What do you consider an advantage?
Before considering some advantages whole life insurance has over other life insurance, it’s important that you know what you consider an advantage to be.
What’s more important to you, the return ON your money or the return OF your money? Are guarantees important to you or do you prefer risk?
Return ON or return OF
If you’re looking for a high return on your money, there is no advantage to life insurance. There is no question you stand to earn a higher return on your money by investing elsewhere, if you’re willing to take the risk. The risk is you could lose some or all of your money and there could be no death benefit.
If you’re more interested in a guaranteed return on your money, albeit a fixed and probably lower return than what you could get elsewhere, coupled with a guaranteed return of your money, then this would be a key advantage of taking this path.
If you want to be able to forecast how much your money will be worth at any point in time, with the possibility it could be worth more than the forecast, and under no circumstances less, and know what the guaranteed death benefit is, then this would also be a definite advantage.
Compared to other insurance policies
Life insurance can be divided into two main types: Temporary and permanent. Both types will pay a tax-free death benefit if the policy is in force at the time of death.
Term insurance is temporary because it is designed to be in force for a specified period of time, which is known as the term.
Permanent insurance is called what it is because it is designed to remain in force for the remainder of someone’s life.
The two main types of permanent coverage are universal life and whole life. Both have cash value and living benefits not offered with term.
Indexed universal life is intended that there will be no loss of cash value and it doesn’t guarantee there will be a gain.
Whole life guarantees there will be no loss of cash value and guarantees there will be a gain.
Compare overall cost
Initially term will almost always cost less. However, the money you pay for term is money you will never see again. If you outlive the policy, which is often the case, there will be no death benefit.
Universal usually initially costs less than whole but more than term. There is a lot of flexibility of premium with this type of coverage. If properly planned, the likelihood of a reasonable return and cash value gain is likely. It is also likely that the coverage will be in force for the remainder of your life.
The whole life policy will have the highest initial premium but the premium is guaranteed never to increase. As long as the premiums are paid the policy is guaranteed to never lapse.
Perhaps some of each?
Bob is a retirement planning and safe money professional who specializes in life insurance products and who has more than 20 years experience.
His company, A Bulletproof Life is the 5 F’s: Food, fitness, finances, fulfillment, fun. and is based on his motto: Honesty, respect, best effort
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