by Guest » Wed Aug 17, 2011 10:00 am
I've heard that a term life policy is cheaper than a whole life policy that offers the same worth of coverage. But then again my dad says, that a TL policy won't accumulate cash value like a WL policy. Is there a way that I may achieve similar benefits by investing in a TL policy?
Posted: Wed Aug 17, 2011 10:56 am Post Subject: Life Insurance
A Term Life insurance usually has lower premiums compared to Whole Life insurance. But a TL can’t have a cash value, which a WL or any other permanent life insurance offers.
Then again, TL is also a temporary life insurance which will give you coverage up till the term of the policy, renewing which will result in a hike in the premium.
Posted: Wed Aug 17, 2011 11:27 am Post Subject:
I'm 30 and in good health. Say, I have an option to go for a 20-year guaranteed level term policy in the amount of $100,000 for $160 a year. I also have another option to go for a $100,000 Whole Life policy for $1,050 per year. Now, what do I do?
Posted: Wed Aug 17, 2011 12:05 pm Post Subject:
Depending on your annual income and your budget, you can choose the insurance that suits you best.
If you want to cover yourself for the given time period only for a less premium, Term Life is a good option.
But if you are looking for cash value accumulation along with life coverage then whole Life is more suitable.
Also, if you think that after twenty years you’d still want to renew your Term policy, do keep in mind about the increased premium that you’ll need to pay at age 50 and still with no cash value.
Posted: Wed Aug 17, 2011 12:45 pm Post Subject:
Guys, I see that there's a premium cost difference of $890 each year between these 2 policies. How about going for the TL policy, and then investing this premium difference every year with an aim to accumulate around $100,000 within 20 years? Wouldn't that be more profitable? I was simply wondering..
Posted: Wed Aug 17, 2011 08:45 pm Post Subject:
How about going for the TL policy, and then investing this premium difference every year with an aim to accumulate around $100,000 within 20 years? Wouldn't that be more profitable?
Nice thought, but it isn't going to happen. $74.16 x 240 = $17,800 + whatever interest/investment gain you might earn in that time. $17,800 to $100,000 in 20 years is a straight line 14.3% rate of return.
That kind of return cannot legally be illustrated in any securities product (mutual fund or variable insurance product), and you won't get it from any bank.
The "forced savings" in a non-participating WL policy will accumulate $100,000 at age 120/121 under the 2001 CSO mortality table. A participating policy using a paid-up additions option for dividends will accumulate both a larger death benefit and corresponding cash value over the same time period. How much more? No one can tell you for sure, then can only make an assumption.
Cash savings of $890 per year x 80 years = $80,100 with no interest/gains. That can be guaranteed, but it may not be realistic either. After the end of one's working years, where will the $890 come from in the remaining 50-60 years?
Besides, the discussion should not be turned to "profit". Life insurance is not a profit-making venture. Its purpose is to provide financial resources to those left behind in the event of a person's premature death.
The premise behind "Buy term and invest the difference" is that the insurance + the separate savings will provide a greater amount of resources to the beneficiary. But it cannot be guaranteed. A renewable term policy at age 30 for $160 per year will renew at age 50 for somewhere between $500-$3000 per year (and not necessarily with another 20-year level premium guarantee). Only the contract can tell you what the maximum cost will be. At that cost, continuing to save $890 per year might be problematic, which jeopardizes the plan.
The response by Mona Wayne above is the reasonable approach to the situation. It's all about one's need for insurance . . . now and in the future. Saving money is mostly a separate discussion. Depending on the answer, the discussion should turn to the proper product to meet the need. There is no one-size-fits-all life insurance product.
Posted: Tue Mar 15, 2016 12:07 am Post Subject: car crash
I was involved in a car crash. It was my fault who did a crash to front car. They called a cop & cop investigated everything & he did not give me a citation & told that it is a minor crash, please do careful & maintain a safe distance in future. Car repair cost was around 640$. But they put a claim for soft tissue injuries, which is still running from almost 3 months. Just want to know in general what will be the expenditure for these treatments.
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