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Term Life Insurance Vs Whole Life Insurance?

I am shopping for a decent life insurance policy. I have a question. Say, if I go for whole life insurance through company A for 20 years and say if Company A goes bankrupt after 10 years. Will I get my money back? What happens if I go for term life instead of whole life. Thanks in advance

Public Comments

1. In order to operate as a life insurance company, they have to set up heavy reserves which are very regulated. If they went bankrupt then those reserves would be dedicated to paying out the remaining policies while not taking on any new business turning their "open block of business" into a "closed block". Not only would you get your money but your policy would still be good.
2. How much money a month is it going to cost? Have you thought about just putting that much a month into a savings account and then buying something like a high yield CD or retirement account. That's another option.
3. No. You don't get a refund, just because the company goes broke. The main two differences between term, and whole, are 1. Whole life costs a lot more, but you're "locking" that rate in, for your "whole life" and 2. If you stop paying either one, they cancel. So. You first need to set the goal. What do you want the insurance to DO for you? You also need to know that MOST people - the vast majority - keep a policy less than five years. You can buy a LONG term, of term insurance - like 20 years, and for not much extra, you can buy a rider that makes it GUARANTEED RENEWABLE for another 20 years (at a higher premium), or convertable to whole life. Whatever you buy, RUN THE NUMBERS. Look at the cost to you, vs. what you'd have in the bank if you put it into a CD or mutual fund, instead of insurance. SET THE GOAL. Then pick the product that acheives the goal, at the cheapest cost to you.
4. Great question, You will not have to worry about the company going bankrupt. They will sell your account to a holding company that will honor your case. I would suggest a Return of premium policy. It is term but after the term end you get all of your money back. Simply put analogy to car insurance if you dont get in a car accident do you get prmeiums back...no but with this life policy if u dont die u get all money back. Example 10yr term 1000 a year in 10 years u get a check for $10,000. Email me for more info- joseph@carylevinson.com
5. First of all insurance companies do not go bankrupt. Period. There are several layers of safety nets, and in the end another insurer would buy the policy holder base from a failing insurance company. But seriously, it just DOESN'T happen. As far the difference between whole life and term, the truth is that you need some of both. You need a modest amount of whole life...Say $50,000. The rest you can get in term. Whole life, as the name suggests covers you for life (age 100). The premiums never increase, and coverage never goes away. It IS however,more expensive than term for the same amount of coverage. Term is just what it says: Tempoary insurance. To cover say a 30 year mortage, etc. Term is cheap and you easy to get...but it WILL go away one day. That is why you need SOME whole life. Don't get caught up in seeing insurance as an "investment" IT'S NOT. If an agent talks to you about all the "cash value" and "retirement income" that a life insurance policy will supposedly provide...RUN LIKE HELL. Insurance creates an estate, and protects assets. Nothing more. So when comparing just take a look at what your actual needs are, then buy a small amount of it in whole life, and the rest in term. Also..The only knock against term is that you are basically "renting" the coverage. You pay for 20-30 years and then the policy expires. But keep in mind you enjoyed the protection of coverage for that time period, so it's an even exchange. Also, you can now get term with "return of premium" which means that at the end of the term (20 yrs, 30 yrs, etc) you get 100% of your money back. So basically you had the protection, but in the end never used it (meaning your term expired and you were still alive) so you got all your money back. Pretty good deal. Also, no disrespect to anyone, but a previous poster advised you to compare the insurance policy with what you would get in a bank CD. This is AWFUL advice. Again, this is an individual confusing insurance with an investment. If your goal is to protect your family from the hardships that your death would cause (loss of income, paying medical bills, maintaining the mortage, etc) then BUY INSURANCE. No CD will do any of those things. On the other hand, if you are looking to INVEST (accumulate wealth) then insurance really has nothing to do with that. Seek an investment strategist. But whatever you do, DO NOT CONFUSE THE TWO. Also, keep in mind that having substantial investments is NOT a substitute for insurance. There are many people who say: "I have a million in stocks, why do I need life insurance?"...The fact of the matter is that investments are subject to TAXATION. Most notably estate taxes (sometimes referred to as "death tax") Insurance proceeds are NOT subject to taxation. VERY IMPORTANT. Like I said, talk to a qualified agent for insurance...And a qualified investment specialist for investing.
6. Life insurance companies do go bankrupt. Typically your account will be taken over by a new company. For the most part life insurance companies pay out their death benefits even if they have gone bankrupt. However you will not be able to get your premiums back simply because the company goes under. You will still be entitled to pay your premiums and the holder of your account will be entiltled to pay the death benefit. Secondly. Term insurance is always better than whole Life. Ask Suzie Orman. Why would a person pay two to three time for something when they can get it for a low annual premium. Most insurance companies and agents promote whole life insurance because they get paid more money up front. By Term Insurance and Invest the rest of your money.
7. Usually life insurance policies are guaranteed by states up to a certain amount. Just make sure the company you buy from has an A minus A.M. Best rating or better and you should be okay. As a general rule you would use term life insurance to replace income and pay off debts until you have enough savings to make the insurance unnecessary and you would use whole life insurance to make sure your final expenses and funeral costs are taken care of no matter when you die.
8. lifeinsurance.awardspace.info - try this one. I have their insurance and, as remember, they can provide such a service.
9. The blind leading the blind. A typical Primerican rubber stamping a person with a term-only recommendation. Yet another reference to the Primerica goddess, Suze Orman, the most famous unlicensed investment adviser. "Why would a person pay two to three time for something when they can get it for a low annual premium" Because unlike your term insurance, this insurance WILL BE PAID out, tax free. It's not about an investment, it's about having the coverage for the rest of your life. Why would anyone pay 50% more for their term insurance from a company like Primerica who has nothing but part-time know-it-alls? Why wouldn't they go to the dozens of other carriers with A+ rankings longer than Primerica has been in business who have much lower premiums?