What is primary difference between "whole" and "term" ? I heard one was a scam/rip off; but no one knows which one.

 

  • mbrcatz17 9:02 pm on February 13, 2010

    Whole life is sometimes called a ripoff, but it’s not. It’s a policy that you buy, with the premium determined in advance, for your WHOLE LIFE. As long as you keep paying the bill, it will never go up.

    Term guarantees the premium for a predetermined term – 1, 5, 10, 20 years. Sometimes it can be renewed, but then the premium goes up.

    If you’re 30, term is going to cost you about 1/10 what whole life will. For MOST people, term insurance (which is pure insurance, as opposed to whole life which has a gimicky cash value program) is the most bang for your buck, and the cheapest over the long term. At 50, the term is about half of whole life, but at 80, the term costs more. The POINT is, if you "invest the difference" between term and whole life, by the time you get into your 70’s, you have more money in the bank than the insurance would ever pay out, and that’s why term is better for most (but not all!) people.

  • Tech 9:02 pm on February 13, 2010

    Whole is a 100 year span life insurance when mature, it released cash values according to the policy in the page that contains the table of cash values. You can retrieve the cash before 100 years but you will get penalize. The problem with cash values insurance is the low rates of return versus what you are paying monthly for premium. It will not pay the face amount because it is not included in cash values insurance. In the long run, it is a scam because most people don’t understand contract or the hard word jargons.

    Term insurance (Standard) is simply a simple = death claim. When you die, the face amount that you paid for will be payout to beneficiary. You will not be tax for receiving term death claim as oppose to cash values insurance.

    If you want an investment attached life insurance, I suggest you find a life annuity that is attached to a respected mutual fund company account.

    Note to the other comment, how is term insurance a ripoff if the company agreed to cover you? As long as you pay the premium, the set life span of the policy will continues to cover you.

    It is also advisable to find a respected life insurance company that have a high rating. Cheapest term insurance worser than competitive term insurance.

    Cash values achieved a minumum of 3% annual rate of return in most policy. If you paid $100 a month on whole life, according to the cash value table. You will be getting less total saved cash values compare to what you paying for premium.

    If you want an investment attached life insurance, get life annuity for a 12% or more rate of return.

    You never get money back from term policy. It is a simple pass away for payout or living to renew your term coverage.

  • Jody 9:02 pm on February 13, 2010

    I think term is a rip off. It expires. So say you are 25 and you get 20 year term life insurance. At age 45 you will have paid the premium for 20 years, but the policy expires and you don’t get your money back. Whole life lasts until you die, no matter what age that is. Term is usually cheaper, but for a reason.

  • michaelstjohn2001 9:02 pm on February 13, 2010

    Whole life builds cash value. Term insurance is cheaper, but is only for protection, and dosen’t build any cash value. Neither is a ripoff, it depends on what you need the insurance for. I believe that term is better since you get more protection for the money, and you can use other higher paying investments than whole life.

  • P S 9:02 pm on February 13, 2010

    Term life insurance only pays you if you die within the "term".
    If you don’t die, all that money you paid is gone forever. If you DO die, then your beneficiary gets the money.
    It’s not a scam, because it saves you money, and you really don’t need life insurance when you’re old and decrepid, because your kids can fend for themselves.
    Whole life insurance is the kind that you keep paying month by month, decade after decade. You are guaranteed a lump sum payment when you die, but you must keep paying into it until you die. So basically, you are letting someone else invest your money for you and you never get to see this money, only your beneficiary does. IT’s not really a scam either, because it can give piece of mind to your family in case you croak before your time. It has a cheaper premium, but you pay it for your entire life, so in the long run, you pay more.

  • aaron p 9:02 pm on February 13, 2010

    This question begs for a simple answer to a very complicated question. Think first about what your insurable interest is and why you need protection. Then explore different ways to cover that risk. Consider the time value of money, inflation, the stability of that risk, your own saving temperament, current cash flow vs. future cash flow, etc.

    If you need help, you are better off asking for some help with your specific situation rather than seeking a generic answer. Try asking a few different financial professionals to get multiple perspectives.

  • Hadley 9:02 pm on February 13, 2010

    Some financial experts have written that you should "buy term and invest the difference" – Meaning buy term life insurance and invest the difference in the savings from what you would have paid for whole life insurance.

    Life insurance is viewed by many as "protection", not an investment.

    However, many people think they should use their investment dollars to buy a form of whole life insurance that builds cash value within the policy.

    Term life insurance provides pure protection, there is no cash value that builds within the policy, you pay only for the life insurance protection.

    So, the choice is yours, do you want life insurance for a specific term or number of years (term life insurance), or, do you want to pay more money for whole life insurance that lasts your entire lifetime and builds cash value for which you are paying extra?

    I hope that helps! Best of luck to you.

  • Bradley S 9:02 pm on February 13, 2010

    All life insurance pays a death benefit when the policyholder dies. The death benefit is intended to replace the lost income of the deceased, allowing the survivors to maintain the lifestyle they enjoyed before the love one’s passing—at least for a period of time. Both term life and whole life accomplish this goal.

    The major difference between whole life and term life is the amount of time the policy covers. As the name suggests, whole life covers the policyholder’s entire life, until death. A term policy insures the life only for a certain number of years, known as the term. When the term is up, the coverage ends. If the policyholder wishes to continue term life coverage, he or she must take out a new policy. This is an important juncture. If the term life policyholder has developed a serious illness, such as AIDS or cancer, insurance companies may not be willing to insure the life—or the premiums will be so high that the insurance will be out of reach. With whole life, coverage continues no matter what health problems the policyholder develops.

    Since term life policies often expire without the insurer needing to pay a death benefit, the cost of term life insurance is much lower than the cost of whole life. In fact, term life insurance costs several times less than whole life insurance does. Affordability is term life’s main advantage. If a person has just started a family, he or she can take out a 20- or 30-year term life policy, knowing the family will be provided for should anything happen to the policyholder. After that, the term lifers argue, life insurance is no longer critical. With children grown, the mortgage paid off, and retirement in the offing, the policyholder can afford to allow the term policy to end without taking out another. The term life policy will have served its purpose.

    This is another difference that whole lifers point to as a shortcoming of term life insurance: Once the term ends, all the money spent on term policy premiums is gone. The policyholder and his or her family will never see the money again. This is not the case with whole life insurance premiums. Since the policy covers the insured until death, the death benefit will be paid, which means the premiums will be recovered by the family. In addition, the insurance company invests the premiums, and the policy accrues what is known as cash value. The policyholder can borrow the cash value and pay it back to the insurance company. If the policyholder wishes to cancel the policy, the cash value will be paid to the policyholder. The amount paid out at the time of cancellation is known as the “surrender value.”

    The “scam” you hear about is term lifers saying that a person would be better off paying less for term life insurance and investing the savings in something with a higher return—stocks, bonds, etc. However, to earn those greater rewards, the term life policyholder must take greater risks in the open market. Many investments will outperform whole life insurance, but not all will. Some investments lose money, as shareholders in World Com, Enron, Peregrine Systems, and many other companies can attest.

    Even if the investment will pay out, it is not certain that the term life policyholder will actually make it. To do so, he or she must calculate the amount saved over whole life insurance; save that money every month, quarter, or year; research possible investments; and contribute to that investment regularly for 20 or 30 years. This makes sense for disciplined and savvy investors, but many others will find the endeavor daunting and time consuming. They may not start it, and if they do, they may not continue it. Whole life takes care of insurance, savings, and investment in one easy payment. Even if the returns on whole life are not great, saving something is better than saving nothing, and nothing is exactly how much many term life policyholders will end up saving.