Term Insurance or Whole Insurance?

Question

I am thinking about getting life insurance. Which is a better deal, term life insurance or whole life insurance? I am 40 year old male non-smoker.

Answer 1

It really depends on your reason for purchasing the life insurance.

Term Life:

1) Although it costs less serves a specific purpose.

    a) Loans.

    b) Specific debt.

    c) Additional money if something should happen while your

        children are still living at home.

    d) Business expense, etc.

2) Term life premiums are usually only guaranteed for the

     length of the term:

    a) 10 yrs, 15 yrs, 20 yrs, 30 yrs.

3) Term life can be very expensive to renew if you need to

     continue coverage beyound the original term.

Whole Life:

1) Cost more in the beginning but the premium and amount

     of insurance is usually guaranteed as long as you pay the

     premium.

2)  More suited for final expense.

In my particular case I have both. A whole life to cover final expense if I live the average life spand and a 30 year term life policy that payoff my mortgage, other loans, debt and to provide my wife money that she will need to finishe raising our children if I should die prematurely.

I would suggest getting on-line and getting both whole life and term quotes from several companies and comparing them.

There's a free rating service at http://mysite.verizon.net/ressg6c7/savin...

where you request multiple quotes at no obligation to buy.  Plus they have articles and links available that better explains the different types of life insurance policies.

Answer 2

Both.   Go talk to a a financial professional and ask about the advantages and disadvantages of each (term and permanent) and then about getting both term and permanent.

You really have to ask what you want the insurance to accomplish.  Insurance policies are just TOOLS to help complete a task.  These tools help you reach your goal.

Define your goal first.

*

Answer 3

I suggest term and only term.  Whole Life insurance, although level the entire life of it, is a waste of money for the majority of people.

Be disciplined and invest the difference between a whole life and a term policy.  You would likely get about 10-12% instead of 2-4% return on your money.

Also look at your need.  If you are married with kids at home with bills, get more coverage.  If you are single with no living relatives, forget it and let the state pay for it.  If you have relatives but no one dependent on you for income and no spouse...get a small policy to cover final expenses.

All and all, talk with a financial person in your area to find the best coverage for you.

Not to the gentlemen above regarding terminal illness.  There are policies that will renew based on obtained age regardless of medical standing.  They will also renew based with the original rating.

If you go to a broker, go to several.  I have yet to find one that can offer ALL companies products.  They can only show you the best from what they offer.

Answer 4

As suggested above, it depends on your goals and what you can afford. You don’t mention dependents—a wife or children. The idea behind life insurance is to help dependents cope with the sudden loss of income if you die prematurely. Assuming you have dependents and do need insurance after all, term gives you the largest death benefit for the least amount of money. According to the latest survey by Insure.com, at age 40, you can get a 10-year term life insurance policy with a death benefit of $250,000 for $130 a year, or just $11 a month. A 20-year term life policy worth $250,000 would cost $203 a year, and a 30-year policy would cost $335 a year. The lowest prices for a policy with a $500,000 death benefit are $200 for a 10-year policy, $345 for a 20-year policy, and  $620 for a 30-year policy. To qualify for the lowest rates, you have to be in excellent health yourself, have an excellent family history of health, and not participate in any dangerous sports or hobbies. Even a 30-year policy will insure you “only” until age 70. If you think you might need insurance beyond that point—again because your spouse will be dependent on a death benefit to maintain a lifestyle, or because you have a disable child who will remain dependent into adulthood—then you should consider getting a form of permanent life insurance, such as whole life or universal life.

You might figure that you can get another term policy when the first one expires, but insurability is not guaranteed. If you gain weight or develop a serious illness, you might not be able to afford the higher premiums, or you might not be insurable at all. Even in ideal health, you will pay much more for term life over the age of 50 than you would earlier, erasing some or all of the savings realized during the term of the first policy. Permanent life insurance—such as whole life or universal life—will not expire and the payments will not go up based on the health, weight, or age of the insured. Permanent life insurance costs more initially, but it is a practical solution for consumers who worry about coverage and insurability later in life. In addition, whole life builds cash value over time, and the accumulated cash can be used to pay the premiums once you have retired or can serve as collateral as a loan. Permanent life insurance costs much, though.

Answer 5

It all depends on your needs. If you are 40 and have a mortgage and children to protect then term insurance is

almost always a better option. The cost of term life insurance

is very reasonable thus you are able to buy more insurance to

cover your needs.

Whole life insurance does have its place but it is used for different needs. A popular use is in tax planning.

Term insurance covers you for a specified period of time and then its over. Keep in mind that most policies allow you to convert to a permanent plan after a period of years.

They are many sites that have a comparison quote engines that you can shop. A useful site is http://www.spectruminsurancegroup.com/

Answer 6

Which is better, a circular saw or a jigsaw?

