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Is term insurance better than the others? Thanks.? |
Is term insurance better than the others? Thanks.? Lets first get rid of a couple of misnomers about Term insurance. 1) the insurance does not go away once the term is up. All the term referrs to is the length of time that the premiums stay fixed at a certain price. Once the term is up, the premiums go up substancially... this is the reason why 75% of term policies do NOT pay out. 2) Term insurance is not better than other insurances...nor is it any better than other insurances. The question to ask is, what is it you want the insurance to do for you? Do you want something that will take care of your loved ones for a short period of time and then be done, or do you want something that can change as your needs change? Do you want something that gives you no living benefits, or do you want something that can give some living benefits? Okay now that we have that cleared up, what you need to do is talk with an agent/advisor who understands both term and Cash Value Life Insurance and what they can do for you and your personal situation. They should ask you a lot of questions regarding what you want to do in life, retirement and how you want things passed on in order to make the right recomendations to you. They should also show you illustrations of both types of policies (term and perm). The main diference between the two is this: Term insurance is bet that you will die in a 5, 10, 20, or 30 year period (or any other period of time). There is no living benefit to having term insurance... it is a die to "win" policy. Once the term is over, the premiums increase substancially. They are though much less expencive upfront than any other form of life insurance. This is the reason why it is a good choice for young people starting out. Cash Value Life Insurance: There are three types, Whole Life, Universal Life, and Variable Universal Life. I will only talk about whole life here the other two have their places, but if you are looking for true insurance whole life and term are the two you should look at. Whole Life is where the policy is forever one premium rate. You lock in the rate the day you except the issued policy. The policy builds Cash Value which is made up of Guarantees and dividends (Guarantees are just that, the company guarantees to put a certain "percentage" into the cash value account, the dividens are just like stock dividens, they are never guaranteed. This cash value over time can be accessed to do things like help pay for the kids college education, put a down payment on a house, or supplement your retirement. All of this is done tax free through policy loans. Make sure that the company you are looking at has indirect reconition when it comes to the policy loans. this means that the money you are borrowing isn't really your money, but actually the company's money... the death benefit will be the "collateral" on the loan, but the cash value account will continue to grow at the rate it was as if you never touched the account, so in most cases the company takes the cash value account and then the death benefit if needed. When looking at term insurance, make sure the policy allows you the option to convert to ANY of the company's Cash Value policies, not those DESIGNATED by the company. When looking at any type of insurance, make sure to look at the company's financial picture, and make sure that it is strong... not just rated strongly, but also they can show you their financials with large reserves or surpluses... this is their ability to pay future obligations... meaning payout your insurance policy to your beneficiaries. Source(s): Life Agent/Financial Advisor 2yrs Financial industry 7+yrs BA Economics www.alaldrete.com Not unless you think you might die within the length of the term. Once the term is ended, your money is gone and so is the insurance. term insurance is not always better than others if your local insurer offer unit linked insurance or investment linked insurance, please take a look. What I have discovered is the cost of insurance is cheaper than Term Insurance if the entry age is from18 - 50. Meaning the actual premium for the same protection is lower in Unit Linked Insurance. If you only need a protection plan to protect you during the working years consider unit link insurance. Term insurance usually don't carry any cash value and if you forgot to pay the premium after the grace period, your policy might lapsed. Unit Iinked carry cash value, and the cost of insurance is deducted every month. If you miss 1 payment and the cash value is sufficient to cover for 1 month then your policy is still inforce or active. Because of the cash value portion, the premium for Unit Linked insurance can be higher than term insurance initially. But after 20 years or 30 years you may get back all your premium paid (depending on the investment return). So this type of plan is gaining more popular as you can 1) increase your sum insured or lower your sum insured, if required 2) add additional protection (rider) like critical illness, medical coverage, pa coverage and more 3) top up the cash value portion as additional saving in the plan 4) Premium holiday. in the event you are not able to pay the premium and the cash value is sufficient to cover, your policy will not lapsed 5) Cash withdrawal option. In need if cash you can withdraw 6) Cash back after 20 years or 30 years. Meaning for the next 20 - 30 years your protection is almost FOC. 7) Cheaper than Whole Life Insurance 8) You can also extend your coverage up to age 100 if you wish http://www.einsuran.com Malaysia Insurance Portal all other forms of insurance can be thought of as a combination of term insurance and a savings or investment plan. the kicker is that most insurance companies have poor or very poor long term investment records, AND after underearning the market they have to deduct their administrative costs from your savings. One counter argument sometimes offered is that the earnings inside the insurance plan are not subject to taxes until received ... in this age of low taxes, this effect is unlikely to offset the poor investment record of most insurers. [Of course, some in Congress want to raise your taxes.] The other argument frequently advanced is that you can't spend the accrual inside the insurance plan until you cash in the policy -- which helps some people to keep saving. This is, of course, nonsense -- it assumes that people are weak willed and easily manipulated. [If you really have a problem in that area, don't you think you'd be better off in the long run to address the issue head on instead of avoiding it via the crutch of a poor savings plan?] enjoy Depends on your age and the amount of dependents. If you are in a high=income bracket, and need low cost insurance for a growing family, it is the least expensive way to go. If it is for you, and you want something back from this, including equity to get loans, try whole life, and something I just discovered Unit Linked, which allows adjustments. The amounts are lower, although your money can be returned without death. |
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