If you follow Suze Orman, you probably know that she is not a fan of whole life insurance. Dollar for dollar, she believes that term life insurance is a better buy. I disagree. Term life can be a good solution when cash flow is a problem, and you need coverage, but it isn’t always the best investment option.
Let’s say you are a recently divorced mother of two. You’re 38 years old, have just returned to work, and you need to provide financially for your children if something should happen to you, but you don’t have a lot of cash on hand. In this situation, term life insurance – a policy that covers you at a fixed rate of premium payments for a specific period of time, like 10 years – might be a good option. It is less expensive than whole life insurance, and it pays a death benefit to your beneficiaries. No bells and whistles, just protection.
In many other instances, however, whole life insurance – life insurance that covers you for your entire life – is a much better investment. Premiums for whole life insurance, also called permanent insurance, can vary. They may be tiered over time, they might remain level, or they can cease at a certain time, such as age 65 when the policy becomes “paid up.” While you are paying premiums to your life insurance carrier, the premiums go to work for you, building cash value tax free. This money is protected from creditors and is excluded from probate. In the meantime, you have access to the cash value. The face amount of your policy is guaranteed by contract, so your money is safe and secure.
Want to learn more? Call me to schedule a no obligation meeting. I can review your current insurance policies and recommend possible changes.