After reading Renee Christopher-McPheeter’s message to your readers regarding her “eye opening” experience in purchasing life insurance, I agree with her.
Buying life insurance is mass confusion, and I believe it is purposely designed that way by the insurance industry so they can sell whole life insurance. As Ms. McPheeter’s stated, term insurance is designed for a certain length of time. Term insurance is much cheaper than whole life, and most policies can run until one reaches 100. That should be long enough for most for us. The cost of term insurance increases each year as one grows older. The price of the whole life policy stays the same but the cost of whole life increases each year just like term. Sounds like mass confusion doesn’t it. As I said it’s designed to be confusing. How is this possible? Please be aware the cash value, which one builds up inside a whole life insurance policy, is kept by the insurance company in the event of death and the face value of the policy is paid out. For instance, if you have a $10,000 whole life policy with $5,000 cash value in it what you really have is $5,000 of insurance and $5,000 of cash value (your money). Remember the price of the whole life policy stays the same but now you only have $5,000 worth of insurance and $5,000 of your money which the insurance will keep. The true cost for your insurance just doubled. Also remember the cash value (your money) in your policy is available to you to borrow and pay interest on until you repay it. Also remember, if one dies, the company keeps the cash value. Would you put your money in a local bank if you had to pay interest on your money to take it out and if you die they keep all your money? I don’t think so, but that’s exactly how whole life policies work.
You would be much better off to buy term insurance for a lower premium, and put the amount saved into the bank. When you “vacate for a different location,” your heirs will receive the face amount of the term insurance plus what’s in your savings account. A much better deal. I hope this clears up some of the confusion.