If you're even considering to buy do you've the hardest time when it comes to deciding on Whole Life vs Term Insurance?
One life agent named Vicki Gunvalson (not affiliated with our organization) vaguely states ….
". The difference of term to permanent. I think that term is being sold to a lot of clients under age 40 where I try to talk more permanent coverings when over age 40 with more on the estate planning side where it's something they want to have for their beneficiary's benefit when they're an age 100.
So with term we could obviously only go 20 to 30 years but when we're looking at 40-50 year olds I always talk to them about permanent coverage . ".
In contrast to what Vicki states we wholeheartedly, wholeheartedly believe that no one should purchase anything other than term life ins. When you've an agent trying to sell you Whole Life, Variable Life Insurance or Survivorship Life Insurance then be extra cautious with this because they may be looking at their own interest and financial gain rather than you and your loved one.
Whole Life vs Term Insurance
Permanent Insurance, which includes Whole Life, Universal Life, Variable Life and Survival Life Insurance. When you understand that the cash value really means nothing to your bottom line you'll never think about purchasing any of the types of permanent ins.
Cash Value is the "investment". Portion of life ins that you can access through loans or withdrawals. The death benefit may be reduced with the withdrawals and there may be some charges which could affect your policy in the future.
Also, you definitely don't want to have life coverage forever. If you understand how expensive continuously paying into a life policy can be you'll definitely rethink this purchase. At age 100 the cost is $ 1000 / month for every $ 1000 of coverage. So if you've a $ 500,000 policy it'll cost you $ 500,000 per month at age 100. You only need it when you're younger and when you've dependents counting on you for your income. Outside of that temporary time period you don't need this coverage. Again, it's only for a temporary period of time.
Insurance agents that tell you the benefits of cash value either don't know how bad a permanent insurance policy is for you or they don't but chances are they know how much commission they stand to make from selling one of these whole life policies to you and have chosen that route instead of looking in you and your family's best interest.
What? Do you mean I get to invest with a life policy? isn't that wonderful?
Yes, there is an investment portion to these permanent life policies but in reality the cash value is never really yours. It's the insurance company's money and they'll allow you to borrow from it. they'll tell you that you can borrow from it to pay for your children's college expenses, medical expenses, emergencies or for retirement. But you must pay the funds back with interest to the life ins company.
Borrow and pay back my own money with interest? Are you kidding? isn't the cash value my money?
Sorry to tell you but it's not. Until you cancel the policy you're paying an intense premium into an investment + life ins that you don't have control over. It's really the insurance company's money. Also, the investments that they offer you're very limited and they make additional taxes off of the investments that you choose because those investments wherever mutual funds or money market funds are held until the insurance company you purchase your policy from. you've a limited number of investment choices and they may not be the best funds to choose from either.
If the life agent, after trying to push whole life / permanent insurance onto you then switches to term insurance and tries to sell you that type of life ins just leave the office. don't deal with them any longer. They tried to push an insurance product on you that wasn't in your best interest and now have to resort to selling you a lower commission product.
Term Insurance and Savings you'll Have
Term Insurance is pure insurance without the investment portion. The amount of money that you save purchasing a low cost term life policy is huge compared to buying a whole life policy. NOW take those savings and put it into any investment (mutual funds, stocks, bonds, money market) of your choice.
YOU CHOOSE what investment you want for yourself OUTSIDE of the life company. KEEP YOUR INVESTMENT AS FAR AS YOU CAN AWAY FROM ANY INSURANCE COMPANY.
You control it. You manage it and make withdrawals whenever you please without "borrowing". From it as you'd from a Whole Life Policy / Permanent type policy.
So forget Cash Value! It's a low way way for the company to try to get you to give them a larger amount of commission. Be careful when dealing certain agents as they may try to convince you that you're buying term and later tell you that you can add a savings plan or investment portion with the term policy. Best rule of thumb is to keep any type of investment away from your policy. Have FULL CONTROL of your money when you separate your and your investments.
Whole Life Insurance vs Term Insurance
Other phrases they may try to use:
- Whole Term Life Ins
- Whole Term Ins
- Permanent Term Life Ins
- Term Life Insurance Cash Value (Just another phrase to get you to purchase whole life)
- Variable Term Life Ins (Another phrase to get you to purchase whole life)
We fully support Suze Orman's stance on Life Coverage. She tells it like it's without any fluff when looking at Whole Life Ins .