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The need for Term Life is Real

Why the masses should instantly consider Term Life Insurance. The Best Reasons to Consider Term Life

The Life Insurance Revolution

Scott Scott , 8/17/2016
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Recently I was requested to participate in a revolution that has quietly been happening in the world of insurance.  I penned an article titled:  The Swiss Army Knife of the Financial World? The point of the article was to draw questions about the reality of Whole Life Insurance sales in today's climate.

With the changing on the times, additions of all sorts of tax deferred and tax free investment accounts, whole life insurance no longer seems like the best life insurance option for most people.  Yes, people that need Final Expense and or do not qualify for term life are still good candidates.   And yes there are a few other solid candidates for whole life such as when setting up a Special Needs Trust and other special situations.

Clearly Whole Life, Universal Life, and to a lower extent Variable Life can make solid sense for the extremely wealthy; But Term Life Insurance is clearly the solution for the vast majority of Americans.

Don't believe me, run the numbers yourself.     Look at the guaranteed chart of returns from a whole life policy and compare this to even just the returns of a FDIC Insured Savings Account (such as Ally Bank) in conjunction with a 20 or 30 year term policy.   Keep in mind that this is probably one of the weaker comparisons against whole life one CAN make.   If this does not turn you off, then run the much tougher comparison.

Depositing the money in a Roth IRA (either through the typical method or through the legal backdoor method.), purchasing a 20/30 year term life policy vs a similar amount in a Whole Life plan. Caution: See a financial adviser when making any changes.   What almost everybody sees is that there is just NO way a whole life plan can compete.  Yet Insurance Agents on a daily basis are pushing whole life as a retirement product?

Often loosing the battle of selling it as a retirement plan, often agents are sometimes pushing it as a vehicle for college savings account.   Really - this is a better idea than a tax free investment in a 529 plan?

With the numbers so in favor of Term Life as the basic starter option, than why is Whole Life pitched by so many insurance agent?

I can't really say, perhaps it is the sales pressure, the commission, or them just not knowing.  Regardless, Insurance Agents need to run the numbers themselves and make their own decisions.   One thing is for sure, their seems to be a partisan divide in the Insurance Community about the usefulness of Whole Life Insurance.
People pushing Term are starting to become called Termites by the WholeLifers.

Do I personally, want Life Insurance for my whole life?  Not if I live the long life I imagine.  Ill retire with tax free funds in my Roth 401K, Roth IRA and pay for my kids college in a Tax Free 529 plan.   My house will be paid off, early... with the extra money I saved with Term Life.  Lastly I will have a significant amount of savings set aside in a standard taxable investment account, which will be available for me to use in the event of an emergency or an early retirement.   This money may in deed be taxable but at least it will clearly be mine and I will not need to take a loan out to get access to it.

If the term "termites" was meant as a derogatory phrase, Ill take it.  Selling Term Life Insurance is the right decision and allows me to sleep pretty comfortably at night.