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"Paid Up" Whole life Insurance

I am planning to buy a 100K whole life insurance and am confused by the options. One option is to purchase the insurance with a fixed premium for the 15-years and the insurance will be "guaranteed" to be paid-up at the end of the 15th year. Other option is standard whole life insurance, where I pay a fixed premium and the "hope" is that the policy will hopefully (depending on the dividend return rate) paid-up at the end of the 15th year. The premium for the second option (standard life insurance) is almost half as that of the guaranteed paid-upn policy. It almost seems that the guaranteed paid-up is a better option as I do not have to worry about the rate of returns and will be releieved from any payment responsibilities after the 15th year. Meanwhile, the standard whole life does have almost half premium (fixed for the lifetime of the policy). However, I think there is more to this equation than I am understanding.... Any help will be greatly appreciated. Thanks much in advance.

Olivia

Reply to
olivia
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No, there really isn't more to this equation. Do you want to pay more for reduced risk, or pay less for increased risk? If you took the standard policy for half-premium, would you put the difference into a

15-year investment, or just spend it?

The main problem with whole life is that, as a bundled product (insurance plus investment plus tax treatment), it is harder to compare apples-to-apples with separate products.

More important might be your choice of whole life vs. term life. If your beneficaries include young children with no other source of support, you probably want to load up on relatively cheap term life until they are close to adulthood. This doesn't preclude a complementary whole life policy, but I would think of it more as diversificaton than the primary way of meeting my needs.

-Mark Bole

Reply to
Mark Bole

I have to take issue with the above reference to the Whole Life Policy being a bundled product of Insurance, plus investment.

There is NO Investment offered in Traditional Whole Life. The investment that occurs is done BY the Company, for the benefit OF THE COMPANY. The contract offers a GUARANTEED interest to be earned on the Cash Value of the contract, which is REQUIRED by LAW, for the SOLE PURPOSE of guaranteeing that there will be sufficient dollars in the company coffers to pay the Face Amount upon YOUR Death.

Anyone who purchases a Whole Life contract as an "investment tool" is being mislead.There are MANY better vehicles that can be used for that purpose.

Any Life Insurance should be purchased to fill an INSURANCE NEED. If per chance that NEED is dissipated over time, then ANY Permanent policy's Cash Value may turn out to be the best investment made ! ! ! ! !

Reply to
Cal

Whole life, universal life, guaranteed life, whatever you want to call it, clearly there is an investment component. I get an annual statement from the policy I bought twenty years ago which shows me exactly how much interest I earned the past year. At present, my interest earnings meet or exceed my premium payments plus costs, but that is not necessarily true of past or future periods.

What do you mean by "dissipated [sic] over time"? Is there an investment component?

-Mark Bole

Reply to
Mark Bole

What you are seeing is the Total Value of the Cash Value Account. It includes a portion of the interest that was earned the company, that has been applied to YOUR contracts C/V. That Cash Value does NOT (and I repeat) DOES NOT belong to YOU. It is the property of the Company, and it IS required to REMAIN in the contract, to offset the cost of the payment of the Face Amount of the contract.

You seem to be confused with the fact that in the event that Y O U decide to SURRENDER the contract, (give up the Face Value Benefit), then the C/V account, no longer being REQUIRED, is RETURNED to YOU.

In the meantime, YOU can ask for a LOAN, from the COMPANY (which is guarranteed), using that same Cash Value as COLLATERAL........

If it is a form or Universal Life (as opposed to W/L), then you can WITHDRAW money from the account, which will REDUCE the FACE VALUE (read Death Benefit) by that same amount. So in effect you are taking a portion of your Death Benefit while alive.

I used that word to signify that you NO LONGER HAVE THAT NEED. There was NO reference to investment.

Cal Lester CLU

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Reply to
Cal

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