Insurance Quotes Comparison : Whole Life vs Term Insurance : Suze Orman on Term Life vs Whole Life Insurance
Suze Orman on Term Life vs Whole Life Insurance
A little confused about Term Life VS Whole Life Insurance? Many people are when they are considering to purchase a life insurance policy. After all, it is one of most important financial purchases for a family.
Term Life vs Whole Life Insurance: Suze Orman Weighs In
Do you watch the Suze Orman Show? You might have an idea of Suze's stance on Term Life vs Whole life insurance. Below is Suze's conversation with a guest caller which will give you more insight on her thoughts about Whole Life Insurance.
Suze Orman: Oh. Thank you! What can I do for you?
Deepak: Well Suze, a friend has recommended that we buy a whole life insurance policy as an investment.
Suze Orman: Stop! Stop! There isn't a friend in the world. Not one friend in the world that if it is a true friend that would recommend you buy a whole life insurance policy. A snook, somebody who wants to take you, somebody who in my opinion is not a friend maybe. But there is no way a friend would do it. Does that answer your question already?
Deepak: It gives me a good sense of what you are thinking.
Suze Orman: Alright, how old are you though Deepak?
Suze Orman: How much of an insurance policy? What was the death benefit?
Deepak: Um, I think 50...$500,000.
Suze Orman: $500,000? Alright how much was it per year?
Suze Orman: Fourteen Hundred?
Suze Orman: Fourteen Thousand dollars a year?!?!
Deepak: ...and the idea was largely use it as an investment to put money away to save on taxes. whole life insurance?
Deepak: Boy it seems like you're reading my mind here.
Suze Orman: Oh sweetheart that's not a friend that a sn....I don't even know %#*#)$! You know, it gives me dandruff I think. Listen, you can get a half a million dollar term policy for 20 years at your age for approximately $25 or $30 per month. OK? That's $300 per year. Now, if you really want to make an investment you could take all those other $1000s of dollars and take that money and invest it where? In a retirement account, a piece of real estate, in stocks, bonds, whatever it may be where it absolutely makes sense to you.
Do you know that I am a licensed insurance agent. A life insurance agent and I am licensed in every single state in the United States except Hawaii because I don't want to go to Hawaii right now to take the exam.
So I have been licensed everywhere. Very few people can tell you that they have that type of insurance background. I can tell you that if you put $14,000 into a whole life insurance policy, my friend, how much commission do you think I or your friend would make off of that $14,000 deposit?
Deepak: Like atleast a thousand or two.
Suze Orman: Oh, are you sitting down?
Deepak: I am.
Suze Orman: Are you? What don't you try about $10,000. Ok?
Suze Orman: So yeah, he could buy you...just forget it. Here's the bottom line. Don't do it. Do what I said. Buy a term insurance policy. You can get a half million dollars that way. $300 a year and tell your friend why doesn't he go and make some real enemies.
Term Life vs Whole Life Insurance: The Good & The Bad
Why doesn't Suze Orman like Whole Life Insurance (also known as Permanent Life Insurance / Variable Life / Universal Life)?
For the amount of death benefit one can purchase Whole Life, as life insurance is way overpriced.
$500,000 worth of Term Coverage = $300 per year
For Permanent Life coverage you are paying a whopping $13,700 extra.
Term Life vs Whole Life Insurance: Differences Between Whole Life vs Term
Term Insurance is for a set term or time period from 1 year and usually up to 30 years.
Permanent Coverage is Whole Life Insurance + Investment (held within the life company) and you are supposed to have the policy for the rest of your life.
In regards to Term Insurance there is no investment but it is just like car insurance = pure insurance. Plain and simple.
It does not make sense to try to combine life coverage with an investment but with whole life coverage it is sold as such. Why would insurers combine insurance and investing?
Permanent Coverage or Whole Life means exactly that. You are paying on premiums for the rest of your life.
Term Life vs Whole Life Insurance: Understanding The Need For Life Insurance?
It is for protecting your family that depends on you for income. If something happened to that income the family could no longer survive. If something happened to the breadwinner then the life insurance is there to protect the family financially.
Once the children are grown up and making their own income they are no longer dependent on the parent(s) income. At that time you no longer need it for that purpose.
Term Life vs Whole Life Insurance: Nobody wants to pay premiums for the rest of their life
Do not fall into trap of making anyone rich by buying life insurance. It is not likely to happen but it is important to have. Don't throw away your money like that. You are better off buying term coverage only for the time period for which it is needed.
As you get older your term life rates will go up but they lock the monthly rate as soon as you start your policy. Only get it when you need it.
Invest your money or just save it.
Term Life vs Whole Life Insurance: Anything Good About The Investment Portion Of Permanent Coverage?
It is sold to you as an investment for retirement / children's college fund / emergency fund in which it will grow while being held by the company and you can "BORROW" from it and pay it back with interest.
What is the reason for borrowing the money? It's not my own money?
If you have a whole life policy you can only borrow it and you will be obligated to pay the insurer back with interest. The investment is called "CASH VALUE" which sounds incredible?
The real ripoff? You first year of premium payments you get NO CASH VALUE. It is correct. The investment portion kicks in the second year of your policy. The money that you paid to the insurer the 1st year is awarded to the salesperson who sold you that policy. Your money? Yeah right. Their money.
Term Life vs Whole Life Insurance: The Bottom Line
Get Term Life Coverage when you need it (that is when you have children)
Take the money that you would save and put it into a retirement account which YOU CONTROL 100%. Make sure you have FULL CONTROL of your money to invest or save it anywhere you like. Keep a good distance between you and Variable Universal / Permanent / Whole Life / Universal Life Insurance or any life insurance that has you placing money into an investment as part of your policy.
Take your savings a step further by comparing Term Rates online.