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Archive for October, 2012

Term or Whole Life Insurance – You Choose

October 21st, 2012 at 11:54 pm

Many people have debated the topic of term or whole life insurance for years. And, they probably won’t stop. The question: should you buy term life insurance or whole life insurance? Some people have endorsed the philosophy to “buy term and invest the different,” while some advocate to purchase “permanent” life insurance. No one should make a decision on something so important unless they are informed and educated. However, below is some essential information, which I trust, will help you make an informed decision about your insurance needs.

Term Life Insurance
Term life insurance is the easiest life insurance to understand. It is called “term” because you are protected for a specific timeframe - a term. The awesome thing about term insurance is that you can get a lot of coverage for a small cost; for a specific time period. You can obtain term insurance for a term of 30 years and for as little as one year. With term insurance, you get what you pay for. It’s not complex, confusing, or full of bogus promises. Matter of fact, with some companies you can get a $250,000 term policy each for a couple for 30-years for as low as $79.00 a month. Insurance professionals and financial planners will tell you it is temporary insurance. Why? Because once the insurance term runs out, you lose insurance unless you renew. The money you save with term insurance gives you margin to be able to invest in your retirement, CD’s, 401k, money market or mutual fund. In other words you can buy term insurance, save money, and invest the difference.

Whole Life Insurance
Whole life insurance gives you insurance coverage for your entire life. However, you must keep on paying the premiums on time each month until the policy is paid up. Various term life insurance policies can be converted into a whole life insurance policy. With whole life insurance the premiums will be much higher than term life. However, the premiums are fixed for life. Most insurance professionals will encourage you to get whole life for the insurance and as an investment. The investment part is a guaranteed cash value that you can borrow against. When you pay your premiums, part of the money goes into the guaranteed cash account. However, if you take any of the cash value or decide to borrow a portion, the value of your policy decreases. Plus, you have to pay interest on the money you borrow. Using whole life, many people tend to believe the cash value is their financial security pot. In actuality, the return is very small, and any withdraw will diminish the insurance amount and cash value.

Bottom line: you have to decide if term life or whole life is best for you. Your life insurance decision is a personal one, but it should also be a smart financial one. Your decision has to make sense for you, your family, and your personal situation.

So what do you have term or whole life insurance and why?