February 14th, 2013

What is the difference between term life insurance and cash-value life insurance? Which policy is best for the vast majority of Americans? Why?

3 thoughts on “February 14th, 2013”

  1. Aaron Howard says:

    Term life insurance pays an amount to the policy beneficiary when the policy holder dies, if the policy holder dies within the number of years of the term of the policy. Term life insurance is typically sold in 10,15,20 and 30 year terms. Cash value life insurance is somewhat like an investment, where each month the policy holder contributes cash to the policy and when the policy holder dies whether it’s in 2 years or 50 years the value of the investment at the time of death is paid to the beneficiary.

    Which one is better for most Americans depends on the situation. A good strategy might be to buy term life insurance if you have children or other dependents and then instead of buying cash-value insurance aka whole life, variable life or universal life, start an investment fund that can will mature to take care of dependents after the term life has expired. The benefit of building your own cash-value insurance fund is that provided you have the discipline to follow with the investments you have much more control over your investment options and the fees or load you pay for that investment. Cash-value insurance is typically not the best place for your money to grow. The insurance agent gets a cut and the fund manager gets a cut.

  2. Gary Sammons says:

    Term life insurance is best for most people; especially those that are still working and want to provide for their family in case of unforeseen death. By paying lower premiums, one can invest in good growth mutual funds and stocks. Cash-value policies may be best for seniors or people with chronic illnesses.

  3. Mike Finley says:

    Great job gentlemen. The answers were detailed and correct. If a person needs life insurance (millions do not to include almost all single people, children, and most senior citizens) look to term life insurance (either a level term like Aaron mentioned or an annual renewable term (ART) if you only need a policy for a minimal amount of years.

    Most people have the cash-value policies. Why? Insurance agents make hefty commissions on these types of policies which equates to reducing your return on this very poor investment (translated: agents have a conflict of interest with the information they are providing you, they are salesmen).

    Term insurance is cheap and provides little in the way of commissions to the life insurance agent (you won’t hear much about term if you let the life insurance agent control the conversation). Stay away from life insurance agents and educate yourself by learning from teachers, not salesmen.

    You can go online to a term life clearinghouse to buy term life insurance without dealing with agents directly. Accuquote.com, term4sale.com, and selectquote.com are three options. If you want to learn more you cannot go wrong with Jane Bryant Quinn and Eric Tyson. I trust these teachers and so can you.

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