he recent volatility of the financial markets has sounded an unmistakable wake-up call for many American families, reminding them that investing for the future often involves taking on risk in the present.

That is particularly true for those who have followed the popular “buy term and invest the difference” approach to risk management. By relying on equity investments to provide a form of self insurance, these people are now seeing how a drop in the stock market – and in turn a loss in their own investment accounts – can shake their sense of financial security. What will happen in the event of the untimely death of the family’s primary wage earner? How will survivors cover everyday living expenses, mortgage payments, credit card debt or college tuition?

Relatively low premiums have made term life insurance the default option for many consumers. While term may be the right choice in a number of situations, we don’t recommend using it as part of a “buy term and invest the difference” strategy. Instead, we believe you should seek out security for your life insurance plan. And whole life insurance offers secure and dependable protection through a number of valuable guarantees. Whole life products feature:

• level premiums,
• level death benefit,
• options to purchase additional coverage in the future without providing evidence of insurability and
• cash values.

The cash value aspect of whole life has been on the minds of many consumers during the current period of financial turmoil. As the equity markets have stumbled, more people have been turning to cash value life insurance to diversify their investment portfolios. We believe it is inappropriate to recommend life insurance as an investment; however, we do point out to clients that the accumulation of cash value in a whole life policy can provide additional security and flexibility. Cash values can be:

• borrowed at the interest rate stated in a policy,
• used to purchase a reduced amount of paid-up coverage, or
• collected upon the surrender of a policy.

And since these cash values are guaranteed, they are not subject to the volatility of the equity markets.

Despite its significant benefits, whole life insurance is by no means the only kind of coverage we recommend. Typically we advise using whole life to cover permanent needs (such as money for final expenses or supplementary income for the surviving spouse) and term insurance to cover temporary needs (such as funds for a child’s college education). In recent years, we have expanded our permanent insurance options by adding universal life products to help protect those who recognize the value of this permanent insurance strategy later in life.

But we continue to endorse whole life insurance as the permanent foundation of a strong risk management strategy. There is always a need for some level of permanent protection, and we recommend that clients satisfy that need with whole life because of its long-term value, flexibility and stability.

So what types of life insurance are right for you? At First Command, we are committed to helping you understand the value of the various products and the role they can play in the risk management portion of a comprehensive financial plan.

Your First Command Financial Advisor has the training and knowledge to help you build a risk management strategy that addresses both permanent and temporary needs and offers the highest quality of coverage with the greatest number of guarantees that your budget will reasonably allow. If it’s been a while since your last review, give your advisor a call.

First Command Financial Services, Inc.