Term Life Insurance vs. Whole Life Insurance

The other day at work we had a guy who works for the financial company that handles our 401k come in and give a little talk.  I’m generally not very interested in what these guys have to say because they are essentially doing nothing more than trying to sell their financial services.  I’m sure they are more than happy to handle the account of a company that will allow them to come in a couple of times a year and pitch to their employees.  But, they bought lunch for anybody who was willing to come to their little talk, so I was obligated to go–cheap bastard that I am.

As expected, the guy was very soon trying to sell insurance.  I expected that, but what really surprised me was that he was pitching his insurance products for the EXACT wrong reasons.  According to him, the purpose of whole life insurance is to create a replacement for your income, while term life insurance was there to pay off your depts when you die.  In fact, it is the opposite.  Unless of course you plan on dying old, in debt, with a negative net worth.

Whole life insurance is an absolutely horrible product that no one should buy.  That’s right…no one!  Level term life insurance is unbelievably cheap in comparison, and if one simply saved the difference of the premiums of the two for 15 to 20 years in an index fund there would be no need for insurance at the end of the term of the insurance.

Term insurance can be used to replace your income until you have saved up so much money that it doesn’t matter.  Anyone who has lived a full life and has been financially responsible should be able to die without the need of life insurance.  The only excuse you’d have is if you didn’t know any better.

But you just read this right?  Now you know better!

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