Expert Q&A

Comparing Term and Whole Life is commonly used in an analogy
of renting or owning your home. You certainly need a roof over your head (Death
Benefit), but many people prefer to own their home because it gains equity
(Cash Value). By renting you get a roof over your head, by owning you get a
roof over your head and earn equity. Both are useful and have their place in
future planning. Sit down with a professional and discuss your particular
situation.

Term is renting your insurance for a specific time (10,15,20 years etc…) after the terms of the lease if you want additional coverage for another term the premium will increase or might have to do another physical. Whole Life is paying a fixed premium amount, which is slightly higher, but does not go up at the end of the term, with the intention of owning your policy where it does not expire.

Term is a lease, just like an apartment you pay only for the insurance coverage for a set period of time, ex.10, 20 yrs. Whole life is owning your policy just like a home , stable premium, equity build up for future use, you decide how long you want to keep the coverage in force.

Term Insurance-

Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value. You can renew most term insurance policies for one or more terms even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase. You may be able to trade many term insurance policies for a cash value policy during a conversion period–even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Cash Value Life Insurance-

Cash value life insurance is a type of insurance where the premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value if you stop paying premiums and take out the remaining cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums. You can also use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash value life insurance may be one of several types: whole life, universal life, and variable life are all types of cash value insurance.

The whole story with term life insurance being “renting” and whole life being “owning/buying” is a salesman trick. You “own” both types of policies but there’s a catch. Did you know that if you bought a whole life policy (insurance + savings program) and you died, the company usually keeps the savings. In essence you bought two products but only get one. Don’t get tricked by whole life salesmen, no matter what they call themselves, such as “advisers”.

In addition, a term life insurance can have many great benefits consider speaking with a financial services professional.

Many benefits can include: low monthly premiums, more coverage, can be 10,15,30,40 years, can offer a return of premium, and disability income protection.

Unlike a whole life insurance were the cash values is a set amount of money, a term life insurance with a return of premium can be just as beneficial for the family.

The difference is huge. Term insurance is “pure” insurance, it is a lot cheaper and therefore you can get a lot more protection for your money while you need insurance (e.g. you have young kids, mortgage, not much assets or low net-worth). Whole life is a rip off where the insurance company takes your money, uses it for their own benefit, and gives you back a worthless “guaranteed” return, amongst other issues. “Buy term and invest the difference” here is a nice video: http://www.youtube.com/watch?v=gvjir8yxPUI

Enjoy.

Term life insurance provides protection for a specific period of time and is designed for temporary circumstances. I makes the most sense when your need for coverage will disappear at some point in the future, such as when the mortgage is paid off, or the children are grown. Term insurance usually offers the greatest amount of coverage for the lowest initial cost. Whole life or permanent coverage offers lifelong protection and the opportunity to accumulate cash value on a tax-deferred basis. This cash value can be used in later years for a variety of purposes, such as supplementing your retirement income. Initial premiums are usually considerably higher than those for a term policy.

Both have their place. You have to 1st consider your need and then your budget. Term is typically referred to as “renting” and whole life is “buying” life insurance.