1. All policies fall into one of two camps.

There are term policies, or pure insurance coverage. And there are the many variants of whole life, which combine an investment product with pure term insurance and build cash value.

2. Insurance is sold, not bought.

Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.

3. Whole life is expensive.

Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured.

4. Whole-life policies are built on assumptions.

The returns quoted by the agent are simply guesses - not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.

5. Keep your investing and insurance strictly separate.

There are better places to invest - and without the high commissions of whole-life policies.

6. Buy enough term coverage to fill your needs.

Life insurance is no place to skimp, especially with rates at historic lows.

7. Match the term of the policy to your needs.

You want the policy to last as long as it takes for your dependents to leave the nest - or for your retirement income to kick in.

8. Buy when you're healthy.

Older people and those not in the best of health pay steeply higher rates for life insurance - so buy as early as you can, but don't buy until you have dependents.

9. Tell the truth.

There's no sense in shading the facts on your application to get a lower rate. Be assured that if a large claim is made, the insurance company will investigate before paying.

10. Use the Web to shop.

You can get tons of quotes - and avoid the pushy salespeople.

__________________
http://usedcarlosangeles.blogspot.com
http://usedcarlosangeles.blogspot.com
http://homeequityloanminnesota.blogspot.com

The biggest difference here is how and why to use each type of insurance.

Don't be fooled, Term policies pay a nice commission as well. One reason they cost so much less is that over 95% of term policies never pay out! On the other hand, permanent insurance held to maturity or kept in force, pay out 100% of the time.

So where is term right and when is permanent right?

As pointed out, it is good to have a large face value when you have a family you want to protect. This is probably best accomplished with a 20 or 30 year term. The rates are higher than 5 or 10 year rates, but you have a product you can keep without rate hikes later on. Also if using term, you should always be certain it is convertible into permanent insurance. The last thing you want is to die a week after the policy is closed because it could not be converted. You also want to know your rates will remain level, not have annual increases.

Often this approach is used to inspire investment outside of a life policy. Unfortunately, a vast majority never get around to the investment part, so when the policy comes time to close, there is no investment dollars to take it's place as a means of providing security.

Permanent insurance is also used (frequently by the most wealthy of families) to create a tax free growth vehicle, access to the dollars on a tax free basis, and a tax free way to pass along an inheritance or charitable gift.

There will always be arguments on both sides but knowing the difference between them and using the right product for the right purpose will always serve you best.

Personally, I don't like life insurances but for many people it may be a good choice.

It's always important to shop around and know what you are looking for.

I also think that too man people are too concerned with tax-fee 'investments' but that's just a personal opinion.

I think the need of a life insurance depends on how financially intelligent you are.

A young couple may get one becasue you never know what will happen tomorrow but there are clearly better ways to put the money to work for you that you will spend on the life insurance.

In the end it's all a personal preference.

__________________
It is not smart to play it safe but it is safe to play it smart.

Another thing to consider is your current health, and whether the insurance company will accept you.

Some people are now going online to look at another option for term life insurance without taking a physical exam.

You can get free quotes online and apply online in a matter of minutes for up to $250,000 of level term life insurance.

This may be an option for people who need life insurance quick, or those who don't want to take any physical exam or blood tests.

Keep in mind, this type of coverage may cost more because the insurance company doesn't fully underwrite it. They only ask you a few health questions and let you know immediately if you qualify for coverage.

I agree entirely with Dru, and Hadley has made some good points, too.

Insurance companies actually hate Whole Life insurance, and would prefer to sell you Term, Universal Life and Variable Life insurance. Why? For a few reasons.

1. As Dru pointed out, Term insurance rarely pays out a death benefit. Making the premiums 100% profit (minus some administrative costs).
2. Whole Life has higher Guarantees than most policies, which the insurance company is on the hook for.
3. Universal Life has the highest lapse rate of any of the permanent products. Low guarantees and low cash-value returns = disaster.
4. VUL has few guarantees, a high lapse rate, and very high fees. Not to mention, the sub-account performance is your responsibility as an investor, not the insurance companies.

My comments on PPL's note...
1. True, there is term and permanent. Permanent includes whole life, universal life, and variable life, plus other variants. Technically, UL and VUL are only permanent in the sense that it's only if you pay the necessary premiums, which can increase/fluctuate.