You can't pick the best product, until you determine what the JOB is you want it to do.

First define the job, THEN select the product.

Answer 7

TERM TERM TERM  you get more for your buck and pay less in the long run even if your insurance rates go up over time. Whole life is a glorified savings plan where you get less than you typically put in.....very bad idea.

Answer 8

It depends on your financial situation and the reasons you need life insurance.

Term insurance is like renting, when you rent an apartment at the end of the lease you leave the apartment and you have not built up any equity. With term insurance you buy 20 year term and you pay a set price for 20 years. If you die within that time frame your beneficiary receives the death benefit. If you don't die at the end of the 20 years the term expires and you no longer have life insurance. This can be a problem if you still need insurance and you are no longer in good health or maybe you even have a terminal disease.

Universal life, Variable life and whole life are all versions of permanent life that are designed to provide you coverage until you do or reach age 100 or in some cases 120. This is more expensive than term but you will always have some life insurance. These policies have a cash value component, meaning that a portion of the premium you pay gets placed in an account that earns interest. After 20 years it is possible that this cash value could be enough to pay your premiums for the next 20 years.

It is wise for most people to have a portion of both term and permanent life. A good example is a family with young children may want enough life insurance to provide income for the surviving spouse to stay home raise the kids and to provide for a college education. Let's say this is $1 million need. I would suggest 900K term for 20 or 25 years and then a smaller permanent life policy of 100K.

I routinely run across people from age 50 to 70 that are buying permanent life insurance.

Let’s say someone has term insurance and comes down with a terminal illness at the end of the term. Even with health insurance a terminal illness can cause great financial harm to the faineances of the family. Then you are left without life insurance to offset the cost of the illness and the final expenses.

I suggest you look for a local broker that can help you sort through the different companies available. You can us yellowpages.com to search for life insurance brokers in your area.

A Broker represents multiple carriers and can help you sort through all the different insurance companies and plan options in your state.

You can call your auto and home agent they specialize in property and causality insurance and usually have a good knowledge of life insurance.

But you may have better luck with a broker that specializes in life insurance they will have a wider selection of companies to offer.

Answer 9

Cash value life insurance vs Term insurance



What is life insurance? Life insurance is an insurance contract that pays your beneficiary (which are usually family members) a sum of money upon your death. Main reason why people purchase life insurance is to protect the family from financial loss, otherwise known as "income protection." There are currently two types of life insurance out there available to the public. One is known as "cash value" life insurance and the other is known as "term insurance." If you have life insurance right now, it is important that you read your policy. The information given in this blog comes from my life insurance text books and from experience of reading many of my client's life insurance policies.

What is cash value life insurance? It is a term policy to age 100 that contains a savings vehicle in it. Cash value comes in many forms, such as whole life, universal life, variable life, or a mixture of those words together such as variable universal life or universal whole life, etc. The advantages of having cash value life insurance is that you are protected until age 100, you can use the cash value anytime for any use such as paying your premiums, and interest on your cash value is tax-deferred.

The disadvantages of having cash value life insurance is that you are paying lots of premiums for low amount of coverage, no cash value is accumulated during first two years of the policy, rate of return is very low, and if you use any of the cash value, you will owe monthly interest on it. This interest does not go back into the cash value, but rather kept by the insurance company because the money you taken out of the cash value is treated as a loan. In many policies, if you were to die, your beneficiary will receive the face amount and all cash value will be kept by the insurance company. Keep in mind, if you use any of the cash value and you did not pay it back, this amount will be deducted from face amount upon your death.

Another disadvantage of cash value life insurance is that they are riddle with insurance fees. The most noticeable fee is the surrender charge. This is clearly stated in the policy of how much cash value you will get if you surrender the policy. Then there are fees you don't see such as administrative fees, policy fees, maintenance fees, and all these other operating fees. If your cash value life insurance is a variable policy, that means your cash value is invested in the stock market. Investments too have their own operating fees. If you combine investments and life insurance together, now you have so many different fees that eats away the returns on your investments.

You are probably asking, why would anyone buy this kind of life insurance? First reason is that many people do not understand how this policy works. Second reason is that people don't buy life insurance, they are sold on it. The agent who sells cash value life insurance does not care about you or your family. All he/she cares about is how much commissions he/she is getting paid and they going to use whatever deceptive sales tactic to make you buy it.

So, what is term insurance? It is the type of insurance that provides a level death benefit for life. Just like car insurance, if you don't pay your premiums, you will lose coverage. Advantages of having term insurance are: premiums are very low during the term, you have more flexibility to invest your money in a savings vehicle (hence the phrase, "buy term and invest the difference"), and if you were to die during the term, your beneficiary will get the face amount and all your investments. Another advantage is that you can change the amount of coverage without affecting your savings and vice versa. (In cash value life policies, you are stuck with paying into both.)

