What would you like to do?
Is my life insurance whole life or term?
Term is strictly protection. Whole life is protection plus cash value. Cash value is similar a to a savings account within the policy. Part of the periodic premium goes to pay… for the insurance protection, and part is applied to the accumulation of cash value. Term insurance can be purchased for a specified period to coincide with your needs (such as raising children), such as, 5, 10, 20 or 30 years. Whole life also can be purchased for a specified time, but when done so, the specified time will me stated in terms of how long it will take to pay the policy in full such than no further premiums are due. When that occurs, the policy remains in force, whereas if premiums stop with term insurance, the coverage lapses. Whole life insurance is for life, or up to the age of 100! You do not need to renew it and the premiums are fixed for life. They are usually high when compared to term life insurance. This is because whole life insurance has cash value benefits as well which you can dip into. This comes in handy when you may have need of money.
Whole life insurance provides lifetime protection and builds cash value within the policy. As long as you pay your premiums on time, your life insurance remains in effect. … Term life insurance provides temporary protection for a specific number of years, usually 1-30 years. If you outlive your policy, the life insurance coverage expires. Term life insurance is less expensive than whole life insurance in most cases. Whole Life (WL) is considered "permanent" insurance; that is, it is intended to be kept for one's entire life. WL also builds "cash value", which may be borrowed or used to pay premiums . Term (T) is a non-cash value type of coverage, which runs for a term of time e.g. 10, 20 or 30 years. At the end of the policy term, the contract terminates, and coverage ends. Answer Whole life insurance will cover you for your whole life, or up to the age of 100. Term life will cover you only for a specified term - 10, 15, 20 or 30 years. Whole life insurance is more expensive than term life insurance. This is because whole life insurance also acts as an investment and will accrue cash value over the years. These can be utilized by the policy owner whenever needs arise. In contrast, term life policies do not carry any cash/surrender value. If the policy holder survives the term, there are no returns on premiums paid, unless it is a ROP term policy. You can learn more about the differences between the two policies at Term vs. Whole Life Insurance.
The answer to that question is in the love you have for your family and the character that you do or do not have. Here is the question...Do you want to have life insurance in …force when you die? Do you want to have insurance to pay for the burial, tombstone, cremation, all final expenses, left over medical bills, final ride in the ambulance, cemetery plot, perpetual care, probate, estate taxes, etc etc? All is well with term insurance if it is in force when you die, but like most people you don't know when you are going to die and usually it is after the term insurance has expired or you let it lapse because you can't afford it anymore or your future health prevents you from buying any more. I suggest to ALL my clients that they should have at least a burial policy as a minimum. Term insurance is pure profit for the insurance companies as only 2% of all policies ever pay a death claim. Think about it... Understanding the differences between whole life policy and term life policies will help you to see whether you would like to purchase both kinds of policies for your specific situation. Whole life insurance suits the person who has expenses that do not diminish over time such as estate taxes, etc. Whole life insurance can also work as an investment. There is cash value attached to whole life insurance after a certain number of years, which the owner can avail of in times of need. In comparison, term life insurance offers no cash value. And once the term is over you do not get any refund on your premiums, unless you opt for a ROP term policy. Term vs. Whole Life Insurance may help you grasp the features of both these policies.
Whole life insurance is the most expensive type of life insurance. The advantages of a whole life insurance policy include guaranteed death benefits, guaranteed cash values, f…ixed annual premiums. The primary disadvantages of whole life are premium inflexibility,the internal rate of return in the policy may not be competitive with other savings alternatives, and the cash values are generally kept by the insurance company at the time of death. Term life insurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. A policy holder insures his life for a specified term. If he dies before that specified term is up, his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing.
