Thanks for your time.
Hi, I have a couple questions. Is it better to buy whole or term life insurance? Also, have you ever heard of Zander Insurance? Dave Ramsey supports it. Wanted to get your thoughts in comparison with the ones rated highly on this site.
Thanks for your time.
Just like a hammer isn't inherently better than a screwdriver, whole life isn't better than term life and vice-versa. The best way to think about them is that they are tools that accomplish a similar end (a cash payment at someone's death) in different ways.
Term life is a simpler, more transparent product where you can buy a lot more coverage for dollar of premium than whole life but only 1% of term policies have a death claim paid against them. Whole life is much more complex, costs more per dollar of coverage but can last your entire lifetime in addition to building a cash value. As someone who's sold life insurance in the past, I can tell you that term is a much easier product to sell and more conducive to advertising and being sold over the internet than whole life or any other type of cash value policy.
The answer to which is better lies in what you're trying to accomplish with buying life insurance. If you're looking to protect your family during your working years or want money set aside to payoff a mortgage or for education expenses, term is the way to go. If you have estate tax, estate liquidity issues, or want some sort of forced savings vehicle a cash value life policy might make sense. In a majority of cases I see, buying a larger term policy with generous conversion privileges makes the most sense.
My only familiarity with Zander Insurance is that they are a large advertiser on the Dave Ramsey Show. They aren't an insurance company themselves, instead they sell policies written by different insurance companies.
When buying life insurance, you can either buy it from an agent who represents just one insurer (called a captive agent), a broker who represents several insurance companies, or from a company that sells direct to consumer.
The first two places I look to place life insurance coverage are with TIAA-CREF who sells direct to consumer and Low Load Insurance Services which is a broker that primarily works with fee-only financial advisors.
It depends on what you want to accomplish. Generally speaking, term insurance usually takes care of your need 80% of the time. Typically, one owns life insurance to cover obligations they have when income ceases due to death, such as providing for spouse and children's living expenses, education for children, a mortgage payoff or other outstanding loans.
Term life insurance comes in two major forms: annual renewable term and level-term. I typically recommend the latter with conversion privileges during or at the end of the term. Terms are typically offered for 5-, 10, 20- and 30-year periods.
When you expect there is a permanent need to carry insurance through your lifetime, consider whole life, universal or variable life. Depending on your goals and pocketbook, each has es and minuses that need to be weighed before purchasing. Permanent insurance is much more expensive than term insurance since, as long as you make adequate premium payments, the insurance stays in place until you die. Some people buy permanent insurance to satisfy an estate planning goal, leave a legacy, make a charitable commitment. However, these are not the main reasons the average person needs life insurance.
I'm a strong advocate of utilizing an agent rather than an insurance broker who offers products of one insurance provider. That way, you get to compare policies, ratings of companies by AM Best (very important to go with a company rated A+) and premiums. Ask friends who might know reputable agents in your area. A group we use for both term and permanent insurance is Low Load Insurance Services. They are located in Tampa, FL and conduct business e via email, online, phone conferences. I highly recommend them. They can be reached at 1-877-254-4429.
Let's start at the very beginning. All insurance is term insurance. The only difference is whether you pay all of the mortality costs out of pocket or you put money into an account that is set up in the policy and the investment earnings help you pay the mortality costs.
All insurance has the SAME mortality costs because it is an actuarial science and all of the insurance companies use the same basic mortality data. If they didn't then it would not be an actuarial science. All of the companies have the same relative expenses. So the only real difference is investment returns - and by law the companies are limited where they can invest. So there is very little difference even in investment performance. (But the companies will say there is).
So the question is - tell me when you are going to die - and I will tell you what to do. If you want insurance your whole life, term insurance will not get you there. The cost will become so astronomical at your older years, you will not want to pay the premiums. So the only solution for owning insurance until life expectancy or beyond is to buy permanent insurance.
Dave Ramsey and others all direct people to term insurance. On some level. that makes sense because the cost is so small compared to the benefit for the first few years. But then as you get older it becomes harder to pay the rising premiums. The concept is that your investments will be large enough that you won't need life insurance. That may or may not be true.
What is true, is that term insurance is inexpensive in the beginning - but what you give up by buying term instead of a solid permanent policy is years of compound interest that can the premiums when you 75 or older. If you really look at the difference, permanent insurance does not really cost that much more.
Hope this helps.You might want to go to an educational website on the difference between permanent and term. http://www.aboutthebox.com
Term insurance. It really is that simple. It is there in case a catastrophe happens and your heirs need a cash payment in case of your death. And it costs less in the mean time. Whole life is very expensive and comes with high fees. If you need a means of forced savings, such as that offered through a whole-life policy, there are better, cheaper ways to do it (e.g. automatic contributions into a low-cost, index-fund Roth IRA).
Just remember: Term insurance. That is all you need to know.
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