Life Insurance

Whole Life Insurance

In this article I will try to tell you the good the bad and the ugly about Whole life insurance. Whole Life insurance is not for everyone. The biggest problem with this type of life insurance is that people are Miss informed. This problem is elevated by the fact that life insurance agents are compensated higher when they sell a whole life insurance policy. This fact alone will prompt some agents to become whole life pushers rather than life insurance advisors.

That's not to say that whole life insurance is not a good policy for some people but it could be the wrong policy for most people.

So what is whole life insurance? The term insurance proponents would say that whole life insurance gets that name because your money ends up in a hole! That is true in many cases because most people don't realize is that your cash value is really the property of the insurance company and most people will never get a penny out of it, unless they cash in before they die. If you cash it in though then the problem is that you have no more life insurance. So it is hard to win with a whole life policy.

Another danger is that some people buy whole life insurance for the wrong reason such as a savings plan for their retirement. That wouldn't be so bad if it wasn't at the expense of adequate protection for their dependents if they were to die tomorrow. I'm trying to say is that the monthly premium on a whole life policy can be as much as 10 times more than a equivalent term insurance policy. So a lot of people will buy less of a face amount of whole life insurance just to stay within their budget, not realizing that they had just bought a lot less insurance than they really need. That's when it becomes a bad deal for you and your family.

If you are young and have children that are dependent on you, it is hard to argue that term insurance is all you really want to buy. Once the kids are grown you may consider getting some whole life insurance, you could even convert part of your term insurance policy into whole life just to lock in the premium on part of your policy.

There are some versions of whole life insurance that make it make more sense. What I'm talking about is paid up whole life insurance. What that means is that after a certain amount of time, usually 10 or 15 or 20 years, your life insurance policy is fully paid up or in other words, you don't have to pay any more premiums even though your coverage stays and in effect for the rest of your life. Those kind of whole life policies are more expensive up front but in the long run turned out to be a lot cheaper. The reason for that is that you can budget and exact amount of money that you will spend on this policy over a lifetime and this way insure that you will not be paying premiums for life insurance when you're in your 80s.

I will write a separate article on paid out whole life insurance policies to give you a little more detail on how that works.