Term life insurance versus whole life insurance

trapsetter · #1 05-23-2007, 08:56 PM

In your opinion, which of these is better, and why?

firstyearclay · #2 05-23-2007, 09:31 PM

1k views no replies?????

fyc

mosdef · #3 05-23-2007, 09:33 PM

[ QUOTE ]
In your opinion, which of these is better, and why?

[/ QUOTE ]

They each have advantages and disadvantages over the other. That is why they both exist.

wdcbooks · #4 05-23-2007, 09:34 PM

Term life insurance will almost always be better. Term insurance is a contract for a set period of time, you can usually choose intervals from 5-40 years, with a set premium and a set benefit to your beneficiary if you die. If you don't die then you don't get your money back. Whole life is a policy that is good for as long as you live. You pay a set price to buy insurance and as long as you keep paying, your beneficiary receives the face amount on your death.

Whole life can seem like a better deal because you can borrow off the policy and it accumulates a cash value. The thing is that for equivalent amounts of coverage, whole life is much more expensive than term insurance. You are almost always better off paying the lower premium for term and investing the difference between that cost and whole life.

There are cases where permanent life insurance is a solid choice, but they just don't apply to most people. If you need permanent insurance, for instance to settle your estate tax obligations, or to provide for a disabled family member then you may choose permanent life insurance. Also some people use life insurance arrangements for tax reasons, but this doesn't apply unless you are a high net worth investor.

One thing to be aware of is that an insurance agent has a vested interest in selling you a permanent and expensive policy. Their commission is often 7-10 times higher on a permanent policy than on a term insurance policy. That leaves you to do a lot of research on your own to make sure you are being advised correctly.

wdcbooks · #5 05-23-2007, 09:35 PM

I should stress again that neither is 'better'. Term is the correct choice for a larger number of people who just want to protect their family in their earning years and are not facing a special situation.

ChipWrecked · #6 05-23-2007, 10:00 PM

[ QUOTE ]
In your opinion, which of these is better, and why?

[/ QUOTE ]

Whole life: better for your agent. Your entire first year premium, or more, goes into his pocket.

Term life: better for you. As A. L. Williams (Primerica) used to say, 'buy term and invest the difference'.

prohornblower · #7 05-23-2007, 10:14 PM

Dave Ramsey also swears by Term.

ridonkulous · #8 05-23-2007, 10:22 PM

LOL @ quoting Primerica.

There is no correct answer to your question OP, it depends on your situation.

trapsetter · #9 05-23-2007, 10:24 PM

Thanks for this. I just bought term life. I'm 32. I bought a 30 yr, preferred non-smoker policy for a $4 mio payout to my wife. Annual premium of $3,549.

I ran the numbers myself between whole and term and to me it was an absolute no-brainer to take the term. I just wanted to see what OOT thought.

Appreciate the run-down. That is pretty much how I saw it in my analysis.

trapsetter · #10 05-23-2007, 10:31 PM

[ QUOTE ]
[ QUOTE ]
In your opinion, which of these is better, and why?

[/ QUOTE ]

They each have advantages and disadvantages over the other. That is why they both exist.

[/ QUOTE ]

My bottom line in the long term is the priority. I don't care about "forced savings" and what have you. I'm not an undisciplined person when it comes to my finances.

I see no reason to have whole life over term, if we're counting the dollars off my bottom line long term. Prove to me that I'm wrong.