We believe there are four factors that can help guide you in making the right decision when deciding between a term, whole, universal, or variable life insurance policy. Those four factors begin with your plan. A plan is created to determine your appropriate or optimal coverage and protection as well as your management style and quality preferences of the financial product.
A plan consists of your needs, wants, values, and goals. A need is essential to your survival. A want is a desire, but is not essential to your survival. A value is something that is important to you. A goal is something you intend to accomplish.
Coverage is temporary or permanent. Temporary coverage provides short-term protection against loss of principal while permanent coverage provides long-term protection against loss of principal.
Protection includes preservation, conversation, and appreciation. To preserve is to allocate capital to fund principal. To conserve is to manage capital to create principal. To appreciate is to increase principal.
Management is the state of being conservative, moderate, or aggressive towards risk. Being conservative means to minimize the risk of loss of principal. A conservative buyer rejects risk, or is risk-averse, and is most comfortable accepting low returns with high liquidity and stability. Being moderate means to hedge the risk of loss of principal. A moderate buyer accepts risk, or is risk-neutral, and is most comfortable accepting low returns with low liquidity and stability by speculating the use of low volatility financial products. Being aggressive means to maximize the risk of loss of principal. An aggressive buyer accepts risk, or is risk-loving, and is most comfortable accepting high returns with low liquidity and stability by speculating the use of high volatility financial products.
Quality refers the affordability, adjustability, and flexibility of a financial product. An affordable financial product meets your budget constraint. An adjustable financial product provides customization of features and benefits. A flexible financial product accommodates a fluctuating budget.