What Type of Life Insurance Should I Get?
December 06, 2006 by
If you have a wife or husband and children, and they are dependent on your income to pay the bills, getting life insurance is one of the best gifts you could possibly give them. If the unexpected were to happen and you were to die suddenly and unexpectedly, the last thing your family
should have to worry about is paying the bills. When you do get life insurance, make sure you get the right type of life insurance, and make sure you get the right amount.
There are two major options when it comes to life insurance, and one is a much better buy than the other. You will hear a lot about cash value or whole life insurance, which is one of the worst financial products made. Sadly, over 70% of the policies for life insurance are whole life products. They will show you a lot of fancy numbers showing how great of an investment it is, but none of the policies ever perform as expected.
Let's look at an example. Let's say a 30 year old individual has about $100 every month to spend on life insurance, for this he'll probably be able to purchase about $125,000 in insurance to provide for his family. They'll sell it to him based on the fact that he's building up savings for retirement, which they technically do. But if the man were to purchase term life insurance, he would be able to purchase about 1.5 million dollars in
life insurance for that same price!
But what about the investment part of it? Well, most of the $93 for the first few years gets eaten up by fees, and after that it will average anywhere between 2 and 7 percent, which is not a very good investment. Whereas if we invested in term insurance with that other $93, we wouldn't have all of those high fees, and instead we would be getting about 12% in mutual funds (the stock market has averaged 11.8% rate of return since inception).
There's a bit of a catch to term life insurance too. If you are to die, the money in the cash value that you build up disappears, and your family only gets the amount of the policy, and the life insurance company keeps the cash value.
There are two major options when it comes to life insurance, and one is a much better buy than the other. You will hear a lot about cash value or whole life insurance, which is one of the worst financial products made. Sadly, over 70% of the policies for life insurance are whole life products. They will show you a lot of fancy numbers showing how great of an investment it is, but none of the policies ever perform as expected.
Let's look at an example. Let's say a 30 year old individual has about $100 every month to spend on life insurance, for this he'll probably be able to purchase about $125,000 in insurance to provide for his family. They'll sell it to him based on the fact that he's building up savings for retirement, which they technically do. But if the man were to purchase term life insurance, he would be able to purchase about 1.5 million dollars in
life insurance for that same price!
But what about the investment part of it? Well, most of the $93 for the first few years gets eaten up by fees, and after that it will average anywhere between 2 and 7 percent, which is not a very good investment. Whereas if we invested in term insurance with that other $93, we wouldn't have all of those high fees, and instead we would be getting about 12% in mutual funds (the stock market has averaged 11.8% rate of return since inception).
There's a bit of a catch to term life insurance too. If you are to die, the money in the cash value that you build up disappears, and your family only gets the amount of the policy, and the life insurance company keeps the cash value.
Insurance, especially life insurance, should be handled with the utmost care. This guide will help to shed more light on term life insurance for those who are not in the know.
By Hykra | Published 7/31/2005 | Read more »
If you have a family, or someone else that depends on your income to live, life insurance is an absolute must. Find out how much life insurance you need, what type to get, and where you can get the best price.
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Life insurance can be as important as your paycheck is to your family. They need a means to survive on if something were to happen to you.
By Rosa Hayes | Published 10/4/2007 | Read more »
If you purchased life insurance even a few years ago, chances are you'll be able cancel your policy and get a better deal now even though you're a few years older.
By Matthew Paulson | Published 4/13/2007 | Read more »
With life insurance being a most important part of any adult's financial future, particularly any adult who has a family, it is vital that the policy holder, or potential policy holder, buys a policy which they can afford.
By Jessica Mousseau | Published 1/11/2007 | Read more »
The article describes in detail the different types of life insurances available and which one could be good for you. The article also describes the improtance of having life insurance.
By Vaibhav Mehta | Published 12/27/2006 | Read more »
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- Term costs 14 times less for the same amount of coverage
- 70% of the policies written are whole life.
- Whole life insurance is high in fees and provides a low rate of return.
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