Whole life 1) Whole Life is a form of permanent insurance. Permanent insurance comes in a variety of forms, e.g., universal, variable universal, equity-indexed, etc. All have… unique attributes, advantages and disadvantages. 2) Premiums remain fixed until a predetermined age, until the policy matures or "endows" (typically age 100), or when you die. If you live to endowment age, the company will pay the face amount of the policy to you, tax-free. 3) There will typically be a "surrender period", often 10 years. The surrender charges decrease over time, thus, it may appear that in the early years, all premiums go to the insurance company as the surrender charges may equal the accumulated value. At the end of the surrender period the surrender value will equal the cash value. 4) Cash value typically accumulates at an annual interest of around 3%. 5) You may access money from the policy be either withdrawing from or by borrowing from the cash value. Withdrawals above basis will be treated as income and taxed accordingly. Loans from the policy do not incur taxes. Interest will be assessed on a loan, typically between 3% and 6%, sometimes as high as 8%, depending on the policy. 6) If there is a loan balance at death, it will be deducted from the face amount of the policy. If you cancel the policy while there's a loan balance, you may be responsible for income taxes on the gains. 7) When you die, the face amount (less any loans, loan interest due, and missed premiums) will be paid to your beneficiary. 8) Because cash value is accumulating in the policy, you are actually only paying for the difference between the face value and the accumulated value. For example, if you have cash value of $250, 000 in a $1,000,000 policy, you are only purchasing $750,000 of insurance. This is how much the insurance company must come up with to add to your cash value to pay your beneficiary the full $1,000,000. 9) Properly designed, the cost of insurance will decrease over time to the point no money is required out of pocket - any insurance costs are taken directly from the cash value (and therefore paid with tax-free money). Term Insurance 1) Does not build cash value. This allows you to save money elsewhere - possibly with better returns. 2) While premiums appear to be considerably lower than whole life insurance - the actual cost of the insurance itself is not substantially different. This is because a) whole life has an investment component (i.e., only a portion of your deposit goes to the insurance cost), and b) the insurance company is obligating themselves to take on the added risk that comes with aging. 3) Provides coverage for a limited time, then expires (like home-owner's or auto insurance). 4) At the end of the term, some companies may renew without proof of insurability. However, most will require underwriting. If you are still insurable, the premiums will be considerably higher as you are now that much older. (To get an idea of how much more, get quotes for both your current age and 20 years older.) 5) Keep in mind that term insurance only pays about 3% of the time. The other 97% outlive their policies. (Just like home-owner's or auto insurance, we hope to never have to use it!) The original author said: Some may argue that it will get more expensive when it is time to renew your term insurance. While that is true, you should put together a plan so that you don't need life insurance forever. I think 20 year level term is long enough for most people. If not, a 30 year level term. Lets say you got a 30 year level term and pay about $600/year for $500,0000 coverage. And you invest $400/month into a Roth IRA for the next 30 years. The investments I own have an average rate of return of 12% in the past 30 years. To be conservative, lets say you get a 8% return in the next 30 years. In 30 years, you will have about $600k saved for retirement. If you get 12%, it will be $1.4 million. I add: Renewal of term insurance will absolutely be more expensive. Guaranteed. Will you need life insurance forever? Who knows? If your child were diagnosed with multiple sclerosis at age 40, would you want to be able to provide for him/her well beyond your death? If you died six months after Bernie Madoff cleaned you and your wife out 10 years into retirement, would you want her to regain her footing? Will your heirs incur estate taxes? An $20M estate in 2011 may incur taxes of $8M or even more! (Do you really want to say "Sorry, kids, I chose to give the IRS half of your inheritance..."?) Life insurance isn't necessarily just about the people you leave behind though, it can also be about you: Do you own a business? There are few (if any) better methods to transfer money from the business to the owner tax-efficiently. Likewise, there are few, if any, better methods to sell or transfer ownership of a business than through the use of life insurance. Do you want to pay for your children's college? Sure there are 529 plans, but what if your kid gets a full scholarship? Or doesn't go to college? You can give the plan to a niece or nephew or you can pay tax on the growth and pay a penalty. As far as investments are concerned, anyone making 12% per year for 30 years deserves huge kudos. (While the stock market has averaged 12%, the individual investor has averaged closer to 6%. Sad but true statistic.) I'm glad the original author said "Roth IRA" - tax-free income trumps taxable income. But what if you make too much to qualify for a Roth IRA? Do you have the means and desire to contribute more than $400 to a Roth IRA? What if you want a Roth for yourself, a 529 plan for your children, and need life insurance? So, give me the bottom line!!! Is whole life or term better? Neither is better than the other. But one will offer a better solution than the other for your particular needs, goals, and abilities. No one in this forum - or on the web - can answer that for your situation. We can only help educate you about the products, their differences, pros and cons, and even offer our own opinions or biases. Talk to your financial advisors - knowing the facts first will keep them honest!
