What is the best type of insurance to buy term or Variable Universal Life? Why?

Answer 1

Term is the cheapest life insurance out there that can provide lots of coverage. It gives you the flexibility of investing for your own. Most people usually invest in mutual funds or setup a IRA account. That way, when you die before the term expires, your beneficiary will get insurance proceeds and your investments.

With Variable Universal Life, you are paying for insurance and investments. Therefore, this policy is more expensive than term. While premiums maybe flexible, your coverage amount will fluctuate if you do not pay your premiums. You have limited number of companies you can invest in. When you die, your beneficiary will only get the face amount while all your investments in the policy are kept by the insurance company.

Which one appeals to you the most?

Answer 2

You can easily get and compare quotes from different companies at: INSTANT-INSURANCE.NET

Answer 3

Whole/Variable/Universal policies are great for the insurance agents. They get people to commit larger sums that are needed to secure life insurance and some form of savings/investment. The key is the internal fees are very high and the return is less than you would get by buying 30 year certain term insurance and investing the balance in good, no load Mutual Funds. I say, support your local insurance agent. There's no reason for you to maximize your earnings. It's better that the agent and their comany get money from you, than have it saved for your retirement. READ READ READ...... There are plenty of articles and books on how to handle your insurance needs without hurting your retirement money, living costs and insurance needs. BTW: Buy insurance even if you don't have children. You need to protect your insurability. I got very sick at age 40. I can no longer buy life insurance. It's a good thing I had purchased low cost 30 year certain term insurance and invested the balance in good, no load Mutual Funds. serubjb has the "rap" down pat. His points sound good. In reality if you follow his suggestions you're hurting yourself and family. THE COMPARISON TO RENTING vs OWNING A HOME IS TOTALLY OFF BASE! It's more like buying a house that has many more rooms than you'll ever need with a high fees (interest, taxes etc.) whose resale value would be less than the correct sized house in 25 years.

Answer 4

You didn't give enough information here to made a good answer.
It really depends on your situation.
If you are a good investor and only really want to make sure your family has enough to pay debts, mortgage, college expenses, then buy terms and use the difference to invest aggressively. Then, at some point, when you have paid off the house and don't have college to pay for, drop the coverage and invest all of what you would have paid as premiums.

If you are not a good investor and want to use the insurance as a nest egg or inheritance and don't want the hassle of always worrying about the investment, then buy a whole life policy.

Personally, I buy a lot of term and invest the difference.

Answer 5

I say buy term life and invest the money you save. The money you make on the investment will most likely beat variable universal life insurance as an investment. Variable universal life usually has high hidden fees that result in a lower return than investing on your own. See these links for more information.

Answer 6

Which insurance is better for you depends on what kind of a saver you are. Most of the answerers above have been clamoring with the "buy term invest the difference" and it's not a bad thing... assuming you are very good at saving. Let's face it, America is not very good at saving money. A Variable Life Insurance policy is tantamount to a Whole Life policy with a built in IRA. It's true, it may have higher managing fees than other financial institutions. However, for those of us who are terrible savers, it's not a bad trade off. You send in a check for your premium and part of it goes into a savings for you. This "cash value" that you accumulate can be used to continue payments on your policy further down the road, or you can borrow against it. I say "borrow" because it doesn't actually pay you like an IRA. The amount you "borrow" is deducted from the policy face value upon the maturity of the policy (when you pass on) complete with interest factored in. What many people do is "surrender" the policy at the age of retirement and get their "cash value" as a form of a retirement nest egg. Hence, the "retirement savings" angle that many Life Insurance Agents tell you about.

One very good point that was made was about Estate Taxes. Let's say you get really successful and you build up a networth over $2mil. Anything over $2mil is taxed at 42% when you die. So let's say you have $4mil when you die. Uncle Sam gets to take $840,000. So that means your family (wife and kids) would have to pony up $840,000 in taxes. If most of your net worth is tied up in real estate or stocks or whatnot, they would have to sell it all to come up with the cash to pay the taxes. So what many people do is they get whole life insurance that covers them until they pass away (Term only covers for a specific period of time). The amount they insure themselves for is usually the amount that would cover the estate taxes and then some. So when the pass away, voila! Instant cash to pay taxes.

So in short:

1. Buy Term if you are great at saving and don't have a networth that's over $2mil.

2. Buy Whole (or some variant of it like Universal or Variable) if you are terrible at saving and want some equity down the road that you can surrender the policy for, or borrow against.

3. Buy Whole (or some variant) if you have a networth over $2mil.

I hope that clears up a few things. Good luck!

Answer 7

Where do all these "Buy Term and Invest the Difference" people come from? Do they not realize that over time a tax-deferred investment vehicle will by far outperform any taxable investment?!

You can never regain the cost of a term life insurance policy. Its just like renting. Don't get me wrong, term serves a useful purpose if your insurance needs are temporary. But if you have a long-term perspective, permanent life insurance is far better than "Buy Term Invest the Difference."

Haven't you people ever heard of Estate Taxes?!

Answer 8

Bicycles are perfectly good ways of getting across town when you need to and they are really cheap.

Term versus VUL is a more complicated question than can be answered on this forum. Both are tools to accomplish a task. Used correctly, they work well. Used incorrectly, they can cause more trouble. Term insurance has its place IF you know that your need for insurance coverage will disappear. Will your debts be paid off when the term expires? Will people in your life depend on you as a source of income?

As to which is better, you would have to post ALL of your personal financial information here to make that assessment (age, health, income, assets, debts etc). Since I doubt if you want to do that, go talk to a licensed insurance agent or financial planner. Expect to pay a fee. Search for one that listens to your goals, needs and wants. That professional should ask about your financial information. If he/she does not, find someone else.

Answer 9

I havent got much to add to above answer. But term insurance is the low cost product which helps u in insuring yourself well. Premiums for other products are comparatively high and thus buying big insurance can be difficult.
Also the insurance shouldnt be confused with investments. Power of compounding can help ur investments grow far better than the insurance fund. So it is always advisable to insure urself fully and invest the surplus properly

Answer 10

Term Insurance may be the way to go IF the following apply:
1 - you are older & just want the coverage, AND
2 - you do NOT need to withdraw money from your policy.
3 - If you only need coverage for a specific time.
4 - If you are buying the coverage for a Business Partner.
Universal Life may be the way to go if the following applies:
1 - You are younger
2 - You may need to pull money from your Life Insurance policy later on.
3 - If you are buying this coverage for your child.
((I think that - sometimes, some policies will reach a point where they policy pays for itself, after you make a number of payments))