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Wendy Said:

Is it better to buy term life insurance or permanent life insurance?

We Answered:

Term insurance because it cost less and you decide where you want to save your money. I wouldn't let any insurance company decide what to do with my money. I only need insurance to manage my risk against financial loss.

Patricia Said:

Term Life Insurance vs. Permanent Life Insurance?

We Answered:

Whole life insurance is a form of life insurance which has a guaranteed level death benefit until death or age 100, which ever comes first. It also builds a guaranteed cash value which will equal the face amount of the policy at age 100. So if you have coverage of $100,000 and you are still alive at age 100, the insurance company will void your life insurance policy and pay you $100,000.

Premiums remain level and there are 3 ways you can pay your premiums. The most common way is called "Straight Life" or "Continuous Premium Whole Life." This is where you premiums continuously until you die or when you reach age 100.

The second way is called "Limited Pay." This is where you pay a higher amount of premiums than Straight Life for a certain amount of time. Examples of this are "20-Pay Life" or "Life Paid at 60." With "20-Pay Life" you pay your premiums for 20 years. "Life paid at 60" means you pay your premiums until you reach 60 years old. The shorter the payment period, the higher the premiums and vice versa.

The third way is called "Single Premium Whole Life." This is where you pay one lump of premium and never have to pay it again.

As I mentioned earlier, Whole life insurance builds cash value. You can borrow it anytime and use it for any purpose. The question is "what is this borrowing part all about?" Isn't the savings suppose to be your money? The answer is no. The premiums you pay belongs to the insurance company.

If you want to take money out from your life insurance, you have to borrow it. The insurance company will charge you a loan interest of anywhere between 5-8%. But in the first 2 years of the policy, no cash value is accumulated. So there's nothing you can borrow during that time. After the first 2 years, you are guaranteed an interest rate between 1-3%. When you borrow money from the cash value, your death benefit is reduced by the amount you borrowed, but the premiums remain the same. Interest charged on the amount you borrowed does not go back into your cash value. It goes directly to the insurance company.

If you die someday, the insurance company keeps your cash value and pays the death benefit only.

If someday, you decide you want to cancel your whole life policy, you will get most of your cash value. When you cancel your life policy, the insurance company may charge you a surrender charge on your cash value. If you borrowed money from your cash value, it is important that you pay this loan back before canceling the policy. Failure to do so will result in income tax on the loan amount.

In summary, here are the pros and cons of whole life insurance:
PROS
1) You are guaranteed coverage until you die or reach age 100, whichever is first.
2) Premiums remain level.
3) It builds cash value.

CONS
1) It builds cash value, which makes this type of life policy very expensive.
2) Cash value grows at a low rate of return
3) If you want to use the cash value, you have to borrow it and pay loan interest of 5-8%
4) If you die, the insurance company keeps your cash value.

Term insurance is designed to provide death protection for a definite and limited period of time such as One Year Term, Five Year Term, 30 year Term, or Term to 65. If the insured dies during the term, the policy matures and the insurance company pays the face amount of the policy to the beneficiary. If the insured doesn't die during the term, the policy expires.

The second most important characteristic of Term insurance is that it is pure insurance. You pay premiums only for the coverage. Since there are no forced savings or cash value attached to Term insurance, it is designed to provide the greatest possible protection for the lowest possible cost. Therefore, the two key points to remember about Term insurance are that if offers (1) protection only for a (2) a specified period of time.

One of the most widely marketed forms of Term insurance is Annually Renewable Term (ART). The insurance company grants the insured the right to renew the policy each year to a stated date or age. The cost to renew the policy goes up each year because the rates are based on the insured's attained or current age.

The increasing in premiums can present a real problem for the insuring public. One Term product that provides a partial solution to the rising costs is Level Premium Term. With a policy of l0ng duration, the payment may be leveled out over the life of the policy to create Level Premium Term. The cost of Level Premium Term is calculated by price of the early years by the price of the later years. So in the beginning, you are making an overpayment of what the actual cost of insurance is. But in the later years, you are making an underpayment of what the actual cost of the insurance is. Why? Because the cost to insure someone is young is low compare to the cost of insuring someone who is old.

