All Life Insurance Tips - Term Life Insurance vs. Whole Life Insurance??

Term Life Insurance vs. Whole Life Insurance??

I have heard many arguments, can you guys give me some input please? I have been told that whole life is a ripoff, but I need some examples. Thanks

Public Comments

term life insurance is the smarter way to go.
Have you tried searching? I've answered this question at least a dozen times in the last two weeks. See the answer pasted below: That all depends on which is better for the person purchasing the insurance. There are also a couple of other options available besides term and whole life, including universal and variable. Term life is relatively cheap and tends to be a good fit for people looking to replace income during the prime earning years. (Take a calculator and multiply your current salary times the number of years you plan to work. That's the amount of income your family would be missing out on if something happened to you this year. Actually, it's a conservative estimate, because it doesn't even factor in raises, etc.) The biggest drawback to term insurance is that it will eventually go away. When the term runs out, it runs out. Most companies will give you the opportunity to convert some or all of the coverage amount to whole life at that point and while there will likely not be any need for evidence of insurability (meaning that you probably won't have to reapply, answer medical questions, or have a medical exam) your rates WILL be based on your age at that time. (And you can bet the rates will be significantly higher than if you'd purchased it earlier.) This is why I usually recommend at least a small whole life policy to cover final expenses in combination with the term life policy. Whole life insurance is designed to cover you until age 100. People talk about the fact that whole life builds cash value and it does. You can borrow against it, if you need to. There are two types of whole life, though: participating and non-participating. For the non-participating type, it will NEVER be worth more than the face amount. Period. The participating type takes the cash value that builds up over years and when the cash value becomes worth more than the face amount, the cash value is used to buy paid-up insurance. This type of policy still won't pay out the "cash value"; however, the policy will become worth more than the face amount once it goes beyond a certain point. Universal and variable are different animals entirely. Universal can be used similar to a term policy that, effectively, never ends. In other words, it won't really build cash value (at least, not after the first few years), but it will provide insurance to age 120 (or even longer, depending on the contract.) And because it's a universal product, you have more options about how it's paid. For instance, I usually set these up for my clients so that they stop paying for them at age 65, based on the idea that this is the age they will typically be preparing to retire and have less income with which to pay. The premium they pay till age 65, in that case, is usually only slightly higher than someone who was scheduled to pay through age 100, but they aren't saddled with that ongoing responsibility (and yes, the policy remains in force.) Variable life requires a different type of license to sell because it's not a guaranteed value that it will pay out. These are typically purchased more for an investment than as true life insurance. And frankly, I think you could do better with other types of investments and not have to worry that your life insurance might run out of money (yes, even if you've been paying into it consistantly) about the time you need it most.
Several months ago I was confronted with this very question. After extensive research in speaking with friends, relatives and mostly on the internet, I reached the following conclusion: A combination of term and whole life that fully insured my life and the life of my husband and which fit into our long-range budget would be the best way for us to go. For this to fit into our long-range budget it was very important for us to guarantee a fixed cost throughout the life of this plan and that this plan must last a lifetime. In using fixed cost throughout our lifetime it is guaranteed that the annual premium we pay in Real Dollar Terms will decline over time. This is true because $1 spent today (fixed each year) will be less spent in the future due to inflation. Not just any term or whole life will work for our budget plan to work. On the term side we needed guaranteed level premiums for an extended period of time. On the whole life side it was very important that we receive a good return on the money directed into the whole life policy without undue risk. The traditional pure whole life plans will not work for us because the annual premiums are a budget buster (I do not want term built into the whole life because the term cost when built in is not fixed - we looked at Northwestern and Mass Mutual). Variable life where the cash value