Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Whole life insurance as opposed to term life insurance
When are you supposed to go with whole life insurance as opposed to term life insurance?
Gail V. Marquet:
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Whole life is never a good option. The only way it is beneficial is if the insuree dies young. The best option is always term life. At the end of the term, you should have sufficient funds to pay funeral expenses and in essence be self-insured. Term life is an excellent choice for young families to cover not only funeral expenses, but supplement daily living costs in the event of the death of one individual.
Dianne C. McCabe:
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If you have a lot of responsibilities such as a young family and mortgage, term insurance works absolutely perfect because this is a way to purchase a large amount of protection (to cover a mortgage, child care, college education fund etc..) for a specific period of time (until mortgage is paid off and children have graduated and on their own) at a very reasonable cost! You can purchase a guaranteed level premium term policy which means the cost stays the same for a specific period of years and also the death benefit remains level for the term of the policy. Investment advisors continue to recommend term insurance for these needs. What you are saving by buying term insurance instead of whole life, you can invest the difference on your own OR if you have not “maxed out” your 401K contribution, do that FIRST before you ever think about purchasing a whole life policy, especially if your employer is matching your contribution!

On the other hand, if your children are grown and your mortgage is paid and you are basically just looking for a final expense death benefit (enough for burial and final expenses), then a small whole life policy works perfect. A whole life policy means you will have the coverage for your whole life! You can use projected dividend earnings to either reduce your cost each year OR buy additional paid up life insurance each year. Your premium is guaranteed not to increase for the life of the policy.

Someone with a large estate and concerns of estate taxes, would also be a candidate for whole life insurance.

Someone who is getting close to retirement and contemplating their pension option can purchase term or whole life to supplement their pension choice “pension maximization”.
Jeff Kyle:
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I recommend as soon as you can afford the premiums. The younger you are the lower the premiums will be. It’s a great tool!