Rational Analysis

Katt, Peter C.
April 1994
Journal of Financial Planning;Apr94, Vol. 7 Issue 2, p54
Academic Journal
The article focuses on insurance and its various forms. The author talks of term insurance and cash-value life insurance. The author says that the issue of choice between term insurance and cash-value life insurance is a matter of rational analysis. He says that unfortunately many financial planners automatically recommend term insurance to their clients, while most life insurance sales people automatically push cash-value policies. Term insurance provides a death benefit aid and nothing more. There is no policy cash value. Cash-value or permanent life insurance, generates a policy cash value. The cash value is generated because the annual premiums for a permanent policy are, generally five to eight times higher than the initial term-insurance premiums. The author says that there are specific situations where term or cash-value insurance is required, other situations in which one or the other type is preferred and still other situations in which either type is appropriate. The author comments that life insurance should be purchased only to provide family protection, fund buy-sell agreements and serve as an estate planning asset.


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