
The disadvantages of life insurance are zero. As a product, it can be misapplied, misunderstood, but not a disadvantage.
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
Your question, "What are the Advantages and Disadvantages of Life Insurance" is a good starting point of inquiry. However there are several different types of life insurance and some additional options of the kinds of providers.
I would say that the universal advantage that all the types of life insurance have is that they will pay a cash benefit to the beneficiaries of the policy that has a much greater value than it's monetary cost. That is - as long as the policy is in force, and if the policy is a "Universal" life policy that the premiums must have been kept up with the pace of the increasing "cost of insurance". And that's what I hate about "Universal" life policies and would definitely count that as a DISadvantage.
The greatest Advantages all around are achieved with Participating Whole Life policies with Mutual companies. The only thing that could be considered a disadvantage in these policies would be the higher premiums paid compared with Term policies. But that's like comparing carrots to Filet Mignon. WHole life policies carry a much greater benefit (face/death value) than their cost. They also accumulate tax-free Cash Value that may be used, tax-free and even provide an income for retirement years.
Participating Whole Life with Mutual companies are also eligible for Dividends in addition to the Guaranteed tax-free compounding interest paid to the cash value. And as long as the premiums are paid as agreed the policy will never expire. And the premiums will never increase. Also with these participating policies your benefit amount may increase over the life of the policy.
Term and Universal policies do expire and that would be a disadvantage. With Term policies there is never a cash value, and with Universal policies there can be a cash value that grows for a number of years, but then it will usually be devoured by the increasing 'cost of insurance'. All disadvantages.
For more information see https://www.linkedin.com/pulse/what-characteristics-whole-life-insurance-stan-cox-ii?trk=prof-post
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1) It provides a fairly quick cash payment to your beneficiaries at a time of great sorrow, stress and financial need.
2) The funds are income tax free and do not have to go through probate.
3) Leaving life insurance speaks from the grave of what a responsible and loving person you were.
Three disadvantages are:
1) You need to keep track of the how many policies you have and let others know where they are at.
2) You need to make sure the insurance company knows your current address. (and bank, if auto withdrawal), or you could lose your policy by missing payments
3) People sometimes do not understand the advantageous features of their own policies.
The disadvantages of life insurance are zero. As a product, it can be misapplied, misunderstood, but not a disadvantage.
I would say that the universal advantage that all the types of life insurance have is that they will pay a cash benefit to the beneficiaries of the policy that has a much greater value than it's monetary cost. That is - as long as the policy is in force, and if the policy is a "Universal" life policy that the premiums must have been kept up with the pace of the increasing "cost of insurance". And that's what I hate about "Universal" life policies and would definitely count that as a DISadvantage.
The greatest Advantages all around are achieved with Participating Whole Life policies with Mutual companies. The only thing that could be considered a disadvantage in these policies would be the higher premiums paid compared with Term policies. But that's like comparing carrots to Filet Mignon. WHole life policies carry a much greater benefit (face/death value) than their cost. They also accumulate tax-free Cash Value that may be used, tax-free and even provide an income for retirement years.
Participating Whole Life with Mutual companies are also eligible for Dividends in addition to the Guaranteed tax-free compounding interest paid to the cash value. And as long as the premiums are paid as agreed the policy will never expire. And the premiums will never increase. Also with these participating policies your benefit amount may increase over the life of the policy.
Term and Universal policies do expire and that would be a disadvantage. With Term policies there is never a cash value, and with Universal policies there can be a cash value that grows for a number of years, but then it will usually be devoured by the increasing 'cost of insurance'. All disadvantages.
For more information see https://www.linkedin.com/pulse/what-characteristics-whole-life-insurance-stan-cox-ii?trk=prof-post