Policy cost and rate of return: We think you could obtain a lower policy cost and higher rate of return with a different company and a specially designed policy. Such a policy would have a very low commission structure (with no more than 20 percent of the commission amount of the policy you have been shown by your agent).

Higher cash values and greater long-term death benefits: You will notice that the first-year cash value in the illustration you have been shown is a very small percentage of the total first-year premium you would pay (in fact, the amount is very often zero). We would suggest a policy with a first-year cash value of at least 50% (it can sometimes be 90% or more) of your first-year premium. Saving this commission will result in a much higher immediate cash value. Reducing commissions produces even more dramatic increases in long-term cash values as well as a significantly greater death benefit. With a policy designed in this way, permanent life insurance is a very attractive investment for those who otherwise want life insurance for more than a short-term need (i.e., 15 years or less).

Financial strength of insurance company: The financial strength ratings of the company that has been proposed to you are reasonably good (with a specific mention of what they are). But there is no reason not to choose a company with all of the top ratings if it has also has a record of delivering superior value to its policyholders and would offer the same or similar underwriting (i.e., health) classification as the policy you are considering.

Amount of insurance: Most suggested guidelines for amounts of life insurance in the financial press tend to understate the need. The recommendation is often just 5 to 7 times of income – without consideration or mention of whether most all of current income would be needed by survivors and for how long. We recommend an amount of insurance that would be sufficient, along with other investment assets, to generate the income (adjusted for inflation) that you would want to provide for surviving dependents. If that income needs to last for a long time, such as for the life of a surviving spouse, while increasing with inflation, a general financial planning rule is that no more than about 5% of capital should be consumed each year. Based on the limited information you provided in our questionnaire about your income and current investment assets, you may want to consider more coverage than would be provided by the policy that has been suggested to you. We can assist with a more detailed needs assessment if you are interested.

In addition to evaluating your total amount of insurance coverage, we can help you think through whether some of it should take the form of term rather than permanent insurance, and, if so, how much and from what company. We are not suggesting that all of your insurance should be in the form of permanent insurance, with its added cost above term insurance for its investment component. But the consideration of insurance – at least insurance purchased to assure adequate support for surviving dependents – is not complete without careful thought to the most important factor – the total coverage needed to sustain dependents if a breadwinner or caregiver is not in the picture.

If you like, please call to discuss our findings and suggestions and the additional ways we can help you obtain the best value from your life insurance premiums.