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