is invested in mutual funds within the policy is too risky for us and contains many more fees (Two friends of mine had this kind of policy and it feel apart during the bad stock market period a few years ago). A Life insurance plan should not fall apart because of the stock market or from low interest rates. It must be there though all conditions. Universal life also called whole life or permanent by some, is neither for your whole life or is permanent life. Are you aware that these policies may fall apart just when you need it most. Near your normal death age. This may happen in a low interest rate period. It's very important that you get the lifetime guarantee rider attached to these policies to guarantee that they last your lifetime. So what did we decide on after all this? We purchased a 30 Year guaranteed level term policy for 60% of the $1,500,000 of life insurance we each needed ($900,000). We could have gone with the 20 Year, but we wanted to make sure we had this coverage in place to near age 70 because we expect to work in some career beyond age 62 or 65. Also, if you buy the 20 Year and you find that in 20 years you need to buy new coverage, any negative health condition will bump you into paying a very high premium even for term insurance. A risk we do not want to take. For 40% of the $1,500,000 ($600,000) we purchased EIUL or what is called Equity Index Life Insurance. We looked at this three ways. 1. Minimum premiums paid for life to guarantee the death benefit for our lifetime or age 120 whichever is longer. Note: this cost is fixed and will never increase. 2. A higher premium paid to age 65 (Policy is guaranteed and fully paid off) to guarantee the death benefit for our lifetime or age 120 whichever is longer. Note: this cost is fixed and will never increase. 3. An even higher premium paid to age 65 with the sole purpose of driving the death benefit upward over our lifetime. (Policy is guaranteed and fully paid off) to guarantee this increasing death benefit for our lifetime or age 120 whichever is longer. Note: this cost is fixed and will never increase. Why EIUL or what is called Equity Index Life Insurance? Because the interest we earn on the cash value in the policy is based on stock market indexes. The neat thing here is that you have no risk of market losses you only share in the gains. Your cash value only goes higher and never ever down due to the stock market index. We purchased # 3 and we used an internet service to make our purchases. This particular service is actually owned by a very experience CLU, ChFC and he worked very hard to help us find the very best solution and the very best deals for us. We made the final decision and we made it at our pace. No pressure at all. Just an unusually great experience in buying life insurance. You may not need $1.500,000 of insurance each like we did and your split between 30 Year level term and EIUL may not be 60% / 40%. Just know that I did all of this research for the both of us and I can highly recommend that this solution will work for you as well. This is where I ultimately found this specific solution (I tried many places first) and we made our purchase here. http://www.joesalvemini.com/life_insurance_quote I hope my research, what I went through and my recommendation helps you save a ton of money just like my husband and I did. Remember a long range fixed cost over life is the very best way to meet your life insurance needs. This is true because $1 spent today (fixed each year) will be less spent in the future due to inflation. Get this right the first time and enjoy your life! Rich Kathryn
better whole life, but a mix is better
you got all wrong. insurance companies make all their money in term life insurance. what you think they get rish by giving money away,lol. term life means if you dont die in 5,10,15 or what ever the term is your family will not get any money. metlife is the best, over time you will still get some money if you stop the policy after some time .only in whole life .
Depends on what you want it to do. If you want insurance to pay for your kids to get through college if you kick off, well, once they get through college you don't need it any more, so you'd need TERM insurance. If you want insurance to pay the estate taxes on the family farm so the kids don't have to SELL it, well, you're GOING to die sooner or later, so you need PERMANENT insurance, or whole life. They both serve different needs - there isn't any "one size fits all". It's like a hammer and a screwdriver - you use 'em for different things. You have to identify what you want it to do, first, THEN find the tool to fit your need.
ISOintelligentlife is pretty much the best answer except she should make it clear that you can also buy increasing-benefit whole life that is NOT participating. This is simply whole-life coverage intended for funeral expenses that has an inflation protection built in. The death benefit (face-amount) increases by between 3 to 5% each year. It does not rely on dividends for policy increases.
