A little info on Life Insurance?

What are the differences between Term & Cash Value ( aka permanent life)? Benifits & Disadvantages!

Term is pure insurance.

Cash SURRENDER Value is Term Insurance with a savings plan. Most of these plans, you loose the CSV if you die. Only time you don't is when you pay more for the privilege.

Both last for a specified period of time. Term will typically go to, at most, 35 years out. CSV generally runs till age 100 (sometimes further).

For a limited pay CSV policy, it is designed so that at the point you stop paying, there is enough cash in the policy to keep growing and pay the price of the term insurance inside of it. Generally, at age of maturity (100 in this case), the cash value will equal the death benefit. Each policy is different and is a good idea to read through it to know the specifics.

The only benefit to a CSV policy that I can see as a sane man, is a tax break once I use up all the rest of my options. Beyond that, there really is none. I know of better options for estate planning that provide a greater death benefit for less money and add in more to cover estate taxes.

In other words, to make a car comparison, a term policy is the stripped down car with no bells or whistles. The cash surrender value policy has all the options on it, costs substantially more and pays the salesmen a considerable commission. All you want the vehicle to do is get you from a to z. You want to pay $10k or $80k to do that?

When you buy permanent Life Insurance you have a cash value that you can borrow back when you need it, if you get behind in your premium payments then often times you can draw on the cash value to keep your policy going.
With term you buy insurance only and as you get older the premiums will get higher, then it becomes so expensive that you will need to drop it when you need it the most.

Cash value insurance is not an investment vehicle like the first person says. It can be used as one, but it's primary purpose in having a cash value is so that you can keep the insurance your 'whole life.' A universal life policy with a guaranteed premium to age 100 contains a cash value, but it acts more like a term policy that'll last until you're 100 years old. The cash value is insignificant at best....and if it runs to zero the policy will still be there.

First determine how long you want/need insurance and then figure out which product you need.

If you want some coverage forever get that amount in a policy that will last forever. If you only need it for a specified 'term' then get term.

Most likely a combination of coverage works for many people....or at least some people. Most people should be looking at just term though.

http://www.InsurancePickle.com/life-insurance

Sarah is right. Take the cheap term policy and invest your money somewhere else. It is too complicated to explain. Disadvantages are having to borrow your own money later or pay yourself back or cancel your insurance and then never getting the money you would have recieved if you invested it elsewhere. The life insurance agent is right too but should have advised you of that. Life insurance is not the place to invest. It really is a rip off.

An earlier poster gave you some figures that are not accurate. Every time she answers a question she gives different numbers. She's knowledgable in many areas, but she seems to always make information up when it comes to permanent life insurance. Cash value is not necessarily 10% of what you've paid. Over a long period (15+ years) of time and with a decent policy, you will have more cash value than what you've paid into your insurance policy. Also, the value you can borrow varies per policy. Good policies will let you borrow up to 90%.

With that said, you will not get a better investment return from buying permanent insurance than you normally would with a balance porfolio of individual investments. For the vast majority of people, the primary purpose of permanent life insurance is not to use it as an investment (but there are some people for whom this will make sense).

The primary purpose of permanent life insurance is to buy a policy that will last your entire life. Whole life and universal life policies have always lasted to the age of 100, and with new mortality tables, companies are offering these policies to age 121.

Most term policies are renewable after their set term (ie, you can keep the policy after the original 20 year term is over) but the premiums go up drastically and they usually are only renewable to age 80 or 85 (or somewhere in that ballpark). So if you need life insurance into your very old age, permanent insurance is your only option.

Most of my clients do not have large investment portfolios, and are not on track to be wealthy or super comfortable in their retirment. Therefore, for most middle-class people I suggest a combination of term and permanet insurance.

For example: A 35 year old man with 3 children. He decides that he needs $1.5 in life insurance. I would not tell him to buy only permanent insurance, but I wouldn't tell him to buy only term. Typcially, I would suggest $100k in permanent and then $1.4 million in a 30 year term policy. This way he has the large death benefit he needs until his children are grown and he's at retirment age (65 years old). But he also had $100k in death benefit for the rest of his life if he keeps paying his premiums. This way, when he dies there is guaranteed to be money to pay for final expenses (who knows how much a funeral will cost in 60 years) and hopefully some money left over to leave to his children/grandchildren.

Both policies are good for certain purposes. Anybody who tells you to only buy one of the two types should not be trusted. If you blindly tell people to buy term and invest the difference, or to only buy permanent, then you do not truly understand the purpose or benefits of either policy.

I have nothing bad to say about either type. Both serve their purpose, but should be used wisely.

Edit:

Also, everybody states that with permanent insurance the insurance company keeps your death benefit when you die. With certain types of policies this is true, but you do have the option to buy policies in which when you die, the policy will pay out your death benefit and cash value or will pay out your death benefit and the premiums paid.

These policies are called a Universal Life Option 2 (or Option B, depending on the company). Those pay out your death benefit and cash value. So as you accumulate more cash value, you're saving more money to pay out to your beneficiaries.

The type of policy that will pay back your premiums is just a return of premium Universal Life policy (sometimes called Option C). When you die, it pays the specified death benefit, plus every dollar you've ever paid for the policy.

Some agents don't keep up with advancements in the field, or they represent companies that don't offer a broad range of products. I know that on this forum, it's easiest to use generalities, but a lot of people state things as fact when there are many exceptions. Be careful about what you read.

Cash value is 10% of what you paid in. So you borrow your own money, and pay the interest to the insurance company. Adding insult to injury, if you die without paying it back, they subtract that loan amount from the payout. If you die, without a loan on it, the insurance company keeps the cash value.

AND, cash value insurance costs about 10X what term costs.

In order to decide which is right for YOU, you need to DEFINE THE GOAL. What do you want the insurance to DO for you? For how LONG? Then you can pick the best product for the goal.

Cash value insurance is used as a investment vehicle( a very poor one I might add) Always invest outside of your insurance, your paying a much higher premium and the insurance company keeps your saving
when you die. Term insurance is the way to go!!

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