Which Do I Buy ? Term or Cash Value Insurance

I am often asked which is better. Term or whole life. My answer is always the same.

Tell me when you will die and I can tell you which is the best plan for you. But, of course you cannot tell me this. If you could you would not be able to buy a policy from any insurance company because They would not issue you a policy knowing that your timeline was finite. It is because of this uncertainty of life that we desire to buy life insurance to begin with. The best plan is the one that is in force at the time of your death. For example : lt’s say you are considering a $100,000 20 year term policy at a premium of $20 per month or a $100,000 cash value policy at a premium of $80 per month. It becomes rather obvious that should you death occur with that 20 year period then you would have paid less for the insurance. Let’s assume for a moment that your death did not occur and you renewed this 20 year term policy for another 20 years at a premium now of $60 per month. you have not died with this 20 year period either. Now your term policy needs to be renewed again but the renewal premium is now $300 per month and you cannot or are not willing to afford this so you allow the policy to lapse. All you have for the past 40 years of paying for this insurance is receipts totalling $16,800. 3 months later you die suddenly of a heart attack. Nothing is paid.

Using the above senario if you had purchased the cash value policy your premiums would not have changed during this time frame. You would not have had to make additional buying decisions. When the 40th year ended you simply continued paying your $80 premium. At your death you would have invested $38,640 but your beneficiary would have received the $100,000 death benefit. if you had elected to terminate the cash value policy at the end of year 40 you would have received the cash value of  $39,000.

As previously stated it all depends on when you will die.