Term or Whole Life Insurance?

[momto2Cs]

Which really makes sense for a couple in their 40s? I have some life insurance through work, but dh and I are looking (at long last) into actual policies for ourselves, and I am totally confused as to which to go with. Any thoughts?

[Mrs Mungo]

We have 30 year term.

[Bootsie]

Term life insurance is generally cheaper.  Some things to consider are:  Why are you wanting life insurance and how long will you have that need?  (e.g. to fund the kids' education if both of us should die--and I expect that need to end within 15 years) and What are the other sources of financing that need should death occur?  (e.g. sell home that is owned; retirement savings, etc.)

[Lara in Colo]

I am of the opinion you need a small whole life policy for the stuff that never changes (burial or a special needs child's care) but for things that change (money to raise a child to adulthood lessens every year they approach adulthood) then term.

 

I also have whole life for children's policys-- they are cheap and will be paid off by the time the child is 20 or so and cover them for their entire lives should they become uninsurable

 

[zoobie]

Whole is usually purchased as part of estate planning, to pay the taxes or have liquid cash available immediately. Right now I think an estate needs to be over $5 million to be subject to taxes, or somewhere around that mark. If you work with a financial planner, s/he can usually advise you what you should be doing. We have a separate planner and an insurance agent, so we're not paying for (potentially) a sales pitch.

[Ottakee]

I was always told term as it was cheaper and even though whole life you get a small % back you are much better off buying term life insurance and investing the rest in a CD, stocks, bonds, or basically anything else and you will come out ahead and can use that money for anything.

[AmyontheFarm]

We actually have some of both.  Hubby bought some whole life when he was 25 for both of us.  We were planning on two kids.  Fast forward 13 years and we bought some extra term insurance because we wanted to make sure there would be funds to at least put the kids in private school or homeschool them with tutors until our now youngest is at college age. 

[Crimson Wife]

My dad worked in finance and he advised us years ago that it only made sense to buy whole life in certain circumstances and none of those applied to us at the time, so we bought term policies. I should ask him again what those circumstances were to make sure they still don't apply.

[ZooRho]

You need to find a good financial planner that can look at your financial needs now and in the future to make the best decision for you.

 

[idnib]

Term.

[Stellalarella]

Well, if you are elderly and have purchased Whole Life that has accumulated cash value (like over a couple thousand or so), and you find yourself in a position where you need to qualify for Medicaid, then you can just kiss that Whole Life policy good-bye.  

 

Basically, you have to irrevocably sign over the cash value to a funeral home to pay for future burial expenses, or you have to use it to pay for your nursing home costs so that your assets will get low enough to qualify for medicaid.  Medicaid sees it as an asset, and they will come and get it.

 

 

 

 

 

 

[amyrobynne]

We got 20 year term policies on each of us about 5 years ago for the purpose of being able to take care of the kids if they aren't college age yet. My husband's is enough that we could pay off the mortgage and I could work 1/2 time and live partly off the interest. Mine is enough for daycare and some education costs.

[Stayseeliz]

My husband is an insurance agent. He deals with this a lot. Term is the way to go until the kids can take care of themselves. Have enough that if something happened to you your children would be raised and educated in the way you'd like them to be. You only need enough whole life to cover burial expenses after that.

[G5052]

Term because it is much cheaper.  DH has a much larger policy because we couldn't make it on my income alone.  My policies would have covered private school and household help until the DC are done with high school, and household help until they are done with college because they're headed towards living at home and going to college.  Now that they are in high school, DH has indicated that he probably would either reduce his hours or retire early and finish them at home if I was gone.  He would need household help though.  Because I am self-employed, mine were bought through alumni associations, which was much cheaper than going through our insurance agent or in the open market.  I had to have a physical for both of them BTW, so keep that in mind.  At the last one, the nurse commented that weight is the #1 reason why people are denied or put in a more expensive category.  It is OK if you are overweight per the BMI categories, but not if you are more than that (i.e. obese).

[Mary in VA]

Well, if you are elderly and have purchased Whole Life that has accumulated cash value (like over a couple thousand or so), and you find yourself in a position where you need to qualify for Medicaid, then you can just kiss that Whole Life policy good-bye.  

 

Basically, you have to irrevocably sign over the cash value to a funeral home to pay for future burial expenses, or you have to use it to pay for your nursing home costs so that your assets will get low enough to qualify for medicaid.  Medicaid sees it as an asset, and they will come and get it.

 

But that's true of any assets above the limit put by Medicaid.  So if you have stocks, or savings, or mutual funds, they also will have to be spent to qualify for Medicaid.  I don't think we shouldn't save or invest because we might need to spend it for healthcare in our later years.  Isn't that a reason to save? We have long term health insurance in addition to our life insurance.  I'd rather Medicaid be my last choice when I'm in my later years; a fallback position if I need it.  I had my mother's durable power of attorney and was intimately involved with her finances and health care the last years of her life.  I watched her Medicare and long term care insurance be depleted, then her bank accounts after pre-paying her funeral costs, and then she was on Medicaid. I didn't care that there was nothing left when she died, but I know Medicaid got her the lowest care in the nursing home.  It was a very sad and difficult time.  I think it was the most stressful time of my life. Both my in-laws spent time in nursing homes before they passed, but didn't deplete their long term care insurance.  Our parents' end of life experiences definitely made us want to buy long term care insurance.  They odds are not in our favor and we hope it will help our children avoid the stress. 

[ThatHomeschoolDad]

We have term level 70, meaning the premium stays the same until 70. My mom had a small whole life that she liked because she could borrow against it at a low rate. We already get that with DW's teacher pension, so no need. I suspect a home equity line might serve the same purpose. If the cash option/borrowing thing is the only real appeal of whole, stick to term. I think agents get bigger commissions on whole.