What are the pros and cons of whole/variable/universal life insurance?

Wholelife provides a death benefit upon the death no matter when that occurs as long as you pay premiums. It is more expensive than the other forms of insurance. You may receive a dividend that can build up cash value and help pay for premiums in later years. You may also borrow against your policy in later years. The good thing about these types of policies is that as long as you pay you will have a death benefit. Will not lapse.

Univirsal life also pays upon the death of the insured as long as you pay premiums. It is less expensive than a wholelife policy. You are paid interest on your excess premiums that can build up cash value and you can borrow against. The interest credited on these types of policies is pretty low currently. Around 4-5%. As long as you have cash value these policies will not lapse. If you don't pay enough in the early years you may have to pay more in later years.

Variable life is similar to universal. It is more expensive than universal but less than whole life. The difference with this type of policy is that your excess premiums are invested in sub-accounts that can can be invested how you want. Typically in mutual fund like investmenst that given time could build up substantial cash value that you could use. The problem with these is that if they are not properly funded you could lose your cash value which would cause your policy to lapse if no further premiums were paid. If you dont have much tolerence for watching your cash value go up and down this might not be for you.

A type of policy you did not mention is Index Universal Life. This works the same as the other universal life contracts but your cash value is linked to an index such as the S&P 500. You are credited with interest when the index goes up but don't lose anything when it goes down. These typically avg. around an 7-8% return and are about the same price as an universal life policy. Most can be purchased with guaranteed death benefit that will pay no matter what happens to your cash value. You can also use the cash value that build up inside the contract.

Term is pure insurance. You pick a duration such as 10/20/30 years and pay premium every year. As long as you pay your premium you will have insurance. It is cheaper than all the rest but will never have any cash value. Kinda like renting instead of owning a home. The bad thing with term is that when it runs out you may still need insurance and may not be healthy enough to qualify or it will be very expensive.

If you are on a budget I would suggest term ins. If you can afford to pay a little higher premiums I would suggest a permanent policy for part of your ins need and maybe term for the difference.

Hope this helps

To all those suggesting term. Buy it! The insurance company will love you since its their biggest money maker. Only 3% of term policies ever pay a nickel. Insurance isn't for you its for your loved ones. I would rather leave a legacy than have my term ins. run out when I'm in 60's or 70's just a few years before I die. To all of you term lovers out there, may your family enjoy the $0 you left them because to were to cheap to provide for them!

Whole/Variable/Universal policies are great for the insurance agents. They get people to commit larger sums that are needed to secure life insurance and some form of savings/investment. The key is the internal fees are very high and the return is less than you would get by buying 30 year certain term insurance and investing the balance in good, no load Mutual Funds.

I say, support your local insurance agent. There's no reason for you to maximize your earnings. It's better that the agent and their comany get money from you, than have it saved for your retirement.

READ READ READ...... There are plenty of articles and books on how to handle your insurance needs without hurting your retirement money, living costs and insurance needs.

BTW: Buy insurance even if you don't have children. You need to protect your insurability. I got very sick at age 40. I can no longer buy life insurance. It's a good thing I had purchased low cost 30 year certain term insurance and invested the balance in good, no load Mutual Funds.

serubjb has the "rap" down pat. His points sound good. In reality if you follow his suggestions you're hurting yourself and family. THE COMPARISON TO RENTING vs OWNING A HOME IS TOTALLY OFF BASE! It's more like buying a house that has many more rooms than you'll ever need with a high fees (interest, taxes etc.) whose resale value would be less than the correct sized house in 25 years.

Pros:
potential for permanent coverage.
potential for cash value accumulation.
potentially more favorable underwriting.

Cons:
potential for coverage to disappear unexpectedly (due to complexities).
potentially more expensive if you only have a temporary need.
potentially higher costs and fees work against cash accumulation goals.

I'm trying to keep the list simple. There are many things to consider when making such an importatnt financial decision.

The others are fine answers.. I'll keep it short.

Whole life, Universal Life & Variable Life is for suckers.

Term Insurance only.. Level Premium Term is best.

Check your motives. Do you really need insurance?

Unless you have minor children, the answer, is no.

when you buy whole life etc.. you build up a cash value.
term insurance is cheaper and better.
why? you could invest the monies yourself and probably
beat the value you would get in whole life.
insurance agents are like stockbrokers, they
are commission hounds.

You left out the only good life insurance: Term life insurance. It is the best and only life insurance you should be getting information on. The rest make the agent rich through commissions.

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