2. Every insurance and financial services product is technically "sold". In fact, sales make the world go round. You wouldn't have a job if it weren't for sales. None of us would. Now, I do agree that you can be an educated shopper, ask intelligent questions, and find professionals you can trust.

3. A good insurance agent would never recommend being underinsured. If you cannot afford a full whole-life premium, a good agent will re-structure your insurance program to compensate. This can be done by using some term insurance, term riders, or policies that are structured specifically for low premium. A life insurance policy needs to be designed for a client, and these things would be taken into account.
And from a macroeconomic perspective, whole life policies are CHEAPER than term. The premium remains fixed, and therefore becomes cheaper over time. Not to mention dividends can begin paying premiums, even in early years, making out-of-pocket cost go down. Whole life has profound economic benefits from an estate planning and retirement planning perspective.

4. You do not understand whole life insurance. WL is built on Guarantees. A WL policy has to "endow" at a specific age, and the guarantees ensure that those cash values earn an internal rate of return necessary to get the cash values to that level by that age. What is promoted, are the dividend rates, which are not guaranteed. These rates are above and beyond the guarantees. No professional insurance agent should be selling policies off of dividends.

5. Insurance is not an investment. But you have to plug the holes in your bucket before you can fill it up with water. The best investment program in the world won't help your family when you die prematurely or become disabled.

6. I agree entirely here. However, many people define "needs" differently, so do some research. You should carry the largest death benefit that an insurance company will issue, with waiver of premium to protect against disability, and conversion to whole-life options.

7. I've already written enough, but there are significant retirement and estate planning benefits to having life insurance after retirement. Buying term insurance just to get you there will not allow you to take advantage of these benefits. And if your health changes, you may be stuck.

8. Definitely buy when your healthy. This is where conversion is an important consideration. Not to mention waiver of premium.

9. Agreed, tell the truth. Some smaller insurance companies are notorious for fighting death benefit claims, mainly because they do not have the financial resources built up enough to be able to absorb any increases in their projections.

10. Life insurance should NEVER be bought over the internet. Not even term. Now, you can research companies, products, and features over the internet, but DO NOT buy insurance this way. I can show you a single life insurance product that can be issued 50+ different ways. They can be built customized to your unique needs. Find an agent you trust, because they will be the ones delivering that check to your family if something happens to you.

Sorry for the length!!!!

PPL, I wasn't going to reply to this thread but I just can't resist throwing in my 2 cents. I'm going to respond to each and every one of your assertions.

Keep in mind I'm NOT attacking you personally.

I'm simply replying to your topic and perhaps offering a perspective from someone with 23 years experience in the financial services industry who has SOLD hundreds of life insurance policies over the years and earned tens of thousands of dollars in COMMISSION in the process!!!!!!

Okay, let's play.....

PPL wrote:
True.
But not really accurate.
All polices are either Term or some form of Cash Value. To characterize all cash value policies as some form of Whole Life is simply not accurate.

What would call Return of Premium Term? It's not "pure" term insurance and it's certainly not Whole Life, however, the insured gets back every penny they paid for the life insurance at the end of the term.


Your comment is a blanket condemnation of an entire industry. Agents don't sit down with clients with a gun pointed at their heads demanding they buy one form of life insurance over the other. That's not how the sales process works.


PPL, the internal cost of insurance and the risk to the insurance company of providing the death benefit is the same regardless of whether the policy form is Term Insurance or some form of Cash Value life insurance. To compare the premium of a term policy with the premium of some form of cash value insurance with the exact same face amount is an apples and oranges comparision.

Your statement.....
.....is patently false.

The first thing that's determined in any life insurance interview is how much life insurance is NEEDED. The affordability is a separate issue and obviously a person's financial circumstances will dictate how they pay for their protection.



Another blanket condemnation. "Agents" have NOTHING to do with company software or projections and each and every cash value life insurance application submitted is accompanied with a signed proposal from the client clearly identifiying the policy's CURRENT projections along side the policy's GUARANTEED VALUES.



Another blanket condemnation.

PPL, are you aware that typical agent first year commission for term life insurance is 90%-100% to perhaps 105% of the first year's premium?

There are fundamental reasons why insurance agents are paid COMMISSION rather than an hourly rate or a weekly salary. I'm quite certain if any insurance company could pay their agents minimum wage to market and sell their products THEY WOULD.


