Should I buy term and invest the difference?

The concept of buying term insurance and investing the difference was a seemingly well-intentioned idea. What contributed to the popularity of this idea were the sweeping claims and generalizations made by mainstream media financial gurus who suggested that term insurance was better than whole life insurance. But now in searching for confirmation of its effectiveness over a period of 20 years, there has not been much available data to prove that this concept is a better strategy or that it is even effective.  There is even some data which indicates that most people don’t invest the difference after buying term and the money is not deployed to achieve financial goals.

So why buy term insurance? It is affordable and coverage is available in 10, 20, and 30-year durations, which means it runs out eventually and/or becomes less affordable.  Buying term insurance can be a great alternative to whole life insurance for protecting your family and covering your home especially if you are protecting a younger family who might have a brand new mortgage and cannot afford a whole life insurance policy.

Today, most term insurance policies offer similar long-term care & living benefits options as whole life policy.  Though your potential access to this money varies on a % scale from company to company must read between the lines to know how much you can get.
Now let’s look into whole life insurance.  Whole life or permanent insurance is coverage throughout your entire lifetime.  Although these policies are available at a higher price point than term life insurance, whole life insurance offers a fixed and predictable cost of coverage and a limited period of premium payments .  Inside these policies, cash value grows tax-free and is accessible tax free for any needs (education, cars, business capital, etc.) that may arise without the waiting periods and requirements that you would normally be subject to if you were to apply for a bank loan. In addition to these benefits,  a whole life insurance policy offers living benefit or long-term care.
Another major benefit of a whole life insurance is a game-changing concept known as “being your own banker”. Successful implementation of this concept requires the following:

  1.  A properly designed whole life insurance policy
  2. The whole life policy must be issued by a mutual life insurance company
  3. Non-direct recognition of policy loans

For more information about the power of whole life insurance and if it would be appropriate for your goals and needs, feel free to schedule a free session with us.

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