Ok, I'll admit it....I only know enough about insurance to be a danger to myself. :lol: Can some of you tell me what you think are the pros and cons of each? I've talked to my insurance agent but now I want other's opinions as well. Thanks! Brenda
term is the only way....... here is someone that can explain it way better than I can. http://www.daveramsey.com/the_truth_about/life_insurance_3481.html.cfm
Term life insurance is pure insurance. If you die they pay off. If you do not die you get nothing. Whole life or variations thereof are life insurances with investments. They build up a cash value over the period of coverage. So at the end of the coverage if you have not died you get money back. You have also paid more in than term life but the returns are usually pretty decent. There is usually no guarantee of return levels outside of a bare minimum so it is a less of a risk than a simple bank savings plan. If you want only insurance go with the term life. If you want to be able to borrow money agains the insurance policy or to get money at the end if you do not die the whole life insurance may be the best for you. The problem is the sheer number of variations on the whole life system and each has benefits and drawbacks.
Why do you need life insurance, and how much insurance will it take to accomplish your goals? For most young people with families, you want to make sure your family doesn't lose their home if something happens to you; you want them to be secure; you want your children to be able to go to college. Your income from your job contributes to all that, so if something happens to you, you want to replace that contribution with insurance proceeds. Once you determine how much insurance you need, compare the cost of term vs. whole life, and consider what other investments you could make with the difference. Whole life insurance is a very safe investment, but not one with a very high return. Of course, it's true of investments generally that the more risk you are willing to take, the higher possible return, but usually you can find other investments about as safe as life insurance that will pay a higher return.
Thanks everybody for answering. This is just what I was looking for. Pirate96, D.R. is the reason I was asking this question. :lol: I've been listening to him and following his plan for about a year now. This insurance thing is the one I'm having a problem with though. Guess I'm so darn set in my ways. My parents had whole life and I took out my first policy when I was about 20. I'm 45 now and have had the whole life all along. My DH agrees with Dave about term life. My insurance agent that I've had for years is advising me to keep my whole life. Not sure how that whole thing works when you're an agent....don't know if you continue to see proceeds or not. Anyway, thanks for the link. I will definately check it out! Brenda
I'm another true beliver in Dave Ramsey. I love how he whammys peoples crazy loans & credit card spending.
If you have had the whole life for that long you probalby should keep it, but any new policy would be better served by term life.
If you have a mortgage, get a separate term policy equal to your payoff, look for one with a return of premium rider, that is, if you don't use it, you get your money back. They're not easy to find, but they are out there.
Dave would be the best answer, but usually I think he recommends you take the penalty and cancel your whole life insurance. Get term insurance, finish the baby steps and then reinvest any left overs in a good mutual fund.
Hey Bren~ If you like/trust your agent, ask him/her to run comparisions for you. Your agent should be able to determine if your existing policy can be rolled into a newer/better one, etc. Can't really say much more, since I'm not licensed. PM me if you have any questions or need direction. You know I'll help all I can! *muah* Frogger
I figure I want enough to take care of the wife and kid, but not enough for the wives next guy to set on the porch all day.
Whole life gets a bad name from time to time. IF everyone would take the difference in whole life vs. term and invest it in mutual funds, stock market, etc. then there would be no need for whole life. Many whole life policies however are paid up in full at age 65, meaning no further premiums are due. So if you have a paid up $25,000 policy at age 65 with no further premiums, you have enough to bury you. Many people run into problems with term because they take out a 30 yr term life policy at age 25, then at age 55 the insurance expires and you're shopping for insurance at age 55, when any insurance is going to be much higher than when you were 25, plus now at age 55 you may have health issues which make you less than a perfect risk for the insurance company. For most people who are not going to put aside the extra money, I would advise to buy a whole life policy, paid up at age 65, when they are young ($10,000-50,000) and then buy term for as long a term as you can get for the proverbial 6-8 times your annual salary.
Maybe its a rip off for people who have saved and don't need insurance to pay for funeral expenses. However if you live past 65, you haven't saved anything for a funeral, then a paid up $10,000 policy really helps the family,especially if all your term insurance ran out when you were 60.
See if you follow Dave Ramsey's plan when the term insurance ends you are self insured for the rest. Everything is paid for including the house and you still have a million or so in the bank allowing you to live with dignity. http://www.daveramsey.com/
Well I'm glad that ole Dave has it all figured out. When I'm waiting on my SSI check, I'll give him a call and ask if he can spare a few dollars, lol...
Seriously, if you decide to go with term insurance and invest the difference, you need to set up some kind of automatic investment plan. Have the money taken out of your paycheck or automatically drafted from your checking account, so you don't "forget" or get tempted to use it for some "emergency". You can do that with as little as $50.00 a month. If you don't have an investment counselor, I highly recommend Suzanne Wiley at Edward Jones Co. at 4042. The office manager (?) (don't know her title) at the front desk is great, very helpful, and they treat me as if my account had a sufficient number of zeros to be significant.
Given I think we are roughly the same age. Wouldn't hold out for that SSI check. It is impossibly hard, but if we want to retire it will 99% on our own actions.
Sef Insured See if you follow Dave Ramsey's plan when the term insurance ends you are self insured for the rest. Everything is paid for including the house and you still have a million or so in the bank allowing you to live with dignity. I am a big fan & believer of D.R. but I do have a question regarding term insurance. What has been said is that when one's term policy comes to an end one will be self insured. I know this is a big what if, but I have seen both my parents die of cancer which IS very expensive to fight. What I am worried about is if my policy expires and I don't have enough $$$ to self insure my cancer battle? What then? I see this being the only apsect NOT discussed with-in this thread.
