I'm looking in to insurance, when is whole life a good idea. I can't find one.?

Question

I want to get life insurance and after getting quote from an agent I looked into it. I found that I would get more coverage with term for a better price. I kind of understand the savings portion but wouldn't it make more sense to get a term policy and put the rest in a etf or mutual fund, that way it's my money and the insurance company can't keep it if I would happen to pass. I am going to go with the term but is there any reason to go with the whole life. I'm 24 with wife and 3yr old. Also, why would the agent not tell me about term insurance, it seems like a better deal if you ask me.

Answer 1

Usually the people pushing whole life policies are those that will benefit from them selling them to you.

Whole life commissions for agents are far, far higher than term insurance.

At 24 with a wife and a three year old....you do need a lot of insurance right now.

It's smarter to buy as much term as you can for as long a term as you can....20-year level premium term would be good.

Then take what you wouldn't have spent on whole life policies and stick in as good as an investment as you can......for your child's college education.

The term policy is simply an income replacement mechanism until you can get your kid through school and your house paid off.

As you age, term policies get more expensive.....so when the 20-year-term is up....you should re-up....but now your kid will be through school and you'll only owe another 10 years or so on your house so you won't need as much life insurance at that point. You can dial down your amount and your premiums won't be that bad.

Some insurance agents try to put the guilt trip on you for 'wasting your money on term' when you can 'put it to work for you.'

Don't buy that argument.

If you were a higher dollar earner that wanted to leave a legacy amount to your heirs and premiums didn't matter to you.....then go with the whole life.

But at this point, you child's college education is far more important than a higher commission to an agent.

Answer 2

Some companies will recommend buying term and investing the rest, other companies will tend to recommend whole life insurance and stress the savings portion of it. It primarily depends on the companies product mix and strengths more than anything.

Whole life can look like a much better product if you have maxed out contriubtions to your 401k & IRA, since the cash value will grow tax deferred. The other argument that can be made for whole life is that you will have coverage for your whole life. For term you'll likely pay premiums and have a small chance of actually getting anything back. Some will say that this is like owning instead of renting. But, as you noted, the premium is much higher for whole life than term.

If you go with term, I would recommend maxing out your 401k and IRA contributions before doing etf's or mutual funds, just to get the tax benefits.

If you go with whole life, many companies have term riders that can go on the policy. This will reduce the premium, and the cash value growth on the whole life will gradually convert the term to whole life, so that you'll still have coverage for life. I would recommend this option if you go with a whole life policy. Ask for the minimum mix, or the least amount of whole life and most of the term rider, to reduce the premium as much as possible.

Answer 3

You're heading in the right direction. First and Foremost, make sure you have the right amount of death benefit - then worry about what type of product. As an alternative to these 2 options, ask your agent about Variable Universal Life - might fit your needs better than either Term or Whole Life. In order to sell this product, your agent will have to have a securities license as well. Most reputable insurance agents do.

Answer 4

Cash value is 10% of how much you pay into it. So, the greatest cash value, is the most expensive policy, that you pay the most into. Plus, every dollar you borrow reduces the payout by one dollar. Plus, you pay interest to the insurance company. Heck, if things get tough, that borrowed money probably isn't enough to pay the premiums, and then the policy cancels, and then you have NO life insurance. Life insurance is NOT NOT NOT a savings or investment plan, it's for IF YOU DIE. Taking out 10% of what you put in, losing the rest, is a ROTTEN investment plan. If you want money you can borrow against, put your $100 a month into the bank.

Answer 5

he makes a bunch of money off you at the beginning. I have heard the whole life insurance is not a good financial decision. I would go with term, if you need life insurance that bad.

I have had a whole life insurance policy and I quit paying.

Answer 6

only 3% of term policies actually pay out because people are living longer. i would get a whole life policy as soon as you can because its cheaper when you are younger. you might not qualify for a life policy in your later years.

if you can't afford whole life right now see if you can get a term insurance policy where they will let you upgrade later to a whole life policy with out any medical tests.

Answer 7

Well, I think it all depends on your needs. If you think it makes more sense to buy term and invest the rest, then go ahead. However, I would strongly advise you to buy a whole-life term only.

Answer 8

A life insurance deal can be really tricky, so you really have to weigh your options first. Ask yourself if it will be a long term benefit for you. You may also browse this site http://www.upkb.com/lifeinsurance.php to help you decide and make up your mind.

Answer 9

Whole life is a savings plan for people who are bad at math.

I don't think it's EVER a good idea.