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Term life insurance vs. whole life

I

inspectah

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There was a thread about this on DS a while back, but I don't know if it will get much play here since this board seems pretty heavily skewed toward the millenial crowd. Anyway, I am in the market for life insurance and would appreciate thoughts on which is better.
 
if you haven't maxed out your other investment alternatives, I would stick with term.
 
Negrep for starting a thread in TheReff's wheelhouse..... ;)
 
Why are you in the market for life insurance? Simply to provide funds to support your spouse/minor children in the event of your untimely death? Provide liquidity with which to pay debts/taxes upon your death? Take advantage of tax-free build up of investments?

Generally, I agree with ChrisL, but obviously, a lot will depend on your personal finances and reasons for purchasing life insurance.
 
Whole life is a usually a scam unless you are in a potential estate tax scenario (currently over $10 million between you and your spouse). Just pay the premium on term and invest the rest of the money that would make up the whole life premium, and you should make out better in the long run.
 
Usually you are barred from recovery if you kill the person of whose policy you are a beneficiary. Keep that in mind.
 
I've got a whole-life policy that my parent's started when I was a little kid. It is what NC calls a jumping juvenile policy. It started at $10,000 and jumped to $25,000. I pay a monthly premium of $14 and I'll keep it. Otherwise, I did the employer life insurance. They pay for 2x salary and I buy another 3x on the cheap for like $3 every two weeks.

I had an NC Life & Health Insurance License with my mortgage job a few years ago. If you are married or have kids and few investments, a term policy is a good idea. Otherwise, your money is better off in investments. The only thing to consider is that life insurance pays off to the beneficiary and does not become part of the estate where your other investments and assets would and could be taken by creditors.
 
Go with Term...

If you have kids, I would go with Term, with a long enough policy to probably cover them to the end of college.
I got a 30 year, 500k, policy about 4 years ago (neither my dad, or his dad made it past 50), and now with a 2 year old, I know if something happens, they will be better off financially than I was at that time.

I read the article from WSJ and pulled the quote below....

The difference in premiums can be stark. A 37-year-old man recently could get a $1 million, 20-year level-term life policy for as little as $495 a year, according to Term4Sale.com, a comparison website. By contrast, a low-cost universal-life policy from TIAA-CREF could cost the same man $4,933 a year in premiums—though at the end of 20 years, this consumer would have about $150,000 in the cash account, based on the insurer's current 5% interest rate.

So...
Term (495 a year for 20 years)= 9900 - down the drain if you don't die.
Universal - 4933 a year for 20 year)= $98,660 and it would grow to 150K.

I'm no investment guru, but I think if you took the difference ($4438 a year) you could probably do better than turning 100K to 150K in 20 years time.
 
In my experience it is cheaper getting quotes online. Some of the top insurance companies offer discounts when ordering online, because it is less work for them. But to be safe you could compare rates online, pick the best offer and try a local agency to see if they can match it or do better: www.quotes-center.com/life-insurance-premium-calculator
 
Thanks for the advice and in particular the WSJ article.

My wife and I have a kid on the way so we are trying to get our financial house in order. I am the only one working now though my wife plans to work in the future, and we are not currently maxing out our retirement investment options. We both have grad/prof degrees and decent salary prospects for the next 20 years or so (assuming our jobs don't get outsourced). I don't expect us ever to be wealthy enough for the tax/estate considerations to matter, but I don't want to make a naive assumption along those lines so I'm trying to study up. Naturally our agent is incredulous that we would consider declining a whole life policy and insists that people go the term life route only because they're ignorant of the true benefits of whole life.
 
yeah i talk to a northwest life "salesman" and he completely talked over my head and made the whole life sound fantastic. then i did some research and realized his vested interest in sellling me the policy to get his sweet commission. I should have left when the first thing he started talking about was flying from greenville to wash dc for every redskin home football game.
 
yeah in your situation go term and max out your 401k
 
Thanks.

My guy is Northwestern too. He almost sold me based on the argument that Northwestern's rate of return is so stable that if you have a whole life policy with them you can get really aggressive with your 401k and other investments and fall back on the whole life if you lose big elsewhere. I just don't see myself ever getting comfortable with that approach though.
 
Good thread - good article. I'm in a similar boat to the OP - this was quite helpful.
 
Henry Chinaski said:
Good thread - good article. I'm in a similar boat to the OP - this was quite helpful.
Click to expand...

Definitely a good topic - I was in very same boat six months ago - wife and I had first kid last May (2010) and I am the only one working but we both have advanced degrees, etc. Wanted to provide longer term financial stability in case I bit the dust.

When I was first looking, went through the whole/term debate, but my agent was very good, never pressed me into anything. For the reasons already mentioned, term was clear choice for us. At first, I was only thinking of covering myself given I am currently the only means of financial support.

However, the one thing he did suggest that I went with was getting separate policies for both me and my wife (despite the fact she wasn't working) - just as a cover if I had to suddenly incur large daycare costs or take time away from work to care for my son. Our policy values are skewed to me as primary wage earner, but enough on her that IF i needed to take time off from my job or suddenly pay for daycare, funds are available (in case she bites it instead of me).

Good luck.
 
Awesome thread and very timely for me and the future wifey as well...we have been looking into getting life insurance now that everything is settling down and we are done with pharm school. Thanks for the WSJ link!
 
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