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Whole Term Life Insurance

October 19th, 2009 by admin in Life Insurance, Term Life Insurance, Whole Life Insurance

Term or Whole Life Insurance?

Life insurance comes in several forms that can either pay a named beneficiary upon the death of the insured, put part of the premium towards investing, or both. It is up to the individual what type of plan would work best for them and this is why many carriers offer life and investment options individually or bundled depending on the needs of the consumer. But, like anything else, one should research all available options out there before deciding on a life insurance policy. Failing to do so can result in a plan that one is not satisfied with. Or, it could be worse – a plan that the individual cannot get out of.

Term life or whole life insurance

Term life insurance is a type that only insures the life of an individual and pays out one lump some to the beneficiary upon the death of the insured. With a term life insurance policy, the insured pays a monthly premium for a period of one to thirty years depending on the plan.  A whole life insurance policy, on the other hand, insures the individual’s life but also includes a separate investment vehicle that part of the monthly premium goes towards. Some companies call this method of life insurance “forced savings” and advertise it as a retirement plan. With whole term life insurance plans, the insured gets to borrow against the equity built up in the investment account and pay themselves back similar to a company sponsored 401K plan.

Many financial analysts are against whole  life insurance plans because they say there are better ways to invest money. The issue with these plans is that there are fees and costs associated with them that reduce the annual yield of interest by a few points. Investment professionals say that whole  life insurance plans are only worth it for the long term. Some even say that the plan will not yield a thing until after 10 to 20 years. Therefore, investment professionals recommend that if one is interested in a whole  life insurance plan that they realize it will not start making them money for a decade or two. Regular term life insurance plans however are practical and quite inexpensive for someone of moderate to great health.

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