Whole Life Insurance – The Life Insurance “Controversy”

  • May-05-2011
  • Richard Reich

As long as there has been life insurance, there has been an ongoing controversy about which type is best whether – term or permanent, like whole life insurance or universal life insurance.

There really is no controversy, but it seems like there are some interests that may want to fuel the debate. Investment companies that market investments may have helped fuel the “hullabaloo”. Why? It makes sense that if people tied up their money in whole life insurance with guaranteed values that they may not want to or have as much cash to invest in mutual funds or other investments. Thus is born the concept of “Buy term and invest the difference.”

This was compounded in the 80’s and 90’s by a promoter named A.L. Williams who took this concept to major proportions. Mr. Williams was a charismatic speaker and he combined the almost evangelical fervor of his marketing with the pyramid-like structure of multi-level marketing unknown to the conservative insurance industry. Thus, through negative publicity built on the vested interest of making term and mutual fund sales, whole life suffered in the public eye and in the media. This tradition is carried on by people like Suze Orman.

The fact is that there is a place for both types of life insurance depending on the circumstances of the individual including their age, income, financial position and family makeup. It makes no sense for a young family scraping by with young kids and a limited budget to buy $50,000 of whole life instead of $500,000 of term. Get what you need for your family!

On the other hand, a family with high disposable income can take advantage of the benefits of a quality whole life insurance policy. The number one value of whole life (or universal life) is that it will last a lifetime. If you keep a whole life policy, it will pay the claim to your beneficiaries. There is no such guarantee with term. In fact, the vast majority of term life insurance policies do not pay a claim.

The fact is that 100 percent of the death benefits of whole life policies which are kept (payments are made) result in a claim. Furthermore, because one paid more for a whole life policy, a reserve or “cash value” with tax deferred interest is generated, often very competitive interest.

To summarize, the most important point is: Get enough life insurance – a lot. Then look objectively into which type based on your circumstances. Experts at a website like LifeInsure.com can help advise you in which direction to go.


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