All Life Insurance Tips

Is purchasing a small amount of whole life insurance ever a good idea?

I am a single woman in my mid-30s and unfortunately have not been able to save much for retirement. My 401k from a previous job has been all but decimated in the last year, and I am not eligible yet to join my new company's plan. I sought to open a Roth IRA, but the financial adviser my credit union recommended me to is actually an insurance salesman. He wants to sell me a whole life insurance policy with a $169k death benefit that would cost me $100 per month. I keep reading that whole life insurance is typically a bad investment unless you plan to keep the policy for more than 20 years. If I sign up for the policy, I would do so with the intention of keeping it as a long-term investment. The term insurance I have through work would only pay my beneficiary $35k, and I would prefer that my mortgage and other potential bills not be left for someone else to take care of if I got hit by a car and killed tomorrow. The projected rate of return over 30+ years looks good, but I do realize the guaranteed rate is the only, well, guarantee. And I understand my premium will stay the same unless I opt to buy more insurance. But everything I am reading from financial experts (Suze Orman, for instance) says it is better to buy term insurance and invest the difference. Is this a blanket guideline?Can a small whole life insurance policy ever be a good idea in combination with other investment strategies? I am so confused.

Public Comments

1. Whole life polices are a great way to save. They build cash value, and a percentage can be pledged for a bank loan in the future. You can also borrow the cash equity from the insurance co., or cash it in. A term policy is not good for a 30 years old. There is no cash value. A term policy only pays if you pass away during a certain time frame like 10 years. It's like a crap shoot a real gamble. It does have a purpose for the elderly. Universal life is just another version of term. You may not qualify later if health problems are then a factor. Don't take the risk. Go with the Whole life. See additional comparison below.
2. Life insurance is NOT an investment. Suze Orman is correct. Take the term policy which will be cheap and provide you with more insurance for your dollar now when you need more insurance. Take level premiums for 30 years. Whole life and universal life are more expensive policies that just put a lot of money in the agent and insurance companies pocket. That is why they want to sell it. Do the other investments you mention and you will be fine. Why put money into a whole life policy and they you have to borrow your own money to get the money out? Put your money into something solid that later it will be your money to do whatever you want with it. Listen to Suze Orman. She knows. Universal Life is part term and part whole life. The life insurance premium called (mortality rates) go up every year so the customer never knows how much they are actually paying for the insurance cost. This is the way it works. I explain it this way. It is like you have a savings account. You deposit money into that account every month. The insurance company takes out the cost of the insurance every month out of the money you have on deposit. So, you see you never know how much the insurance cost is unless you ask. That is because you just keep on making deposits. The deposits are not the cost of what the insurance company is charging you for insurance. Sounds confusing? Ask your insurance agent for an illustration of what the mortality costs are. If they have no clue what your asking for then find a new agent. Most customers do not know this. Most life insurance agents do not know how universal life insurance policies work. So, be careful what people tell you.
3. term plans are going to be the cheapest as opposed to whole life or universal life policies. you could buy a term policy and invest the difference. that way, you could have a cheaper premium and your money will still be invested. a premium of $100/month for $169k death benefit sounds like alot for a female in the mid 30's - even for whole life. personally, i would not buy whole life policy. if you're looking for permanent coverage, i would purchase a universal life policy. it is similar to a whole life policy to where it earns cash value, but it is more flexible than a whole life policy. with universal life, you can reduce the amount of premium that you're paying and stop or delay payments if need be (provided there is enough value to cover the charges). the life insurance company i work for, we have a universal life policy to where as long as you make the premiums as scheduled, then your coverage would be guaranteed for life. if you're really not sure which way to go, i would just go ahead and purchase a term life insurance policy for now. most term policies have what's called and exchange or conversion privilege to where you can take your term policy and exchange/convert it into a whole life or universal life policy - with no medical underwriting. the rates on the exchanged/converted policy would then be based on the rates that your term policy was issued with but at your current age. if you want more information, you can contact your local agent. while i'm not a licensed agent, feel free to contact me and i can provide you with one of our agent's contact information for quotes.
4. All life insurance is an investment. If you want NO coverage at the end of the term, don't buy any permanent insurance. If you want to be able to bury yourself, regardless of how long you live, then whole life is a good investment. Personally, I think ALL TERM is a horrible investment of your money. Pay and pay and pay, and potentially get nothing in return.