The "historic lows" are for Super Super Extra Super Preferred Non-Tobacco Rates that very few persons will qualify for and get the policy as applied. Less than 20% of these policies will be issued at the low ball sucker rate within the 35 to 65 age range.

AND even if YOU are perfectly healthy in ALL areas, if your Mom or Dad died of any form of cancer or had a heart attack prior to age 60 you will be slapped with the Standard Rates which will be just about double the quoted premium.



Really? That's it? Just those two criteria are all that one should consider when buying life insurance? So are you saying, Federal Estate Transfer Taxes, Business Buy-Sell Agreements, Employee Benefit Plans, Charitable Funding, Business Loan Collateral Assignments and other such uses are not to be considered?

PPL, does a persons needs and circumstances, wants and desires change over time?

I'm not following your point about holding life insurance until retirement income kicks in. Term life insurance is certainly not going to supplement anyone's retirement income and retirement proceeds from pension plans would be paid to the named beneficiaries. If you're talking about having life insurance to provide for a survivng spouse to augment income in retirement because of the loss of their deceased spouses Social Security Income then Term Life Insurance is absolutely most inappropriate for that objective.



Yes PPL, "Buy when you're healthy." Because if and when you become uninsurable then YOU CANNOT buy life insurance at any price.

Your statement,
"but don't buy until you have dependents."
is contradictory.

Do you think perhaps a young married couple with no children might want to provide for each other if one predeceased the other? Once again are you saying that having dependents is the ONLY trigger for the consideration of life insurance?



Hmmmmmmm, shade the facts???? The medical questions on a life insurance application are YES or NO. There is nothing to shade. Anyone applying for any type of significant death benefit with any reputable company is going to be required to submit to a Paramed Exam, Blood Test and Urine Test at the very minimum. There's not a whole lot of room to shade anything.




Yet another blanket condemnation.

Term Life Insurance quotes are a joke. They are sucker rates. Have you seen the commercials? A male age 40 could get $250,000 of coverage for under $15 dollars per month!!!!!

Oh it's true...... for their Super Super Extra Super Preferred 10 year term rates THAT NOBODY QUAILIFIES FOR. Not to mention the premium explodes in the 11th year and if you become uninsurable you're stuck.

An insurance agent would know this and advise you of the 11th year premium explosion along with the fact of life that one risks becoming UNinsurable in the future.

By the way PPL. It is insurance agents and agencies who own and market those online term insurance web sites and they are paid 90%-100% to perhaps 105% or more of the first year's premium when you buy the policy online.

So while you may have avoided the pushy commission salesperson the insurance company still paid the EXACT same commission to the agent who owns the online agency.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

agree, but still have tone of term and regulation can't be understand ............need to open a law forum for this situation...ha

__________________________________________
a penny a day, make life happy always

Before purchasing low cost life insurance, be aware of factors generating life insurance rates:

1) Your age and sex. The younger you are, the easier it is to find life insurance policy with low premiums and correspondingly the older you are the higher the premiums.

2) State of health. If you aim at life insurance with low premiums, you are obliged to improve your health, for example stop smoking and drinking alcohol, make physical exercises, lose weight and so on.

3) Risky hobbies. It’s advisable to give up risky hobbies, if there are some.

Do search properly for various quotes, fill them out and compare.

__________________
http://www.lifeinsurancetalk.org/

Uh, I think there is more info. on here than most people need/want to know.

How can I insure my family the cheapest against the loss of my future income if I die before my kids get out of college? Term.

Which policy, term or whole life, would allow me to invest more of my disposable income in other instruments to get a good return as I move to retirement? Term.

Is insurance an investment? No, you only get back more than you put in if you die while the policy is in force.

How can I tell whether the insurace company that I'm considering is a reputable one? Look at their AM Best rating. You want an A+ or A++ rating.

All Things Personal Finance...And Then Some

Uh, I think there is more info. on here than most people need/want to know.

How can I insure my family the cheapest against the loss of my future income if I die before my kids get out of college? Term.

Which policy, term or whole life, would allow me to invest more of my disposable income in other instruments to get a good return as I move to retirement? Term.

Is insurance an investment? No, you only get back more than you put in if you die while the policy is in force.

How can I tell whether the insurace company that I'm considering is a reputable one? Look at their AM Best rating. You want an A+ or A++ rating.

All Things Personal Finance...And Then Some