Good Reason For Whole Life Insurance Quotes?
I have a whole life policy, through the Nights of Columbus. There is a respected financial advisor, Suze Orman, who seems so adamnant that whole life is not a swift move. She makes it sound as if there is not one reason to own whole vs term. Are there any good reasons for owning whole?
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November 13th, 2009 at 3:16 PM
She is not an insurance professional and has given inappropriate advice many times in the past.
Whole life is a good choice for some people. It is a cash value policy, which allows the cash to grow tax free inside the policy. If you need cash in a crunch, you can withdrawal your premium payments w/o tax or getting a loan. You can get a loan against the cash value if you need more, and in many times the dividend will offset the loan interest. If you have a few months where you have skip a payment, the policy has enough cash to sustain itself typically. The cost of insurance goes down as the cash value goes up (the $ insured is only the difference between face value and cash value). You get in most cases a guaranteed cash value on your invested money, and in today’s market that is typically about 4-5% or greatly exceeding what you would get in a CD. It typically will get dividends that equal the premium in 10-20 years, and you can choose to quit paying premium at that point. You can’t do that with Term.
But the cost of whole life is much greater than a non-cash value policy, like the way most UL policies are sold.
Term when you are 75 or 80 will likely cost you about 1/3 of the face value PER YEAR, so it becomes very inefficient. It never is "paid up". That is why term is low priced as most people drop it and never have a policy pay out.