The disadvantage of term that while premium remain fix for certain amount of period (10, 15, 20, 25, 30, or 35 years), the premium will go up when it is time to renew. Majority of term policies provide renewable term coverage up to age 100. But there are some term policies that stop coverage after the level term expires because the insurance company wants you to convert it to whole life or universal life.

Why would people buy term insurance? First, premiums are very low and remain fix during the term. In the early stages of your adult life, you probably have lots of debt to pay off such as your mortgage, you probably have kids to support, and you probably don't have much money saved for retirement. So you need lots of insurance coverage to protect the family. As you get older, your kids are all grown up, your mortgage is or almost paid off, and you better have lots of money saved for retirement. As you get older, you probably won't need life insurance or need as much coverage as you did 20 to 30 years ago.

What happens when the level term expires? When the level term expires, you enter the phase of the contract called "Annual Renewable Term." That means you have the right to renew the term without having to provide proof of insurability. The premiums will go up every year or so (check the policy on how often the premiums goes up after the level term). Depending on your policy, you are usually given several options when the level term expires.

(1) You may convert it to a permanent whole life policy (which I don't recommend).

(2) You may exchange it to another level term (I recommend that you significantly lower your coverage amount to a minimum of $20,000). You may need to provide proof of insurability.

(3) You may refuse to pay the premiums to cancel the policy (if you do this, I highly recommend that you allocate the money toward your retirement).

(4) You can change the death benefit to the amount you really need. In most cases, the amount of coverage you need is usually lower than what you needed years ago. In fact, you probably won't need life insurance as long as you enough money saved.

If you have cash value life insurance right now and are probably pissed off about having it, you should figure out what you want to do. Do you want to cancel it or should you replace it with term? It all depends on your current needs. If you have a problem with or questions about your life insurance policy, don't call the agent to get your answers because an agent's job is to sell life insurance, so they won't say the bad things about your life policy. Call the company's phone number that is listed in your life policy (which is usually on the cover page).

If you are going to replace it with term, don't cancel your current life policy yet. First, you want to see if you qualify for term insurance, which you probably will if your health is not that bad. When you get your term policy, then you want to cancel your old life policy. There's a couple things you can do with your cash value. First thing you can do is that you can surrender it. You may have to pay surrender charges on it and you will owe income taxes on it, but at least you have choices on where you want to put this money. The second thing you can do (and is probably the best way to do it) is do a 1035 exchange, which moves the cash value into an annuity product or another cash value life insurance without any tax implications.

I have always sold term insurance and help clients invest their money 100% of the time. That way they are protecting the family's income for a low cost and at the same, building wealth for the future. It does not make any sense to bundle life insurance and savings together. Life insurance's main purpose is to protect your family's income in the event of your death, not as a way to build tax-deferred savings. Since term insurance is so inexpensive, I show clients on how to effectively build wealth. One way is to open an IRA, either Traditional or Roth. Money in an IRA grows tax-deferred. If they max out their contributions to an IRA, then they should put more money toward their 401(k) or 403(b) or whatever retirement plan they have at work. If they don't have an employer's retirement plan, then a variable annuity would be the next choice, not a cash value life policy.

If you are going to meet with your agent to go over your life policy, you want to record everything he says. That way you can review it with your attorney or send it to your state's insurance department to find out if he is telling the truth. If he is lying, you can take lots of legal action against him and his company.

Other facts:

What is a dividend in an insurance policy? It means that you are over paying your premiums and the life insurance is returning (or refunding) it as a dividend. Keep in mind, this is not the same as receiving dividends on mutual funds. Dividends in mutual funds are only paid out if profits are recognized that year, so shareholders will get a share of that dividend.

Getting separate insurance policies will cost you lots of money in the long run. Each policy cost about $100 to maintain each year. If you have multiple policies on yourself, you should immediately change your life insurance agent and probably the company as well. There is no reason why you should have more than one policy on yourself. It is best to add "riders" to the policy such as spouse rider and child rider. That way the whole family is protected under one policy.

Some of you seen the word, "unit" on TV commercials. A unit represents one-$1000 worth of coverage. I seen commercials for retire people where one unit cost $8.75/month. In your mind, you are thinking thats very cheap. If you do the math, you will find out that's very expensive! If you wanted $100,000 coverage, thats 100 units. 100 time 8.75 = $875.00/month you need to pay for life insurance. I have a 20 year term of $150,000 coverage when I was 23 years old and I pay less than $300/year for it.

All life

Answer 10

If you have a wife and children, whole life is better.  If you need money for end of life expenses, term life should suffice.  The premiums should be much lower.