Originally posted by: LolaWiz
A Term policy is going to be the cheapest... if you get a 30 year term policy for 200,000, after 30 years, if you are not dead(don't use it) thats it. You don't get any of your money back. you are basically renting a policy. Most people get this to coinside with the term of their mortgage.
A permanant(whole life) policy will last you until 100(or til your choosing) years old. It is more expensive, however, you can borrow against it, take money from it, etc.
That is a VERY BASIC way to look at it.
I would at least get you and your wife the value of the house on each of you for at least 15 years.
Rates will also be determined by health, if you smoke, etc.
each policy is not better or worse than the other, they are just different.
Term will always be cheaper than whole life, but you get more with the whole life policy
No, this is not a complete or correct answer, but it's what the cash value insurance agents want you to say.
Here are problems with cash value insurance:
1. No cash value buildup for the first 2 years, maybe 3. These policies have large commisions that need to be paid.
Would you put money in a bank if you knew they would take all your money for the first two years? Think about it.
2. Low rate of return. 1 to 5% is typical. You can find many FDIC insured banks online that give 5% and a mutual fund will do even better than that, right?
3. If you want to take that cash value and use it you have to take out a policy loan and pay it back with intrest. Yes, you have to borrow your own money and pay it back with intrest, and the intrest rate is usually about 8%. Now go back and compare that to what they give you in number 2.
4. There are two "options" on cash value policies. These describe what your beneficiary gets if you pass away. With one option they get the face value and the cash value. This is much more expensive than the other option where the beneficiary get one or the other so most people have the option where the insurance company pays out the face value but they keep your cash value. What a deal right?
Buy Term and Invest the Difference - this is the proper strategy
You can get much more protection with term, and at a cheaper price. Invest the difference in a mutual fund and when the term is over you have a large chunk of money.
This strategy beats whole life during the term and after.
Don't belive me? Read what the pros say:
"Next, you should only look for one type of coverage: Term life insurance. Do not-I repeat, do not-buy any other type of life insurance. There's another kind, called "cash value," which is a colossal waste of money, if you ask me. These cash value policies come in a variety of flavors, including whole life, universal life, and variable life. Just say no to anyone who tries to talk you into one of these plans. They can be more than 10 times as expensive as a term policy, yet you don't need any of the "extras" they come with. In fact, the big added feature of a cash value policy is that it provides an investment component. I won't go into a ton of details here other than to tell you that a life insurance policy is a lousy way to save and invest. So stick to a policy that simply provides life insurance and leave off all the expensive bells and whistles."
http://finance.yahoo.com/columnist/article/moneymatters/961
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