| Buying Tips:
Life Insurance
Whole Life vs. Term Insurance
Whole life costs more (4- 6 times more usually than term).
The reason is that you pay for your insurance coverage, plus
you pay a savings component. Eventually (4 – 7 years
into the policy), your policy starts to build cash value.
It offers flexibility since you can take loans against the
policy, you can buy a paid off term policy, or simply cash
out, depending on the contract. |
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Is Whole Life Worth the extra premium?
At Henrikson Hoppens Agency, we generally council that it is not.
The savings that you get are hardly ever as great as what you can
get in the open market or using a competent financial advisor (currently
Life Contracts are only guaranteeing between 3-5% return). We believe
that you buy only the protection that you need, for a stated period
of time with a term policy (increments are usually 10, 20 or 30
years). When a term policy expires you have no insurance.
When might you want Whole Life?
We believe only if you are very wealthy and want to fund your estate
taxes, or if you know when you are younger that you will eventually
be uninsurable due to health reasons.
Our suggested long-term strategy:
- Buy life insurance as soon as you have dependents to protect
(i.e. buy a house, have a child, etc.).
- Buy enough insurance to comfortably pay off debts, provide college
opportunity and child rearing expenses for your kids, and as much
for the spouse to raise the family without money worries as possible
- Save for your retirement and don’t have more debt than
you can comfortably handle without saving
- Fund at least a 3 month cash emergency fund, in case of employment
problems
- Fund a Roth IRA for yourself, if your income qualifies.
If you follow the above strategy, you will
be able to use term life as it was intended, which is a vehicle
to cover you while you have dependents. Once your mortgage is paid
off, your kids are grown and your retirement is funded, you do not
need life insurance payments in your life!
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