Term insurance, then, in any of its many forms, is the most affordable protection available for teh premium

Renee Said:

Is Permanent Life Insurance for my mother in law who is 75 a good deal for $275 a qtr for $10K policy?

We Answered:

In this situation, you are better off buying an annuity for your mom. Annuities are contracts purchased by an individual in which an insurance company pays out monthly payments to the individual beginning on an agreed-upon date and guarantees the individual the payments will continue no matter how long he lives.

An annuity has 2 phases. In the first phase, you are accumulating money for the future. In this phase, you are guaranteed a minimum death benefit by how much you put into the account. For example, if you put in $10,000, you are guaranteed a death benefit of at least $10,000. If the account value is more than what you put in, all of the gains will be included in the death benefit.

The 2nd phase is what I like to call payout phase for the rest of your life. When you start withdrawing money, you lose the death benefit, but it will provide you income for the rest of your life.

Is annuities for everyone? Definitely not. They have higher annual expenses than a normal investment and it is highly not recommended for young adults. Not only that, you need large amount of money of at least $5000 to start it up or you can put away $250/month to $500/month into it until it reaches $5000. But for your mother in law, I believe this is the best option.

When you setup an annuity, it must be in your mother-in-law's name and you can name yourself as the beneficiary.

Perry Said:

What kind of life insurance is better for me, term insurance or permanent insurance?

We Answered:

I have seen this one asked so many times it's amazing. Usually, you have 2 camps: the cash value (permanent) insurance camp and the term life camp. Both think that they are right.

The truth is that it depends. Now, it's nearly impossible to say what is the *best* option for you because I would need to know more about your financial situation. It's amazing how many websites and "experts" can say, off the cuff that one is better than another *all the time*.

The biggest advantage that term life insurance has over permanent is that it is cheaper in terms of coverage per thousand dollars of insurance. You will almost certainly be getting more death benefit with term insurance than with permanent insurance for the same amount of premium you are willing to pay.

The downside to term lies in in the fact that it gets more expensive as time goes on. Also, there is a reason why term insurance is so cheap. Depending on who you believe, only 1-20% of term policies ever pay out a claim. Now even at 20% (which I think is high), thats still not all that great if you ask me. Some might argue that with term insurance you can invest the difference. Meaning that if a permanent insurance policy costs you $100 per month and you receive $50,000 in death benefit then, as the argument goes, you could just as easily buy a $250,000 term life insurance policy for say $35/month and invest the remaining $65. Or you could buy less term insurance and have more to invest. The point is, the theory is that that by the time you reach age 65 (or whenever you plan on retiring), that you won't need life insurance. If you are quote: "smart with your money", you won't need life insurance.

I think that this is a myth for most people (but again, it largely depends on your situation). One of the problems with investing is that it doesn' t matter how smart you are with your money. Most average joe investors put their money into mutual funds. If that fund tanks 5 years before you retire, it is very likely that it will be extremely difficult to retire on what you thought you would be retiring on.

The other issue I have with the permanent vs. term debate is that folks that advocate term insurance usually try to compare permanent cash value life insurance to an investment. It's not. It was never meant to be. They complain about how low the rates of return are after expenses. Many times the internal rates of return are only 3-5%. But do you know what the definition of "cash value life insurance" is? It's not "a type of investment". It's considered "a death benefit with a *savings* component". Look at any high yield savings account or CD. What is the rate of return? 3-5%. Look at cash value life insurance. What is the internal net rate of return: 3-5%.

The problem with permanent insurance is that it's not a be all end all for retirement savings. Some folks think that this is all anyone should ever buy and that they should never consider anything else. They even go so far as to defend life insurance as a "good investment". Bad move IMO.

My opinion is that BOTH sides are wrong. That's something of an answer for you. If you want more in depth details, read this article: http://www.twintierfinancial.com/article…

Perry Said:

What's the difference between universal life insurance and permanent life insurance?

We Answered:

A universal life insurance policy works a little bit differently. The premiums that are paid are chosen by the policyholder and do not have to remain constant.

Go here for more details...

http://typesoflifeinsurancereviews.com

Walter Said:

Permanent Life insurance, Please suggest?

We Answered:

Which is the best size jeans? How do you define "best"?

There's no short cut. To find the best for you, you have to shop around.