Please explain these these different type of insurances please?

Question

term

whole life

cash

universal life thanks

Answer 1

Term- Pure insurance. The First insurance designed by insurance companies. You pay your monthly premium and the company agrees to pay your beneficiaries the face amount of the policy, ie the amount you agreed to have.

Whole Life, Cash Value, and Universal life policies are, for all intents and purposes, the same. Cash Value is another name for Whole life. Whole Life and Universal work about the same way with a minor difference. Whole life invests part of your money into an investment vehicle that earns only modest returns- you can do about the same by investing in money market funds or at your bank. Universal invests part of your money into an investment vehicle that earns better than average interest.

So here's what happens to your monthly premiums: It gets split two ways A) pays for insurance, the amount you agreed your beneficiaries will receive and B) cash value account.

With regards to A, the company purchases level term for Whole life and Annually Renewable term for UNiversal.

For whole life, the cist of insurance will not go up each year. The same amount of money will go toward cost of insurance and to the cash account. For universal, however, because they use ART, this cost WILL go up every year. This means less and less of your premium goes to the cash account. What will happen is that at a certain point in time the cost of insurance WILL exceed what goes into your cash account. Not only is less going into the account but money will be taken out of cash account to make up the difference. This goes on until there is no money in the cash account- no cash account equals no insurance!!!

Five points to Whole Life and Universal:

1)In first couple years there is NO money in cash account. No money in account means FAR less money down the road- say fifteen to twenty years.

2)When they do start to earn interest, both accounts will earn between 1-4% due to fees and commissions.

3)You can borrow against what is there but when you pay back it will be between 6-8%- I thought it was your money?

4)Better know in advance when you need the money for an emergency- it could take up to 6 months to receive the money.

5)You pay each month for your family to get Either face amount OR cash value, NOT both. If this was YOUR money, you would get both right? But you can pay alittle extra each month so your family can receive both. Seems like if you die and they choose face amount, the Company keeps the cash account.

Answer 2

Cash is not an insurance policy.

Whole life and Universal life are both permanent policies which build cash value. However, don't look at a permanent policy as an investment vehicle.

Term life is a life insurance policy that will stop at the end of the term. It is much cheaper than permanent policies but is not always the best way to go.