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April 01, 2010


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In almost all cases, term is the best option. That is what I have done to this point. However, I now find myself in a bit more unique situation. My first policies were tied to getting married and having our first child. As time has gone on, I have been presented an option of making these permanent. I normally would have passed. However, with a recent diagnosis of melanoma, I may take this option.

I like the idea of buying term and investing the rest. That's probably a better idea to get better returns. good tip.

I have experience buying both. Right after marriage, we used Dave Ramsey's advice and got everything lined up according to plan. I bought $1 mill in 30 yr term and paid $95/mo. Then, I lost my way. We were out of debt, making good income and started spending it like mad. I tried and tried to be an active investor, but just didn't have the time for the research.

I broke down and went to an independent financial adviser I really trusted, as I knew the person personally and knew their philosophy lined up with mine. They laid out this mysterious, wonderful plan that sounded awesome. Never was the term "permanent/whole life insurance" mentioned, so I bought in, only to find out that it was an insurance sales job!

I came to my senses recently and am back in term now. The thing I hate is how the salesmen are so slick, as they claim to be financial planners, but there is clearly a conflict of interest, b/c their pockets benefit greatly from the super high premiums. Coming from someone who has been through the experience, stick with term and peace of mind. Don't let the mysterious "cash value" lure you in!

" It's more coverage than most people need"

Huh? Everyone I know who has whole life has less coverage than they need. Because they buy it when they are 30 and they probably need a million dollars of coverage but there is no way they can pay the premiums on that so they get 100K of insurance but feel very good about how much it will be worth when they are 75. However, they could get big gains in other vehicles by 75 as well. What they can't get is replacement income for their family if they die at 32. And that 100k will last all of about 2 years and then their family is broke. If they had 1 million in term insurance they would have bought the insurance they needed. But since they bought whole life, they got far less insurance than they needed because that got tricked into buying it for an investment rather than buying it for insurance. Insurance is first and foremost for insurance. If all your insurance needs are fully covered and you can devise other reasons to have more insurance for other purposes that may be fine. But if you buy insurance for something other than insurance and in the process end up under insured, then unfortunately you have either been tricked or you are irresponsible to those who depend on you to make wise insurance decisions.

MasterPo agrees with Apex.

Further, if you're buying some kind of whole life insurance as an investment, it's a waste of money. Unless you're super-duper rich and using it as a tax shelter it just doesn't pay compared to other investment choices.

OTOH, if you buy a whole life plan for a small child with the thinking they can cash it in some day or convert to an annuity payout then *maybe* it's a decent move.

Permanent life insurance certainly should not be ruled out. It is a great option for those who are looking for estate planning benefits, and for high earners like you. On the whole though, term insurance is a much better ticket chiefly because it is affordable and saves you money that you can invest in other tax-differed investment avenues. Some examples of such tax-deferred options are IRAs, education funds, Roth IRAs, 401Ks, etc. When planned in this manner, you benefit both out of life insurance and out of your investments.

Denise at AccuQuote
Disclaimer: I work for AccuQuote and this is my personal opinion.

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