| Over views whole life and term life insurance | | | | - Can be cashed out after age 65 and used for |
| policies by comparing the advantages and | | | | retirement |
| disadvantages of each policy type as part of | | | | |
| an estate plan consideration. | | | | Whole Life Insurance Disadvantages: |
| Not too many years ago life | | | | |
| insurance was considered to be the | | | | - Costs more than term life insurance |
| indispensable platform upon which all other | | | | |
| estate planning efforts should be based. In | | | | - Generally returns a fairly low rate of |
| fact, for those in the median and lower | | | | interest |
| income ranges, it was often the only | | | | |
| recognized method for protecting one's heirs, | | | | - Does not begin to accumulate any real value |
| particularly in the event of untimely death. | | | | for the first 10-15 years |
| However, over the past twenty or so years, | | | | |
| the concept of financial planning has changed | | | | - If the policy is surrendered within the |
| considerably. The proliferation of varied | | | | first few years, money paid into it is lost |
| retirement plans available through work | | | | |
| (IRAs, SEPs, SARSEPs, mutual funds, etc) has | | | | - Does not provide the investment value of a |
| changed people's perspectives about the need | | | | mutual fund or other investmentTerm Life |
| for life large life insurance policies. | | | | Advantages: |
| | | | |
| Does that mean that you don't need life | | | | - Premiums are generally very inexpensive |
| insurance? No. Most people, perhaps with the | | | | |
| exception of the very wealthy, do need some | | | | - Lower premiums allow the buyer to purchase |
| sort of life insurance, although even the | | | | more insurance with higher death benefits |
| very wealthy may opt for a life insurance | | | | |
| policy (generally whole life) to defray the | | | | - Can be quite useful if the buyer only needs |
| costs of burial and estate taxes. | | | | coverage for a specified period (while paying |
| | | | off the mortgage or while kids are in |
| In general, the options are whole life (also | | | | college, etc.) |
| called permanent insurance) and term life, | | | | |
| with variations like universal life or | | | | - Leaves the buyer with more money to |
| variable life that combine some of the | | | | purchase other investment vehicles like |
| benefits of each. Different companies offer | | | | mutual funds, stocks, bonds, etc. that |
| different options, but which you need and how | | | | provide higher rates of return than whole |
| much you need are matters for heated debate. | | | | life |
| Those who sell one and make most of their | | | | |
| commissions from it will vehemently try to | | | | - Often beneficial for younger families who |
| convince you that the other is not a good | | | | can't afford whole life rates, but need to |
| investment. Here are some facts for your | | | | insure the primary income earner |
| consideration. | | | | |
| | | | Term Life Disadvantages: |
| Whole Life Insurance Advantages: | | | | |
| | | | - Only pays if and when you die; you can |
| - Offers a guaranteed death benefit no matter | | | | never personally recoup any of the money |
| how long you live | | | | spent on term life insurance |
| | | | |
| - Is generally not subject to rising | | | | - While premiums are lower than whole life, |
| premiums; rates stay the same | | | | they also tend to go up and can become |
| | | | unaffordable |
| - Many policies become "paid up" at some | | | | |
| point (15 years, age 65, etc.) after which no | | | | - Term life is only available for a specific |
| more premiums are paid | | | | term (up to 30 years), and then goes away; if |
| | | | you don't die within the term, your premiums |
| - Has investment value which can be cashed | | | | are lost |
| out after some specified interval | | | | |
| | | | Almost everyone needs life insurance of one |
| - Can be borrowed against in case of | | | | variety or the other. The type of insurance |
| financial emergency | | | | and the amount to purchase depend entirely |
| | | | upon you, your family and your mutual goals |
| - Can, in many cases, occasionally earn | | | | and needs. In any case, make sure the company |
| dividends depending on the company's solvency | | | | you purchase insurance from is reputable and |
| and accuracy in predicting actual costs | | | | financially solvent. Don't be convinced by a |
| | | | fast-talking sales person without doing your |
| - The income from a whole life policy is tax | | | | homework first. There are few remedies if |
| deferred | | | | your life insurance company dies before you |
| | | | do. |