| Whole Life Insurance: Is it worth it? |
 |
 |
 |
| Written by Mike Carselle |
| Sunday, 18 April 2010 17:38 |
|
When deciding how to plan your future finances, most financial counselors will advise that you buy at least some amount of life insurance-a sufficient amount to cover your family, particularly if your kids are younger and rely on your income for the immediate future.
When deciding how to plan your future finances, most financial counselors will advise that you buy at least some amount of life insurance-a sufficient amount to cover your family, particularly if your kids are younger and rely on your income for the immediate future. What confuses most people when deciding the right life insurance for them is if they should purchase whole or term life insurance. Many insurance agents may tell you to buy whole life insurance, but I would argue that in most cases you are better off buying term insurance. Here are two main reasons why I advise that most people stay away from whole life insurance: 1. It's far more expensive than buying term life insurance If you have ever looked at different life insurance costs, you are most likely aware that there is a very large difference in the price of whole life vs term life insurance. In a typical scenario, if you are paying say $20 per month for $250,000 in coverage in a term policy, a whole life policy with the same amount of coverage may cost you $300 per month or more. As you already know, this is only part of the story. The reason term insurance is far cheaper is that it only pays you a benefit when the policy holder dies, as opposed to the whole life policy that gains value and becomes an asset which the policy holder can borrow against or even cash out. This brings me to the second reason why I advise against buying whole life insurance: 2. A whole life insurance policy is normally a bad place to invest your money If the $300 you were putting in monthly to a whole life policy were yielding a good return compared to other similar investments, it may almost be worth considering. But the truth is that these policies typically yield lower returns because of all the policy maintenance fees. In addition to that, most of these policies have a lack of transparency in trying to figure out what kind of return on investment you may get. Furthermore, if you do want to cash out the policy later, then you will no longer have the coverage you need to protect your loved ones in case you die-which is the primary purpose of having life insurance in the first place. This makes it even more of a bad deal. The majority of financial advisers who are not insurance agents agree that it is best to "buy term and invest the rest." To say it another way, buy term life insurance to protect your loved ones in case of your death, and take the money you save from not purchasing whole life and put it into an IRA or another safe investment vehicle. Doing it this way, you will be giving your family all the financial coverage they need at the lowest possible price, then you will have the flexibility and freedom to invest the money you save in the best possible investment vehicle to suit your needs. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Compare low cost term life insurance quotes and get started today toward securing your family's financial future at www.lifeinsurancequotetoday |