From a brokers perspective; What is the advantages for a client who buys "TERM LIFE " , over "WHOLE OF LIFE , in your opinion???

 

  • pigeonguy 1:05 pm on March 17, 2010 Permalink

    There is not always a "better or worse" scenario. Each has its place.

    Term is great for those without the present financial ability to secure permanent insurance, or who have a need for additional insurance for only a relatively few years, e.g, to cover children in the home, etc., till they leave. Term is relatively cheap.

    Permanent insurance of any kind continues for the life of the client. There are other types beside whole life, which I personally don’t like, since cash value accumulation within it is usually minimal since it’s tied to the general accounts of the company.
    There are other permanent types of insurance in which cash value accumulation is much better and perhaps to be preferred,

    However, your question is specific and I will answer it so.

    Term life will allow the family that uses it to take the additional money that isn’t spent on the Whole Life policy and put it away into something that will grow better for them, including mutual funds. They will, however, be liable for capital gains taxes on the growth in those funds, but usually they will outpace whatever the Whole Life policy has as cash value in its general funds (normally those pay about 2-4%). Over time, mutual funds have apparently averaged about 8 -12%.

    Even with that, whole life can still have some advantages over term. Let’s say someone has ONLY two choices. Whole life or term. I’d suggest that they seriously consider the whole life. Why? Because term runs out and the premiums to renew can skyrocket. Also, things happen in life and there is a real possibility that you may not be able to get another term policy because your health, for example, has deteriorated between the time you first got your term policy and the time it ended. Assume you were diagnosed with cancer in year 9 or your 10 year term policy. No carrier will pick you up in year 11 when you want to renew. However, with whole life you’d be covered even if you had the same scenario in year 9. Your family could still be taken care of if you died in say year 12.

    Just so you know, though, there are other forms of permanent insurance in which the money is NOT placed into the general accounts of the insurance company, but is placed instead into sub-accounts that also average about 8-12% and money taken as loans from these policies and taken under the appropriate ways are usually not subject to taxes.

    This is by no means a solicitation for anyone to contact me about this, I’m simply answering your question in as full a manner as I can in this short space.

  • Jacks_and_Bullets 1:05 pm on March 17, 2010 Permalink

    dont know

  • mbrcatz17 1:05 pm on March 17, 2010 Permalink

    well, there aren’t any from the sales point of view – you make a lot more money off of whole life, or universal life.

    Most clients only buy life insurance for a year or two anyway, then they stop paying the bill, and they lapse. Then you get to sell them all over again.

    You make more money off of whole life, and the premiums are higher, too. The only slight advantage of term is, it costs less.

  • brendagho 1:05 pm on March 17, 2010 Permalink

    A whole life policy will have a cash value that you can borrow against for certain reasons, it has more expensive premiums for that reason, if you stop paying then there is still a cash value to the policy depending on how long you have been paying on the policy. Term life is just that, it is only valid as long as you are paying on it and you can only collect by dying, if you stop paying the policy a year before you die you get nothing even if you paid on the policy for 50 years before then. That is why it is cheaper, some people stop paying and that is pure profit to them.

  • emariagethai 1:05 pm on March 17, 2010 Permalink

    better whole life