If you Google the phrase “life insurance is a bad idea,” you won’t get any true matches. What you will get is “term life insurance is a bad idea” or “whole life insurance is a bad idea.” People don’t disagree with the concept of life insurance; there’s just a lot of discussion over what type of coverage to obtain, and how to use it. To sort through the chatter, most of the issues can be distilled to a discussion of “now” and “later.”

One approach to life insurance is to view it as a costly, but often necessary “evil.” For those with current financial obligations (spouses, children, mortgages, etc.) greater than our assets, life insurance is a necessary purchase. The cost cannot be avoided, only minimized. From this perspective, the best strategy in the present is to find the lowest premiums. For the future, the goal is to accu­mulate enough other assets as fast as possi­ble so that the insurance can be dropped as soon as possible. The only way to stop the ongoing cost of life insurance is to eliminate the need for it, by “self-insuring” through the accumulation of savings. This “get-only-what’s-needed-and-get-rid-of-it” approach to life insurance has some strong adherents in the financial community.

In another perspective on life insurance, the paradigm is reversed. At some point in the future, death is a certainty—for every­one. This makes life insurance unique, be­cause if the policy is kept in force, there will be a benefit distributed to beneficiar­ies; the premiums will result in a long-term financial gain. Even if some of the origi­nal reasons for obtaining life insurance are no longer relevant, the guaranteed dis­tribution at death can provide some valua­ble benefits, perhaps in retirement or part of a larger inheritance and estate planning strategy. However, having an insurance pol­icy that will deliver benefits later usually means paying higher premiums right now for the same amount of coverage.

Besides the now-and-later philosophical differences on life insurance, there are three other now-and-later factors impacting your life insurance decisions:

Your need for insurance. A breadwinner with a spouse and children has some com­pelling reasons to secure a large amount of coverage now, because it represents their long-term economic value to the family.

Your insurability. Obtaining coverage is dependent on one’s health. In general, we are healthier now than we will be in the fu­ture. Waiting to secure coverage at a later date runs the risk of not being able to get it.

Your ability to pay for it. The arc of a typ­ical financial life features peak obligations (student loans, dependents, car payments, mortgages, etc.) at the beginning, with peak earnings in later years. Some items may not be affordable until later in life.

Balancing now and later

The challenge for consumers is deciding how to balance their financial allocations be­tween using them today or committing them to tomorrow. If you want a life insurance pro­gram that will deliver in the future, this almost inevitably requires cash value insurance; the premiums for term simply become prohibitive in old age. But immediate financial obligations cannot be neglected either, so short-term life insurance can be better than no insurance.

Given these considerations, here is a simple now-and-later strategy for life insur­ance:

Obtain as much coverage as possible while in good health, even if the coverage is term.

Systematically convert the term cover­age to permanent coverage over time as fi­nancial circumstances allow.

A life insurance professional who un­derstands the now-and-later issues of both insurance and your unique circumstances should be able to tailor a program to your specific situation. Done right, life insur­ance can be a great financial asset—both now and later.

Elozor Preil is Managing Director at Wealth Adviso­ry Group and Registered Representative and Finan­cial Advisor of Park Avenue Securities LLC (PAS). He can be reached at [email protected]. See www.wa­groupllc.com/epreil for full disclosures and disclaimers. Guardian, its subsidiaries, agents or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.

By Elozor M. Preil