Term insurance can be thought of as "pure protection" in the sense that it provides only a death benefit, and then, only if the insured dies for a reason that is not exclu…ded by the policy during the term of the policy. Frequently, the maximum term of 20 years from the date of issue, although it is sometimes stated as being the attainment of a fixed age by the insured. A related characteristic is that it accumulates no "cash value", which is often thought to be something akin to a savings element. If premiums cease to be paid while the insured is still alive, the coverage of a term policy ends at the end of any grace period for the payment of premium (often, 30 days). In contrast, a whole life policy is sometimes called "permanent insurance". The premium is greater than the premium for a term policy of the same face amount, because a portion of the premium is applied to the actuarial determined cost of providing the protection, and a portion is applied to the cash value. Although the cash value accumulates slowly at first, it "gathers steam" over a period of time. One of the characteristics of cash value is that at some point during the policy's life, it may reach a point of being sufficient to support the policy and thereby render unnecessary the need for further premium payments. There are many variants of whole life coverage, such as types that permit the insured to invest a portion of the premium into a mutual fund. Keep in mind always that life insurance is designed as protection and not as an investment. Make your choices accordingly, do your due diligence, understand your current and anticipated financial needs, and seek out unbiased advice. Moreover, only transact business with an insurer and an agent that/whom is licensed to transact insurance business in your state. License information can be had through your state's Department of Insurance located in the state capitol. The insured will not get any assured money in term life insurance but in case of whole life insurance, the insured will get assured money at the end of the maturity.
Term life is temporary coverage for a period of time that you choose based on your needs (mortgage paid off, kids finish college, retirement, etc) for 10, 15, 20, or 30 years.… Regular simple term does not accumulate any cash value. If you add the Return of premium rider you will receive all premiums paid, back at the end of the term chosen. Whole Life is permanent insurance (guaranteed to stay in force to age 100, 115, etc) and can accumulate cash value. Contact an experienced agent to help you choose what's best for your situation.
Cost. Other than that, there are no advantages. Whole life insurance lasts your whole life. It pays upon your death a predetermined amount. Once the designated term on term li…fe expires, you have no more life insurance. Term will be significantly cheaper depending on your age.
It is not really a question of "better", as it is of "different". Term insurance may be thought of as "pure protection" in the sense that it provides coverage on ones li…fe for a stated term. If the insured does not die while the policy is in force, it expires, and there is no accumulated value remaining. Stated otherwise, there is no element of "savings" with this kind of insurance, and therefore, it is less expensive than "whole life", all other things being equal. Whole life provides the same type of life insurance protection, with the added element of "cash value". That is, a part of every premium dollar is applied to some sort of savings mechanism. The latter can be within the policy itself, or in an outside vehicle connected with the policy, such as a mutual fund. Because of this element, whole life is more costly than term. Yet, because of the accumulation of value, after a period of time, loans can be taken from the policy, and/or the policy can become "fully paid-up" such that no further payments need to be made.
Term insurance is written for a specific period of time or until an age certain (the term). It may be for 1 year, 5 years, 10 years or it may be until age 60, 65, 70, etc. At …the end of the term the insurer may cancel the policy, raise the premium, reduce the benefit, or some combination of these. Some policies are guaranteed renewable by the insured but always at a higher premium or smaller benefit. Whole life insurance lasts your whole life. The monthly premiums are higher at the beginning but remain level (no increase) throughout the premium paying period. Because of the reserve which is built up inside the whole life policy the insured has more benefits such as cash value, policy loans, paid-up insurance, or extended term coverage.
Only whole life insurance, not term, accumulates cash value from which a loan may be taken While the loan does not have to be repaid, if it is not, the loan plus accrued inte…rest will be deducted from the death benefit. If you are changing from whole life to term within the same company, it may permit you to pay a higher premium for the term in order to pay off the policy loan on the whole life, but this would be unusual. It would make for a far cleaner transaction to pay off the loan and switch to term coverage.
A life insurance is only good for life coverage, when you die an amount of money is given. Whole life insurance includes investments you have. Such as stock market.
The basic difference between long term life insurance and whole life insurance is that a term policy is life coverage only and this is also considered an advantage. One can bu…y a long term life insurance for periods of one year to 30 years, whereas whole life insurance is a combination of a term policy with an investment component.
A whole life insurance provides coverage for an individual's whole life. A savings components which builds overtime and can be used for wealth accumulation. Whole life is the …most basic form of cash value insurance.
There are many places where one can compare term life insurance versus whole life insurance. One can compare term life insurance versus whole life insurance at popular on the …web sources such as Wealth Pilgrim and MSN Money.
Term life insurance is an insurance that is set for a specific time period, for example, one can obtain term life insurance for 30 years. Whole life insurance covers one from …application to death.
One can get term or whole life insurance through various insurance agencies. Some insurance companies that provide term or whole life insurance include MetLife, AAA, and Stat…e Farm.