Whole Life or Term Life

[luxlux]

luxlux, what would happen in the example you gave me if you had 20 years of whole and kicked the bucket?

This is a total layman's oversimplification but for what that's worth:

If you had a say a 500k whole life policy and you died after say, 21 years, the whole life policy would pay out to your beneficiary. They would receive 500k.

If you had a 20 year Term policy, and you died after 21 years, you beneficiary would receive nothing, because the policy would have ended after 20 years.

That's the general idea, and that is the reason why Term is so much cheaper.

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I think the poster you are correcting might have just been out of career school. I appreciate his/her excitement, but he has to catch up on alot of reading as he's off a bit on just about every comment. Just enough to be dangerous.

I've been out of school for some time now, but if my posts seem to you to uninformed or off-base, you would be completely right.

I know very little about life insurance, and the more I learn the more questions I have. I'm just trying to educate myself so I can make an informed decision about what product to buy. There is surprisingly little useful information about various products on the net...(for instance, try to find a good well thought out comparison of Limited Pay Whole life VS. Standard Whole Life)

That said, this forum is full of good info and has answered many questions for me. I'm really grateful for this resource.

For the record, everyone should take anything I post with a grain of salt, because unlike most of the people on this forum, I am NOT an expert or an agent. Life insurance is not my arena. I'm just a confused consumer, and yes, I definitely do have some reading up to do. I'm definitely NOT a super genius.

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If you maxed the contribution in a ROTH for 40 years the average rate of return you would need in all years to get to 4 mill is about 12.15%, a tad tricky.

You know, as I wrote that, I was wondering if someone would object to that...I was trying to think of an exaggerated number, for the sake of arguing the Buy Term and Invest the Difference argument. I agree 100% that 4 million would definitely be hard to accumulate in a Roth if you were only contributing 5000k a year or so into it, and you didn't convert Traditional IRAs and/or have a Roth Solo 401k.

Careful while the FAFSA does not look at life insurance cash values to determine need and expected family contribution, some private schools have their own financial aid forms and processes that will.

This is great info, thank you. I had never heard that before.

 

[Norwayguy]

This is a total layman's oversimplification but for what that's worth:

If you had a say a 500k whole life policy and you died after say, 21 years, the whole life policy would pay out to your beneficiary. They would receive 500k.

If you had a 20 year Term policy, and you died after 21 years, you beneficiary would receive nothing, because the policy would have ended after 20 years.

That's the general idea, and that is the reason why Term is so much cheaper.

You are definitely over simplifying this example because it is still possible that the 20 year term will still be in force on year 21 through the use of guaranteed renewability ie the policy acts like ART at that point and goes up every year in cost. The whole life would pay 500K or more if dividends purchased PUAs or it could be less if the owner took out loans from the policy that had not been paid back. But otherwise a decent explanation of Whole Life and Term.

 

[LGilmore]

"I am NOT an expert or an agent"

Well you should alot of activity towards your posting soon then.

Simplest thing to understand, there are no "right" answers to the life insurance question, only yours.
What ever you decide on, you'll have to live (and possibly die) with.

Maybe look at it from a perspective I used for myself.
"What if I'm wrong?"
Many here approach things with absolute certainty that nothing will effect their suggestions over time. That things will stay static because when you visit a problem, you are visiting a snapshot in time. While we can get it right for the most part, the odds of being 100% spot on are pretty small if not impossible.

Life insurance revolves around the question of "dying too soon or living too long".

If you only answer one part of the question, you really haven't covered it.

good luck, I'm tired with lots to do today...