Term Ins. vs. Cash Value insurance which is better?

Answer 1

Great, we have some Suzie Orman's in the crowd, giving advice without any fact-finding. Term vs Permanent is the battle of the ages. Term is like renting an apartment, Permanent Life is like buying the condo. When you tell the landlord you are moving, you are lucky to even get your security deposit back. When you decide to sell the condo the profit, or lack there of, is dependent upon what is driving the value (in Permanent it is the sub-accounts, interest rate, or dividends), like the condo association there are fees associated to the Permanent plans.

There are benefits to both, although the one thing common is that the only way either is of value is if the policy is inforce when you die, lapsed policies of either type are no value to anyone. Having said that, only 3% of all term policies are paid out. Primarily because people generally out live the term (5,10,15,20,30 years) and term policies are sold through group plans, of which the VAST majority of these policies are not portable.

Term is less expensive. Pemanent plans have higher costs associated to them.

The Ormanheads really cause more damage than provide benefit. It really depends on YOU and your plans! What is the benefit for? Do you have disability income insurance? Let me reprase that, do you have ENOUGH disability insurance? Are you participating in your 401K and or ROTH? Are you looking for another avenue to grow additional money tax-deferred? Are you willing to take the tax hit when pulling money out of an investment with a "term and invest the rest" plan? If you invest the additional money into your property, then need to borrow that money, will you qualify for the loan? If you become disabled during the term life years, are you going to have the resources to continue investing into a 401k/Roth? Do you have Long-term care insurance?

As of 2010 it will now be easier to do a 1035 exchange from a permanent life policy and/or annuity to buy long-term care.

See, the battle will remain. I know the various stats which my industry is founded, as well as those that are estimated for the future. People are living longer, programs to assist the aged and retired are getting smaller. The days of only having $10,000 of life insurance are over, OVER! Pensions and 401ks are being eaten alive from medical and long-term care costs. What about the surviving spouse? Where does the additional money come from if that person lives to be 85-90 years old?

Do yourself a favor. Meet with someone that provides you with value, knowledge, and options in assisting you put together YOUR plan. If you meet someone that tells you one product is better than the other without any fact-finding DON"T WORK WITH THAT PERSON! They already have preconceived notions of forcing you into their model of life.

Answer 2

Hi! I am a new licensed insurance agent, and I'll give you what I know! There are different types of Term and Life insurance. Term is basically an insurance that has payable benefits at death only. Life has a cash value that you can cash in the face value of, as well as you gain the interest. Your beneficiary will recieve the "actual amount" of purchase upon your death. The cash value grows as you get older, but you have to get to be a mighty ripe age before it amounts to much! If you are looking for protection for who you leave behind...I feel that Life is a better choice, but there are benefits to both. If you are looking for some extra cash as you get older...there are more efficient ways of gaining! I will tell you that having EITHER one is far better then leaving your family without anything! It all depends on what your purpose is, but any type of insurance will keep your family's head above water, and continuing on without becoming financially devastated! Hope this helped a little! Good Day!

Answer 3

You would be FAR better off to purchase term life insurance and invest the difference in another investment vehicle - a 401k if your employer offers one, or an IRA that you could set up with the help of a financial advisor. There are two obstacles that few people overcome when attempting this: First, insurance agents want to sell whole life policies rather than term life - higher premiums and higher commissions. Second, many people say "I'm going to buy term and invest the difference" and then they buy term, but never follow through on the other part. You should find the book "The Wealthy Barber". It really is an easy-to-read guide to understanding personal finance and will really clear this up for you. Also, I WAS a licensed life insurance agent for a few years. I quit selling and let my license lapse because I felt it was an unethical industry, and I was being pushed by my company to sell our whole life plan rather than term life. I personally crunched the numbers over and over again and found that whole life is a terrible investment, so I refused to sell it. And just so you know that I really understood what I was doing - when I took my insurance licensing exam, I had the highest score ever achieved in my agency.

Answer 4

Cash value insurance, bundles savings with Insurance, therfore you are paying a larger monthly amount. Whole life insurance is for life, whether you have the need or not. The so called savings part does not start to accumulate until at least 2 years. (So if you were putting money under your pillow, wouldnt you expect it to be there when you need it) With cash value insurance, it is not. Then when you do need it you have to borrow your own money at an interest rate decided by the company. Upon the insured's death, the benficiary will only receive the face amount of the policy and the insurance company keeps the savings.
Term insurance is simple and the BEST as you pay for ONLY insurance and only for the time you need it. Your investments are seperate therefore your beneficiary receives both.

Answer 5

Matthew Z gave a very good answer . Give him the points.

Most (97% of) term policies NEVER pay a death benefit. The insured outlives the policy meaning the insurance company got a good deal. The Insurance company collected premiums for 10 or 20 or 30 years and did not have to pay out anything. (97 percent of the time).

Do your self a very good favor. Go meet with one of more financial professionals and discuss your situation with him/her. I find many people will be best served by owning BOTH term and cash value policies. I own both.

Good Luck.

Answer 6

Matthew Z had an excellent answer. There is no one type of life insurance that is better than the other. I carry both term and whole life policies. Make appointments with a couple of life insurance professionals. Some agents mainly deal with home and auto so make sure that you talk to a couple of agents that deal mainly with life insurance. If someone gives you an answer such as term is the best, then they selling just what they want to sell instead of taking a look at what you really need.

Answer 7

Term is better, and cheaper, and makes your money go MUCH farther.

If you buy a cash value policy, the company takes that money, and buys a term policy with some of it, and puts some of it into cash value, and keeps the vast majority of it. Agents like to sell it because they make A LOT of money off of it. They sell it as a "savings plan". It only works for people who are really, really bad at math - if you save the difference yourself, you'll be WAY WAY WAY ahead of the game.