Comments on: Term vs Whole Life Insurance

By: Tom

Tom — Wed, 01 Jun 2011 16:36:56 +0000

You should always compare quotes online before you Buy Term Life Insurance. There are many different insurance companies, with very different rates. I would encourage you to visit this website http://insurancetop.blogspot.com/

By: Anonymous

Anonymous — Sun, 15 Nov 2009 10:49:06 +0000

[...] Term vs Whole Life Insurance » JoeTaxpayer [...]

By: Derik Tutt

Derik Tutt — Mon, 02 Nov 2009 22:23:37 +0000

It all depends on what the client needs. Term is attractive but when the term ends, then what? If they still need coverage they might not be able to afford the amount they need since they are now 20 or 30 years older. Say someone buys a 30 year term policy at age 35. Come age 65 their premiums will be much higher. Some folks may not need coverage anymore or may just need a burial policy. But for those who need a considerable amount will be in for a shock. They’ll then come with that “My agent didn’t telle me….”

By: JOE

JOE — Sat, 24 Oct 2009 00:15:45 +0000

Yes, I think that numbers can be manipulated to show what one wants. When you look at the underlying expenses in whole life, the money adds up over time, huge numbers over a long period. I am a believer in using the lowest cost Index funds to minimize expenses, and avoid listening to how the 2%-3%/yr is buying me some kind of guarantee.

By: Evan

Evan — Fri, 23 Oct 2009 13:18:05 +0000

I think the problem arises when people don’t know they have a permanent need:
- Buy/Sells
- Children with Special Needs
- Estate Liquidity Issues
- Illiquid Assets and Surviving spouse who has no idea how to run them or will sell at a fire sale

Joe what do you think of my calculations on buying term and investing the difference?
http://www.myjourneytomillions.com/articles/give-whole-life-insurance-a-fair-comparison-get-illustrations-and-compare/

I think the buy term and invest the difference mantra is crap for 2 reasons – (1) almost no one does it lol and (2) how do most people know what the difference is?

By: JOE

JOE — Thu, 15 Oct 2009 11:27:26 +0000

“Annuity” is too broad a word. It’s not one product. The immediate annuities I am familiar with are structured so you buy them at a certain age, say 65. You get a much higher than market return, but no guarantee of principal, i.e. if you die, that’s it, no money. Some portion of the payout each year is considered return of principal and isn’t taxed. Other flavors offer a guarantee, 5 yr, 10 yr, etc, so at least if you die soon, your beneficiaries get something. As I said, you need to study the prospectus of any annuity you are considering.

By: Financial Samurai

Financial Samurai — Thu, 15 Oct 2009 05:26:16 +0000

Sounds good Joe. I thought the interest return for annuities was tax free? Otherwise, why would anybody spend so much for the guaranteed income if they could just keep their money in a similar interest baring CD? Maybe I was mislead by the USAA annuity agent and confusing the whole life tax free interest return.

Let’s say you buy a $500,000 annuity, and then you die in 5 years, what happens to the $500,000? Does it just get passed down to a designated beneficiary, or does goodness forbid, the insurance company keep all your money? I can’t imagine so.

By: JOE

JOE — Thu, 15 Oct 2009 05:08:17 +0000

I’d need to see the prospectus for the annuity. In general, the only annuities I like are immediate annuities bought much later in life. How is the return tax free?

By: Financial Samurai

Financial Samurai — Thu, 15 Oct 2009 02:30:09 +0000

Joe – Question for you on annuities as well. Let’s say you were in your early 30′s, making $500,000/yr and have $500,000 in savings as well as various other investments.

Would you bother buying a couple hundred grand annuity for guaranteed income at this stage in your life? The tax free return of 4-5% sounds pretty good no?

By: Credit Card Chaser

Credit Card Chaser — Wed, 14 Oct 2009 23:23:45 +0000

@ TJ

Yes, you are technically correct in that the 2 main categories of life insurance are in fact term and permanent and not term and whole life. Whole life happens to be (at least over the years but not so much anymore) the most popular type of permanent life insurance but there are also many other variations of permanent life insurance like universal life, variable life, etc.