It truly depends on your situation. Are you in a higher tax bracket? Have you maxed out your 401(k) / Potential IRA contributions? Do you have problems saving money? If you are buying a whole life policy it is probably only a good idea from a select few companies, unless you are buying it for estate planning reasons. Be sure only to buy a policy from a mutually owned insurance company. One of the following, Northwestern Mutual, New York Life, Mass Mutual or Guardian Life are all great options. These policies will never decrease in value and all of these companies pay strong dividends on their policies. Another great advantage is how you can access the cash, tax free, with little or no charges. Lastly, very few investments will grow so greatly in value in your later years like these. For example, if you simply invest in tax free funds, at some point in your life you are going to want to be more conservative with your money. With whole life policies, the greatest returns are in the later years which can be 10 to 20 times the amount you pay in annually, no other financial instrument will do that for you.
Logically, life insurance agents and other people such as financial advisors would recommend whole life insurance or universal life insurance than term insurance because it pays higher commissions. Whole life builds up cash value because the insurance company don't want the risk of being unable to pay death claims in the future. But they sell it as a good way to save for retirement. Clients think it is good plan to have, but in reality when they die, they lose all the cash value, unless they pay an annual fee to have this cash value included in the death benefit. Plus clients can also borrow the cash value and pay a loan interest on it. If you own a savings account, do you ever have to borrow your own money? Then why is there a loan feature in the life insurance plan? The answer is simple: The cash value don't belong to the client at all, thats why they can borrow it anytime or lose it all when they die. Either way, its a win-win situation for the insurance company. With term insurance, it doesn't build any cash value. Therefore, the premiums are very low. Since premiums are low, these gives clients the flexibility of putting their money somewhere that they can access anytime and never have to take a loan out. Lets take a HYPOTHETICAL example of the difference between whole life insurance and term insurance in numbers. Lets say this person is 30 years old and is rated non-preferred. Whole life: Coverage: $100,000 Premiums: $1000/yr until age 98 Cash value: First 2 years, $0. By age 60, $40,000. 30 year Term: Coverage: $100,000 Premiums: $250/year for 30 years Cash value: N/A Investing the difference... Invest $750/year or $62.50/month @ 0%: By age 60, have $23,250.00 At 5%: By age 60, you will have: $55,675.86 At 12%: You will have $249,400.28 in 30 years. Taking a look at the difference, would makes more sense to you? Whole life or term insurance? You probably asking how can I get 12%? Simple, you can earn 12% from mutual funds. I have putting away $100/month into 3 different mutual funds and the rate of return on my portfolio has been around 11.15% in the past 3 years. Ok, what if you only invest $100/month? Would you still buy cash value life insurance? @ 0%: You will have $36,000 in 30 years. @ 5%: You will have $83,573 in 30 years. @12%: You will have $352,991 in 30 years. How much would it cost if I renew my term in 30 years, keeping coverage the same? At age 60, most insurance companies can only offer term up to 20 years. So, for 20 year term for $100,000 coverage: $1500/year. Yes, this would seem more expensive than to buy whole life 30 years ago, but you need to look a the cost. Comparing term and whole life: With term insurance, you are paying a total of $7500 in premiums from age 30 to age 60. With whole life, you are paying a total of $30,000 from age 30 to age 60. Then you renew it to a 20 year term, you are paying $30,000 from age 60 to age 80. With whole life, you are paying an ADDITIONAL $20,000 from age 60 to age 80. So total cost from age 30 to age 80: Term insurance: $7500 + $30,000 = $37,500. Whole life: $30,000 + $20,000 = $50,000. At age 80, do you think really need life insurance still? What finanical obligations do you have at age 80? I doubt you will have any kids to take care of. I almost certain that your mortgage is paid off. As for credit cards, you should be able to pay the balance off each month if you started investing at age 30. Do you see why term insurance makes more sense than whole life or any other kinds of cash value?
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Term life insurance in my opinion is better. Visit http://www.cheap-credit-cards.org/insurance/term-life-insurance.php for more info
add up the premiums you pay every year on a term insurance policy until age 80 and then add up the premiums every year on a whole life insurance with a company that pays dividends into the policy (like New York Life, Northwestern) until it's a paid up policy. Assuming you will live for a long time, which people usually do, are you paying more for term or whole life? Then ask yourself, do you need life insurance that's temporary or permanent?