Should I purchase Term Insurance not Whole Life and invest the difference?

Question

Whole life cost more, but with Term I could cut that in half and invest the other portion of the payment...it's a good idea eh?

The anwers from my question has been overwhelming and I thank all of you who have tossed in their twop cents worth million dollar knowledge. Thanks...Al

Answer 1

It depends upon a variety of factors. Do you expect to need life insurance in your retirement years after your home is paid for and kids are moved out? Are you afraid of potentially becoming uninsurable in the future? Or do you expect to be very wealthy, and after contributing the maximum amount in your 401k and IRA, you need other tax-advantage vehicles such as Cash-value life insurance to stash your money. If you answered yes to any of these questions, then you might consider a whole life policy, universal or variable universal policy.

If you answered no to these three questions, then buying term life insurance and investing the difference will be cheaper and help you accumulate money faster. There are extra costs involved of whole life and universal policies. These costs add up and the difference in premiums can be substantial.

Term Life insurance is pure insurance, no fancy bells or whistles. The difference in premiums for the same amount of insurance could be 75% less for term. That is a huge, and investing the difference could be significant, eventually outpacing the actual value of the policy.

Personally, I have term.

Answer 2

The answer to this one is simple. Is the term policy convertable to a whole life policy at the end of the term without any medical questions or considerations? If so, the term policy is great because the premiums are low and will never go up until the end of the term. However, consider what the premiums on a whole life policy might be at the end of your term. Take into account your age at the end of the term and get a quote for a policy today. This premium will more than likely be more than it will be when you are actually at the end of your term because insurance companies update their mortality schedule about every seven years and we are living longer which allows them to lower rates.

Now, about buying term and investing the difference, do you truly believe you will be disciplined enough to save the difference in the two premiums through the end of the term? If so, it is a great idea based on the assumption of the theory of decreasing responsibility which states when you are young, you have more debt and less saved and when you are older, you have more savings and less debt. Think about it and get some professional advice from a certified financial planner.

Answer 3

No it is not a good idea. Read the fine print. You invest in term life and then when you need life insurance the most it is canceled
because it is insurance for a limited time. Then you are usually too old to get any other life insurance. Whole life insurance is
an investment. You are banking money for the rest of your life and
will have something to leave loved ones. When Term insurance
ends you won't get your money back. Term Life insurance is cheaper because it is usually a rip off in the long run.

Answer 4

Couple of things to consider. What is the interest rate on the whole life, for one. If you can do better in a mutual fund, and if you REALLY WILL invest the difference, then sure. Other consideration is, term ends at the end of the term. Will you still be insurable (re-insurable) when that happens? What if you've come up with cancer by then, or something. So, each one has merits. Term is best if you truly only need it for a specific term, like till your kids are out of college or something, in my opinion.

Answer 5

ABSOLUTELY !! Never buy "whole life" !!!

By investing the difference you will be soooooooo much farther ahead.... You will have THAT money as well while you are still alive... Keep in mind you do NOT need life insurance if, when you die, you will impose NO financial burden upon anyone. Only have enough to bury youself...

If you are leaving behind a family who depends upon you, then you need to do your calculating and get a term that fits it !!

Good Question !! and stay away from whole life !!! : )

Answer 6

I don't particularly care for whole life insurance. If you're looking for a permanent life insurance policy, I'd explore universal life and variable universal life.

Back to your question about buying term & invest the rest. If you are ONLY concerned about the price of insurance, then term is your best option.

However, don't totally discount permanent life insurance. It can serve a valuable role in a comprehensive financial plan.

Answer 7

whole life is a terrible option as an investment vehicle. with the myrid of investment option you can do much better that insurance.

Using Whole Life as an investment tool is like puting you money in to a regular saving with low interest but you cant make any withdrawls.

Not a good option...

Answer 8

Depends on whether or not you want the coverage to be permanent. The term will eventually lapse or become cost prohibitive.

Also, some estate planning applications call for permanent insurance.

But generally, you're right. Buy term and save the difference into a good mutual fund.

Answer 9

Excellent choice. The money that you invest is yours. You can take it out and do whatever you want with it. You decide what to invest in. Giving it to the insurance company you have no say in what they invest it in. You can not get that money back. They will let you borrow against it and pay it back with interest. The insurance companies hate it when you invest it yourself; they lose money. Your rate of return is better when you invest yourself.

Answer 10

Yes that's a great idea! Two problems in life: living too long or dying too soon. Dying too soon is solved by having life insurance. Living too long is solve by having money in retirement account.

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