As a new couple just setting up house, part of your financial planning process may include the purchase of life insurance. Selecting the type and amount of life insurance to buy depends on your financial situation. The trademarked Adjustable CompLife products from the Northwestern Mutual Life Insurance Company provide a lot of flexibility in a single life insurance product.
Adjustable CompLife insurance allows the combination of whole life and term life insurance in a single policy. Whole life insurance provides lifetime coverage and cash value that builds over time. Term insurance is the lowest cost way to buy life insurance coverage, but the coverage will cease — at the end of the term — at some point in time. The objective with Adjustable CompLife is to use the dividends earned on the whole life portion of the policy to buy paid-up additions of whole life insurance, gradually reducing the amount of term insurance and avoiding either higher future costs for term coverage or a reduction in death benefit when the term runs out.
Advantages of CompLife
The Adjustable CompLife product allows you to buy a larger amount of life insurance based on the annual premium than you would be able to buy if you bought just whole life insurance. CompLife stretches your premium dollars in relation to the amount of coverage purchased. The ability to choose how much of each type of life insurance is in your policy provides a higher degree of flexibility. The proportion may be set so the paid-up additions fully replace the term insurance or maybe you need the term coverage for just a certain number of years. At that time, the term portion will be dropped and you will still have the lifetime coverage of the whole life insurance portion.
Disadvantages of CompLife
Future dividends from Northwestern Mutual on the whole life portion of a CompLife policy are not guaranteed. If dividends are not earned at the rate projected when a policy is purchased, the plan may not work out as projected concerning the balance of whole life and term coverage and cash value in future years. Also, since a portion of the premium paid goes towards term insurance, a CompLife policy will not build the same amount of cash value as a pure life insurance policy purchased with the same amount.
How well an Adjustable CompLife policy works to meet your financial plans and obligations depends on the mix of whole and term life you choose when you buy the policy. The Northwestern Mutual agent should show you several different scenarios of coverage and the possible outcomes. If your goals are to build a larger cash value as well as obtain life insurance coverage, the portion of whole life should be larger. To provide the maximum amount of life insurance benefit, more term insurance will provide more coverage for the same cost.
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