What's better, whole or term life insurance?

I'm a financial representative and providing life insurance is one of the things I do for clients. God forbids if the breadwinner dies, where would the family be without life insurance? Life insurance can't protect you against harm or death, but it can replace your income. The problem is that many families that own life insurance don't have adequate coverage, but they pay lots of premiums for it. That's because they own the wrong type of life insurance. Take a look at the facts and you decide which product is the best:

Whole life insurance
1) Its level term to around age 100 that builds cash value.
2) Since it builds cash value, premiums are higher than term insurance that doesn't build cash value.
3) There is no cash value growth in the first 2 years because premiums are used to pay for the insurance and commissions to the agent.
4) After first 2 years, you are guarantee a rate of anywhere between 1-4% (varies between companies)
5) If you wish to take money out from the cash value, you have to borrow it and pay loan interest of 6% to 8%.
6) If you die someday, the insurance company keeps your cash value, but pays the death benefit. Death benefit will be reduced by any loans you taken from the cash value.

Universal life insurance
1) Annual renewable term until around the age of 100 that builds cash value.
2) Flexible premiums as long as there's enough cash value to pay for the insurance.
3) While premiums may remain level in the beginning, the internal cost of the insurance goes up every year. That means less and less of your premiums goes into the cash value. Eventually, the premiums you pay will be insufficient in the future to pay for the cost. What would happen is that you would either have to pay more premiums or a portion of your cash value will be used to pay for it.
4) Same cash value features as whole life.

Term insurance
1) Various of level term products to choose from (from 1 year to 35 years).
2) It does not build cash value, so premiums are initially lower than whole life and universal life.
3) Most term insurance are guaranteed renewable without providing a proof of insurability. If your health was to decline because of old age, you can renew your policy without any hassle.
4) When you renew, premiums will be based on your current age. So premiums will go up after the initial level term.

Those are the facts.

Personally, I have sold term insurance 100% of the time. Why? Its because my clients can get lots of coverage for low amount of premiums. Since premiums are low, I help setup investment accounts for my clients so that they can build wealth. If you had lots of money saved right now, would you still need life insurance? Probably not. But you probably don't have lots of money saved right now and if something were to happen to you, would your family be financially ok? As you get older and continue to invest, you may or may not need life insurance when it is time to renew the term insurance. If you were to invest $200/month for the next 30 years and the average rate of return in your portfolio was 12%, you would have about $650k saved for retirement. That's probably not enough to live on, but at least its better than having money sitting in a life insurance policy.

Which brings me to the next point. It pays to start saving early. The later you wait, the more you would have to put away to reach your retirement goal.

Whole life, universal life and variable life insurance are all rip offs. Everyone of the previous poster are sales people. None of them told you how much they make in comissions (except David M - he is an honest person). With the exception of annuities whole life insurance is the most expensive "investments" out there. You never want to use insurance as an investment. Ask any certified financial planner (not a financial advisor - there is a big difference) and they will all tell you that Im correct. Shame on you insurance sales people for giving advise to rip people off. Go see a certified financial planner (CFP) before doing anythng. Not everyone needs life insurance and then you should only get TERM insurance.

Term

All the financial experts (Dave Ramsey, Suez Orman) recommend that you get a term policy. You can get more insurance for less. Then you take the difference in premium (between the term and whole life) and put that in a Roth IRA or 401K.

Insurance is to pay your debts and take care of your family after you pass. It's not intended to be an investment vehicle.

It depends. Term insurance just insures against your dying. It accrues no cash value over time. After it expires and if you are still alive the insurance company keeps all the money and you get nothing. With whole life insurance, the policy gains value over time so that at one point in the future it will have a value equal to the policy limit. And you can cash in that amount any time you wish after that. Dead or alive.

Whole life is more expensive for this very reason. If you are young with dependents you typically need a lot of insurance since so many of your earning years are ahead of you. If that's the case, you need to buy as much life insurance as you can possibly afford and since term is cheaper, that is what I would suggest. Some people buy whole life insurance because they are terrible savers. Whole life is like forced savings as it accrues value over time. My suggestion there is buy term and invest the cost savings in a stock mutual fund which will probably grow faster over time than the value of whole life insurance. Most life insurance agents will try to sell you whole life because they get a much larger commission on it. Especially in the first 3-5 years.

It really depends on your situation. Term life insurance is hot right now because it's so cheap. You should talk with a local agent in your area and talk it through with them. They will be able to help you decide. Usually there's no cost to you. They just make money if you buy a policy from them.
http://myinsurancequotes.net/life-insurance.html

Sincerely,

Jared Balis
http://www.utahinsurance.org
http://www.healthinsuranceinutah.org
http://www.utahmaternityinsurance.org

They are both TOOLS.

What's better, a jigsaw or a circular saw?

First, you DEFINE THE JOB, then after you've picked out the job, you pick the best tool for the job.

I am a former insurance agent. The best is actually a combination of whole life and term. Buy as much whole life as you can afford; the premiums are higher, but it is permanent insurance for as long as you pay the premiums, and when you retire, you have the option of taking a paid-up policy for a smaller amount of insurance, and it's good the rest of your life. Term insurance is temporary insurance; buy it to pay off the house in the event you don't live long enough to get it paid for so your wife and kids will have a place to live.
Another thing about life insurance; when you die, your widow does not have to wait for your will to be probated, and the proceeds of life insurance are not subject to inheritance tax.
Also if you become permanently disabled, most whole life insurance policies require no more premium payments after 6 months of disability.

I kind of sell the stuff. Whole life is simply life insurance that goes until you're dead. Term is (for a period of time, short term) which is usually cheaper but can be cancelled by the company (issuer) at any time.

I would go with Whole of course, but that's just because I studied it, and well yeh.

Hi, the answer to this question isn't as simple to answer. Your whole financial needs and life goals will determine your answer.

How old is the applicant we're considering? If the person is only 20-25 years old, I believe the term insurance by itself is a terrible decision. But people of all ages decide to purchase term insurance on themselves to have some sort of "protection" at a very affordable (cheap) rate.

What makes the whole life policy more attractive is that it is a cash accumulation vehicle for investing and tax purposes as well as protection. Unlike the term life, which only pays out about 2% of the time, whole life is a guaranteed way to protect your assets and those that you love.

What state are you in? I would love to speak to you personally about the issue if you care to listen to more about the issue.

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