All Life Insurance Tips

Whole Life vs. Term Insurance?

People always ask about whole life vs. Term Insurance and the insurance salespeople always defend Whole life and trash Suze Orman (not a fan of her anyway)... But they fail to prove the point with real hard numbers. Show me how Whole Life beats Term with the additional premium saved being invested in a Total Stock market index fund or other no load investment at a Vanguard or other low cost provider. BTW - I understand it very well. Financial Analyst picked up on my point in his first sentence. I meant Financial Answer Guy, see above.

Public Comments

1. Whole Life used to be how 'common people' saved for retirement. Whole Life is essentially a mutual fund investment that will pay you a big benefit if you die (big depending on whether or not you pay for big). Term Life insurance is a straight bet that you wont die. Term Life is significantly less expensive since you dont have to pay for a poor investment return. I've never had an insurance person explain to me or show me how whole life is better than term -- which is why I have term.
2. Trade Info throws down the gauntlet! Whole Life will not beat the "Buy Term and Invest the Difference" strategy in terms of wealth accumulation. I personally have never said it would. The flaws with the term strategy appear when the need for coverage is inaccurately analyzed. A fairer fight would compare a VUL to a term policy, taking the scope of the comparison out beyond the guarantee period on the term, or even using YRT. Unfortunately I am away from my office until Monday, but I will give you numbers then. I won't even get started on Suzy Orman.
3. My experience over the years is to buy only term insurance. When you are young and you have a family if something were to happen to you they would at least have something to use until they became adjusted to a different lifestyle. Whole life is not to me the type of insurance you should take out. Why should the insurance company make such a huge profit off of you. You should invest the same money in a mutual fund that by the time retirement comes you will have a lot of money! Just make sure you keep putting every month in your fund and don't ever touch it. You will be sorry you did like so many of us before you!
4. Basically whole life has a set premium, that will never go up and it has cash value(you can cash it in at a later time, after it builds up), it's good if you buy it at a young age, when the premium is cheaper. I have a whole life on my son I've had for years and i will probably cash it in, since he's older and married now. As for term, it's cheaper , but rarely does it have any cash value, and the premiums go up every so often, some annually , some every five years etc. Basically, term is renting and whole is buying. I'm 52 and wished I had all whole life because my premiums keep going up, on my term insurance, every time you turn around they're raising the price of it and I'm at the age that whole life would be way too expensive. Hope this helps you to understand it.
5. Term is like renting a home chances are you will walk away with nothing, whole is like buying a home you are slowly getting "equity" in a product.
6. Term insurance There are two basic kinds of life insurance: temporary and permanent. Temporary insurance is more commonly known as TERM insurance. Term insurance has two main components: the amount of death benefit and the price of the policy (the premium). In return for the premium, the insurance company agrees to pay the death benefit upon the death of the policy owner. Term insurance gets its name from the fact that it covers you for a specific term, or period of time. Wholelife insurance Whole life insurance is so called because it provides the insured with permanent protection for the "whole of life." Whole-Life provides you with protection, but it also builds cash value and does not have an expiration period or "term". Whole life insurance is typically more expensive than term insurance because part of the premium you pay to the insurance company on a whole life policy is invested in stocks, long-term bonds, mortgages and other assets that can appreciate in value and generate income over time.
7. I would say the answer is neither, if you're buying it for your son like dragonlady. Put it all in the Total Stock Market Index fund.
8. It is hard to compare whole-life vs term-life. It depends on how long you will live. And, then you have to decide whether you want to "rent" or "mortgage" the insurance. Additionally, be aware of people who show you the stock market index, normally the funds available in the whole-life insurance may have lower return than the stock market index due to various expenses/fees.
9. Over a lifetime the overhead the insurance company is taking will kill you, just like the house take at a casino will kill you if you play long enough. The insurance industry knows this--they have highly skilled actuaries that can analyze this sort of thing--so they throw around marketing propaganda like "don't rent your insurance, build up equity". The only reason to buy whole life is if you're too lazy or ignorant to invest money yourself. If that's the case then you should get a financial planner, who will work for you for a much more reasonable rate.
10. Term is almost always the best way to go, but there's a hitch. Since you really only need it for income replacement, there is a cycle where you don't need a lot of it when you are young and childless....then you need a lot of it when you have kids who are not yet through college....then you don't need as much as they mature (unless you want to leave them something). And, it is somewhat costly to switch from a smaller dollar policy when you are young to a higher dollar policy when you have kids would might need it....back to a lower dollar policy when they are grown and when you likley won't be able to continue to afford higher policy amounts because of your age. (Remember you have to re-up your policy when the term is up or you lose your protection, unlike whole life). So, it is not a bad idea to lock in a longer term when you are younger. If you buy for example, $100K when young, then convert to $400K when you have a wife, kids, house, etc. You are going to have a bump up in premium due to amount and your age. But that same $400K at renewal (now 20 years past when you first bought), is going to be really costly and you may have to drop back down to $100K or so. OR.....you can lock in a 20 or even 30 year term rate which is higher initially but lower than the increase would be down the road if you had to re-up at the normal 10 year intervals.
11. This is simple: Whole life is very bad: It keeps your premium, you always only get same death benefit, you pay each year all this $$ and company uses your $$ to invest and profit. You build an account for no reason, if you borrow, you pay interest-why? to borrow your own money and pay yourself interest on your own money? You should be earning interest! Only Term for safe, secure amount needed. Then, invest additional funds elsewhere.