I was told that a whole life policy may be better than term since I will be able to get all my premiums back in 35 - 30 years. Is that true?

Asked by Lynn

7 Answers

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Answered by Donn Sharer , CFP ChFC CLU in Millstone Township, NJ
Thanks for your question Lynn. While I can't speak specifically to PA, I can say that I'm not aware of a "return of premium" feature for whole life policies. That said, it is true that whole life policies can build up cash values and if funded sufficiently, this can leave a cash value in later years equal to or greater than the premiums you paid in.

Many term life insurance policies do come with return of premium riders that will payout an amount equal to the premiums paid. Most permanent life insurance policies can be setup so that cash value accumulates over time.

Which policy type is better for you depends on many factors, including your budget, how much death benefit you need, for how long it will be needed and for whom it it is needed, your risk tolerance, your marginal income tax bracket, whether you own a business, and your personal saving discipline. And I'm sure I've omitted a few factors.

As you might surmise from this list, it sometimes means that more than one type of life insurance may be best for you. A good financial planner or insurance advisor can help you sort this out. I would steer clear of people who only recommend one type of insurance for all situations as the is one area where there is not one single answer for every situation. | 09.25.13 @ 17:49
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
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Answered by Arin
Term is cheap now, expensive later.
Whole life has equity that builds inside that you can use later in life that pays back your premium plus a return. Consider it as a savings account. | 03.03.15 @ 21:58
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
Answered by Paul Carag, Financial Adviser in Renton, WA
Good Afternoon, Lynn. To add to Donn's and Arin's comments, the type of insurance you purchase should be determined by your goals as well as your own personal factors, such as many of what Donn mentioned. Properly structured Whole Life insurance will indeed not only pay you dividends but the cash value will also gain at a guaranteed rate every single year. You will, as long as you keep the policy, end up getting back what you've paid into and then some - again as long as it's properly structured - and can eventually have that policy pay the premiums for you from the cash value for the rest of your life. Another factor to determine what kind of insurance you buy should be the 'opportunity cost'. For instance, if you purchase term insurance - even with a return of premium - what is the cost of never having the term insurance premiums in your investment accounts earning interest? Remember, every dollar spent is a dollar that can never be saved, invested, earn interest or be spent again. I'd be happy to go into more detail with you if you want to contact me directly. | 04.16.15 @ 20:12
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
Answered by Willard R. Brumbaugh, LUTCF in Victorville, CA
Depending on your age and health, this could be true. However, there is more to consider than the return of premium. First of all is the Face Amount adequate to meet your family's needs.

Also to be considered is the cost of borrowing on your policy, since one of the features of Whole Life insurance is the availability of funds in emergencies. In looking for a policy of this type, seek a policy that has loan interest that is not significantly higher than the interest generated in the policy.

It may be that the premium for the appropriate Face Amount of Whole Life is higher than you can afford. Many companies offer a blend of Whole Life and Term to take advantage of Whole Life features while having the immediate benefit of the initially less expensive Term. | 05.22.15 @ 03:03
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
Answered by Ebrahim Rad, LUTCF , CLTC , MDRT in Woodland Hills, CA
Some people choose whole life policy as part of their retirement strategies and use it's leverage but you need to see what is good for you and your family. You need to see a financial advisor to do your financial need analysis before making any decision. you can't ask your doctor give you medication before your doctor find out what your problem is. | 02.09.16 @ 06:10
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
It will depend on the type of whole life you buy. Many plans are labeled whole life but may not really be. I think what you're being told is your whole life should gain enough in cash values to return your premium outlay over that time. Depending on what you actually buy, it is a true statement.

Basically you're being asked "do you want your money back?" the answer is yes, you can do it that way with a whole life. | 10.16.16 @ 05:06
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
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Answered by Saving in WI
Term life insurance is the only way to go, unless you have whole life already and can not get term due to health issues. Never buy a whole life policy. Buy your term insurance and invest in other areas(401, roth IRA, Mutual funds,etc). Life insurance is not an investment strategy. | 10.17.16 @ 14:02
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 04:14
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Answered by

Donn Sharer
Donn Sharer , CFP ChFC CLU in Millstone Township, NJ

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