My insurance agent contacted me recently about switching some of my term life insurance to whole life.
I have to admit this all confuses me. Can you tell me what the advantages of would be of switching my term-life to whole? And should I keep any term-life, or convert it all? I am male, 32, married with 1 child,
Answers | 13
It may make sense to add a Whole life policy. As you age, your term insurance will become too expensive to keep. You pay the lowest whole life premiums the younger you start and the healthy you are. Often people want some insurance for their loved ones to cover their final expenses or to replace their income or to pass on wealth avoiding probate and inheritance taxes. As with all insurance, shop to find the best rates.
The draw back is that you are likely to be severely under-insured.
Wholelife is a complicated product that mixes insurance and investing. And when it comes to finance, complexity is bad for the consumer since it masks all sorts of fees.
Without knowing more about your personal situation (like income and asset level) it's hard to judge whether it is beneficial...but if you're not in the top 5% of income earners it most probably does not.
First, what is it that you want to accomplish? Why are you buying life insurance? Despite the protests of various agents and advisors here, "whole life" isn't evil, and "whole life" isn't the end-all-be-all financial product. Neither is term, IUL, or any other flavor of life insurance. Each is designed for a specific purpose. And YOUR purpose should dictate which kind of life insurance you should buy.
Second, it's common for a GOOD life insurance agent to approach you from time to time about making changes to your coverage. The fact that your agent wanted to get you to convert SOME of your TERM to Whole Life tells me a little bit about how he approaches life insurance planning. And his way isn't "wrong". I'm not saying it's "right" either. But have him explain to you what his philosophy is, and why it will benefit you.
Just a few things to think about. Good luck with your decision.
Your decision should be based on your needs and goals. Whole life locks your cost in and gives you control of your insurance. Other products are fine, but they have limited durations (they end before you do) and you really don't control the price, the insurance company does.
You may want to look at converting some coverage as that converted coverage most likely will still be there 30-50 years from now.
But do what works for you. There is no right answer only yours.