Friday, February 5, 2010

Term or Whole Life Insurance

Yes, the old debate continues. Well, in our opinion its up to the client and his/her situation. Term can be great if paired with a return of premium rider and/or the client is middle age. Whole life can be great if the client is young or has children. It builds cash value. Price wise, its identical to term life with ROP, and whole life is permanent. Term is temporary unless it can be converted.

People say buy term and invest the difference. That's great if the market is earning AT least 4%. Cd's are not even paying that now. They weren't when the economy was booming in 06/07. Whole life can be variable or indexed to a market index like the S&P500 or a combo of multiple indexes. The indexed universal life policies have a death benefit plus a cash value account which gains as the market gains BUT does not lose when the market index drops. You participate in the gains only.

People say you shouldn't mix life insurance with investments, or "you don't have investments with your car insurance". Well, a diligent advisor would make sure you have both. And if used IN conjunction with cash savings accounts AND investments like mutual funds/stocks/bonds in an IRA/401(k), whole life/universal life insurance is a good value.

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