Whole Life May Not be the Answer: Read on
If you’re in the market for life insurance, you may be attracted to whole life policies. These have a cash value that builds tax-deferred each year. But are they worth it?
Here’s a refresher course on some things you should know about life insurance.
Whole life policies – Pros
Essentially, when you purchase whole life insurance, you’re buying a policy that pays a fixed amount upon your death.
However, part of your premium is put into investments by the life insurance company, and that is used to build cash value. That cash value builds tax-deferred for each year you have the policy, meaning you can borrow against it without being taxed.
Because whole life policies offer tax deferral and the ability to borrow funds, some people will argue that these policies are superior to term life policies, which pay a fixed amount upon your death. But that may not be the case.
Whole life policies – Cons
For example, whole life policies may have higher fees than do term life policies. Moreover, the tax-free accumulation of cash isn’t as appealing today as it was when whole life policies first came into existence.
That’s because other tax-deferred investment vehicles – such as individual retirement accounts and 401(k) plans – are readily available. And they may come with lower costs and the benefits of portability.
Simple may work best
Indeed, you may find term life insurance more appealing.
As noted, it has no investment component; you simply pay a premium to buy coverage that lasts for a set period of time or until your death.
It sounds simple, and it is – sometimes simple just works best.
If you’re considering life insurance and you aren’t sure which type of policy to choose, it’s a good idea to consult your advisor, who can walk you through the options and make a recommendation based on your individual circumstances and goals.
Take Control and Reduce the Cost of Prescription Drugs
Americans are spending billions on prescription drugs, but there are ways for individuals to exercise some control over the high cost of taking a pill.
According to a recent article in Fox Business, Americans spent $269.2 billion on prescription drugs in 2011. And as baby boomers age, this is only likely to grow.
There is help: Seniors in the “donut hole”, who are now responsible for paying for their drugs, qualify for discounts-50 percent on brand-name drugs and 14 percent on generic drugs covered by Medicare Part D. As well, the government has implemented a one-time $250 rebate check, but this is a drop in the bucket for many seniors.
Prescription-drug coverage is surprisingly affordable, but it’s important to find a plan appropriate to your circumstances. Plans vary widely, and you need to do your homework. Your insurance professional can suggest a plan that works for your needs.
That said, you too have a role to play in keeping down prescription costs. Here are two suggestions:
Switch to generic drugs: Even though you may get a larger discount on brand-name drugs, the cost of generic drugs is generally lower. In most plans, copayments are also lower for generic drugs, and the result is overall savings.
Shop around for pharmacies: The cost of the same drug varies from pharmacy to pharmacy; let your fingers do the walking. Even easier, mobile phone users can get free apps that compare prices between pharmacies. Free discount cards are also widely available from many sources, including insurers and pharmacies.