Term or Whole Life? Why You Need an Independent Insurance Agent

Life insurance is not a topic most people like to think about, but it is an important protection to help your family in case you die. And that is, in a nutshell, the definition of life insurance – leaving your named beneficiary (ies) or your estate a predetermined amount of money if you die while insured.

This article talks about two of the most popular kinds of life insurance, term life insurance and whole life insurance. According to the SmartMoney Life Insurance Glossary term life insurance is a life insurance policy that you have for a set period of time usually 10 years. Whole life insurance is life insurance that you have for as long as you pay the premium which is fixed as of the age you bought the policy. Also, permanent whole life insurance earns dividends and builds up a cash value in addition to the face value of the policy.

Many consumer advocates including Suze Orman feel strongly that whole life insurance is inefficient for retirement planning and for savings. These folks highly recommend term insurance. Orman also has often said that when planning for your family’s needs in case you pass away, you should follow her rule of 20: purchase term life insurance that is 20 times your annual salary. So, a breadwinner earning $50,000 per year needs to carry life insurance with a value of one million dollars.

The difference in premiums when comparing permanent whole life insurance to term life insurance is huge. Just how huge depends on your age. One piece of advice that financial experts often tell their clients is:

"The difference between term insurance and whole life insurance is that term is bought and whole life is sold."

This is because an insurance salesperson gets as much as 80 percent of the first year premium as commission for selling you permanent life insurance. Commissions on term policies are much lower.

However, www.bettors188.com recently reported that many investors who have soured on the stock market due to the crash of 2008-2009 have purchased whole life insurance policies for investment reasons. According to the article some policies have been paying out dividends as high as 6 percent. Scism also notes that these policies have guaranteed minimum returns of 2 to 4 percent.

It is impossible for a consumer to compare permanent life insurance on their own. It is far better to talk over why you want life insurance with your personal independent insurance agent. Independent insurance agents depend on repeat business for their livelihood so they are more objective in helping you analyze which type of insurance is best for you. Also, they can explain the costs and benefits of life insurance programs called “blended life insurance” that has both term and whole life components and another whole life policy known as “universal” life insurance which is becoming increasingly more popular.