The question in the headline is one that is voiced more and more.
Certainly term insurance has become a favorite of consumers–it is truly being sold now as a commodity. Consumers view it that way, and if they need some, they don’t hesitate to go to the Internet to find it, just as they do for other consumer products.
Term premiums have been driven so low by competition that traditional agents usually can not make a living selling it to “consumers.” Further, the policies are often small in size. The result is that while there certainly is a need for this coverage, the old kitchen table sale has been replaced by the Internet. In view of the cost considerations, this is probably a good thing.
But, in cases where the needs are more complex, permanent insurance is still the best choice in many situations.
For example, second-to-die insurance is basically a permanent product. While term models have surfaced from time to time, those policies do not attract the attention of the agents, perhaps because when the need is permanent, a term product–even if second-to-die–still does not fit the bill.
What would seem to be needed here is a term product with secondary guarantees. Actually, permanent policies with secondary guarantees may not have any cash values at later ages, so, in essence, they may perform as would term policies. There is no substitute for a guarantee that the death benefit will be in force at later ages, and only a permanent product–albeit one looking like term–can do that.
While survivor needs in the short term are ideal for term insurance, a permanent product is still preferred for long term needs such as estate liquidity. In particular situations, the combination of cash values and death benefit is still unmatched. So, permanent insurance is still favored for non-qualified deferred compensation plans, which really function beautifully due to the tax-deferred cash value buildup.
A major reason for the slower permanent sales in recent years appears to be the uncertainty over the estate tax. Even though most professionals believe there will be an estate tax of some sort, the general media sometimes confuses the issue. To be sure, the estate tax was repealed several years ago. But, many discussions have failed to mention that the repeal is effective only for year 2010. After that, the estate tax will be as it was before 2002, meaning many more estates than now will be subject to the estate tax.