Dilemma: Whole Life or Term Life Insurance?

I can hear your frustration. You need to sit down with an adviser.

You say that you want burial costs covered. Being 48 years-old with minor health problems could mean that she will live a long time - it could be as much as 30 years.

Whole Life is known as a rip-off is a very general statement to make. You need to find out why so many people purchase this product if it is a rip-off. Could it be because the Term Life rates go up so much as a person gets older? What if you do buy the Term and then mom's health gets worse - will she be able to qualify for insurance at that point?

There are many life insurance companies and they all have slightly different products. You need to ask around and find someone that you can trust who has quite a few different markets to compare. Then sit down and talk about where you want things to be. Maybe you should be looking at some long term care for mom - will her health deteriorate quickly? How will you pay for her care?

Take your time. Do your research. Find what you need for your situation. You should feel good about the decision that you make.

Good luck!

Life insurance is very simple to understand. All insurance is term. Term just means the length of time for the coverage. The differences lie in whether you should save inside your policy or outside of your policy. Again very simple. Inside the policy you can 1)borrow the money (borrow your own money - doesn't make sense, but that is how it works) 2) for the 1st few years you have nothing in the savings (which you can tell something is wrong when above the whole life is $60 and the term is $19) you would have an immediate savings of $41 a month by not buying the whole life policy 3) the cash inside the policy grows very slowly (you can add up the monthly $41 savings and place under your mattress and you will have more than what you will see in the savings of the whole life policy) 4) if you die, you don't get the savings and the face amount of the insurance (you get one or the other). This doesn't make sense because you are actually paying for both but you can only get one 5) if you take out any cash it is subtracted from the face amount immediately. example you have $100,000 coverage and you take out $10,000 from the cash your policy is now worth $90,000. Agents will argue and say that is not true because you still have a $100,000 policy. My question to them is: if that person dies the same day or before they pay back the $10,000 what check would the family get and they will say "oh in that case the $90,000". That is what I had stated the day it is taken out it is subtracted from the face amount. What they are saying is once the $10,000 is paid back. Needless to say, it is not a choice. Buy insurance in its purest form (term). No gimmicks. You pay the premium - you have coverage. You don't pay the premium - you have no insurance. Investing is another subject. Keep them separate. If you are talking with an agent and they offer you this option, I would not do business with them or their company. They let you know from the start that they are not there to do what is best for your family. Make sure you invest because once you accumulate enough money or the reasons for the insurance disappear, you will want to cancel all insurance. Agents will argue again because they will talk about estate taxes. For most people they never accumulate enough in their life time for this to be an issue. If you do end up with a large estate, you can then address this issue and I would still use term to cover it. I hope this helps

I just read a few of the comments and the article that someone advised you of and they sound like agents that sell policies that accumulate cash. Anyone that believes that a whole life policy is not a ripoff I would beg to differ. If they are not agents, I hope they read the points I just gave and understand that people have been fighting these policies since the 1800's but the life insurance industry is very powerful. Study well. By the way, there is a difference between preplanning for burial and paying for your burial early. In all the cases I have come across, it was better to buy insurance than paying for a plot. The only way I can see it being the other way is if a person has health issues and therefore they can't get insurance

The term premium will go up each renewal - usually every 5 years. As mom gets older the cost might become a bit too much.

Whole Life isn't a rip off if you understand what it is designed to do - that is keep premiums level. In order to do that the company much charge more than term while you are younger and then use that extra to keep the Whole Life premium level as you grow older.. It is probably a good use of Whole Life to provide burial insurance since you will be keeping it while mom grows old. If she lives to 90 you probably won't be able (or want to) pay the term premium since it will be so high. (If the insurance company allows renewals at that age).

So if all you want life insurance for $10,000 to cover funeral expenses, and your mom is expected to live into her 80's then Whole Life might be better. If you want more coverage for your buck with the chance that the insurance might not be affordable in the future then Term is better. Note: If you buy $20,000 of Term and then the premiums become too high the company will usually let you reduce the coverage to say $10,000 and pay less premium.

You might ask what the Term premiums are at 55, 60, 65, 70, 75 and 80 etc to see what the insurance company currently is offering for those ages - . That will give you an idea of how quickly the premiums jump as you get closer to really paying for a funeral.

Hope this helps.

Sure. Let's do the math. You're looking at, what, $10,000 of coverage. Compared to that whole life policy, if you put that $60 a month in a nice index fund, in about 9 1.2 years, you'd have $10,000. If your mother lived to 78 - not unreasonable - you'd have over $90,000.

Now, term- still cheaper than whole, but you didn't mention how long the term is. If it's 10 years, and in invested the $42 difference in that same account, after 10 years the insurance is up, and you'd have almost $8,000 in the account - you'd be able to self insure.

So. Do you think mom can kick around for 10 more years? If so, you're probably BEST off just shoving the $60 a month into that index fund for mom's funeral. Because if she DOES live until 78, that whole life policy will actually end up costing you almost $70,000 in lost interest and earnings . . .the insurance company would get that, and YOU would get . .. your $10,000 death benefit.

If you need to be able to keep the insurance for as long as she lives (so that you can pay for her burial even if she is 85 when she dies), then get whole life, because term life becomes unaffordable to renew after some age (not sure exactly how old, maybe 60 or 70).

If you just need the insurance for another 10 or 20 years, and expect to have enough saved by then to pay for the burial without insurance, then get term life to save money.

In most cases, whole life is indeed more costly. Read the life insurance section at Yahoo Personal Finance. If burial costs are all you're worried about, buying a prepaid funeral plan is often cheaper.

If you're buying insurance for a burial policy you almost always want a whole life policy. The only reason you'd want term is if you only wanted insurance for a specific period of time...10 years, 20 years, etc... But, if you're going to want it for her burial whether near term or when she's 88 then you want a whole life policy. It's not a 'rip off.' It's just often sold incorrectly and to the wrong people. It's very appropriate and common to use as a burial policy.

This article does a pretty good job of explaining the differences and how to choose

http://articles.moneycentral.msn.com/Insurance/Ins...

My uncle did the pre-pay thing for his funeral. Then after he died they pretended he never paid.