Finance Choices
Term Life And Whole Life Insurance
Which type of policy is best for you, cheap term life insurance or whole life insurance? The answer depends on several factors, including:
Your Needs. If you need coverage only until your children graduate from college, for example, you might be better off with a term life policy.
Cash-value insurance is better suited for long term needs, such as planning estate taxes and providing lifetime security for your spouse. Some term policies cannot be renewed past age 70 or 80 and can become costly to renew as you approach that age.
The Cost. If term life insurance is more suited to your budget and you want life time coverage, consider a term life policy which can be converted into a whole life policy. Then you can convert the policy whenever your cash flow or needs dictate. You can also purchase a combination of term life and whole life insurance and gradually shift into whole life insurance over time.
Your Savings and Investment Goals. Whole life insurance can be a good long term investment vehicle, especially because the cash value has the potential to grow tax-deferred. Should you no longer need the insurance but want some extra cash, you may surrender the policy and collect the accumulated cash value. Be sure to discuss the tax consequences with your tax advisor first.
As an alternative, you could purchase term life insurance and invest what you save on premiums on your own. Compare the returns you can expect, and remember to take taxes into consideration if you plan to select taxable investments.
So, Should I Buy Term Life or Whole Life Insurance? Term life and whole life insurance both have advantages including immediate family protection. Deciding which type of policy and which features are right for you takes careful consideration and, most times, a comprehensible look at your financial plan. To discuss your life insurance needs and financial requirements, contact your financial professional.
Visit the Finance Choices Life Insurance Guide for more information
Your Needs. If you need coverage only until your children graduate from college, for example, you might be better off with a term life policy.
Cash-value insurance is better suited for long term needs, such as planning estate taxes and providing lifetime security for your spouse. Some term policies cannot be renewed past age 70 or 80 and can become costly to renew as you approach that age.
The Cost. If term life insurance is more suited to your budget and you want life time coverage, consider a term life policy which can be converted into a whole life policy. Then you can convert the policy whenever your cash flow or needs dictate. You can also purchase a combination of term life and whole life insurance and gradually shift into whole life insurance over time.
Your Savings and Investment Goals. Whole life insurance can be a good long term investment vehicle, especially because the cash value has the potential to grow tax-deferred. Should you no longer need the insurance but want some extra cash, you may surrender the policy and collect the accumulated cash value. Be sure to discuss the tax consequences with your tax advisor first.
As an alternative, you could purchase term life insurance and invest what you save on premiums on your own. Compare the returns you can expect, and remember to take taxes into consideration if you plan to select taxable investments.
So, Should I Buy Term Life or Whole Life Insurance? Term life and whole life insurance both have advantages including immediate family protection. Deciding which type of policy and which features are right for you takes careful consideration and, most times, a comprehensible look at your financial plan. To discuss your life insurance needs and financial requirements, contact your financial professional.
Visit the Finance Choices Life Insurance Guide for more information
posted by Bruce Wayne at 8:23 AM
Term Life And Whole Life Insurance
5 Comments:
Great article Bruce, thanks.
Can we trust insurers?
A ST reader recently ask the question "Will insurer pull plug when policy is most needed?"
One reader who responded had this experience to share
" I took up a 10-year Red Shield Total Refund Plan (now under AXA Insurance) that was supposed to provide medical cover for me.
Under the plan, I will get a full refund of the premiums paid (principal only) at the end of the 10-year period.
Nine years and three months into the plan, with only nine months to go before its full term is up, AXA pulled the rug from under me by terminating the policy.
The reason: AXA said it was 'discontinuing the policy as it is not in line with AXA's current strategy and new corporate guidelines to propose long-term insurance cover.'
When it sold me the policy, it did not indicate that it was subjected to their strategy. I had not made any claims at all during the nine years and had paid my premiums dutifully and on time.
One would have thought that AXA would continue to honour a product it sold and make the refund at the end of the term, which was only nine months away.
It may not want to promote new long-term insurance cover products but it should honour the policies that had already been sold.
I have written to AXA and the reply I got was that it had the right to terminate the policy by giving me seven days' notice. To add insult to injury, the first time AXA sent me a cheque, it bounced when I tried to deposit it.
I am highlighting this for those who may have similar or other AXA products so that they can look carefully at the way such products are presented.
In my case, the 10-year Total Refund Plan means nothing if the insurer can simply terminate the policy without having to honour it.
This has taught me not to buy any more insurance products.
Will an insurer pull the plug when a policy is needed most? Look doubly hard into the policy before you sign on the dotted line."
Is he just plain unlucky because he had AXA as his insurer or are all insurers the same and they will pull the plug when you need the cover the most?
Any experience or stories to share so that we can take note and be a little more wary of insurers?
I want to get myself and my husband insured
I think that i want a lump sum if anything should happen rather than doing to mortgage protection etc.
Is this what is called Level term Assurance or have i got it wrong?
Also do you take out a joint policy or a seperate one in each name and how long should i take it out for?
Any help would be gratefully recevied
I can only comment on my experiences- we're buying a house and are taking life assurance.
I think the term Level Term refers to the sum covered - ie its fixed over the life of the policy.... If you insure your lives for £150,000 - whether you claim today or in 10 years, you'll receive £150,000
The alternative is Decreasing term - which is used mainly in line with a mortgage to cover it in the event of death. ... so if your mortgage is £150,000 in year 1, if you died you'd broadly be paid out £150,000 - in year 25 (When mortgage is near paid) you may only get £1
I dont know your situation, but I plan to take out a decreasing term policy to secure the mortgage for me and my fiance -then when kids come along in a few years time, I'll look to get a new life policy to pay out a guaranteed lump sum to fund funeral expenses, university fees etc etc etc.....
Hope that helps.
Term life insurance can also be used to insure your mortgage. Term life can be significantly cheaper than the coverage offered by the lending institution. It also allows you, not the bank, to name the beneficiary, thereby retaining financial control.
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