Term vs Whole life insurance | life insurance Explained

 Insurance and whole life insurance. 

So insurance is one of those things in life that is very necessary because, well, life happens. Go for a bike ride and crash. Whiteboard Finance is over, although I'd like to think my audience will create a Facebook memorial page but we all know that probably won't happen, so the truth is we'll all need it eventually.

Making fifty grand a year, you should generally have something that covers about 11:50 times your annual salary. So in case of your death, your spouse or any of your beneficiaries can take the lump sum invested in the market. point or something else, throughout our lives. So here I go with the difference between term and whole life insurance. However, before I get into it, I'm actually excited to announce that I've decided to sponsor this one.

So it is also good for repayment and by that what I mean is the premiums are much lower than whole life insurance. So you can actually use it to lean into debt and pay off your debt and get out of debt, right.It stays within an organization and they leave. Whether the institution or the beneficiary, the insurance policy will realize. So let's talk about the disadvantages of term life insurance. So this is one of the biggest shots.

A 30-year-old gets a 30-year policy and still needs it, say he's still in debt or something. His financial situation is not good and he still needs to work. If he were to renew the policy at age 60, it would obviously be much more expensive than at age 30.

ok It's exactly what it sounds like. This is the amount paid to you after your death. So let's call it 500 grand for easy numbers. And finally, this is the kicker. That is what separates the whole. With these salespeople, sales agents or insurance agents try to sell you, it's like the savings component or the investment component of a whole life cash value policy, right. So when you

This forces you to believe that very little is going towards cash value. Most of these premiums go towards the salesperson's commission. So that's why they always try to stress whole vs term. And they are, as I said, actually going to fuel or fund the death benefit. ok So you would be led to believe that if you have a cash value, whole life insurance policy, you are going to make 1011% of the market.It will be your money, right? Actually, this is wrong. After all fees and all things are said and done, you typically average 1.5% on a whole life policy. OK, let me repeat that.

2% After you've been paying into this death benefit for 5 to 10 years, that cash value starts building up more based on the premiums you're funding it with. Okay, so beneficiaries, here's the big kicker. The cash value that you've built up over this whole time, the thing that you've been selling this whole time goes away, right? It is absorbed by life insurance companies. Believe it or not, this does not go to your beneficiaries.

This forces you to believe that very little is going towards cash value. Most of these premiums go towards the salesperson's commission. So that's why they always try to stress whole vs term

No cash value. It goes back to the insurance company. So all that means is that you save this $93.00 difference between the seven and the hundred, that's the $93 difference that you're saving month after month. This goes back to whoever your supplier is, right? The other thing is that with whole life insurance, you have no choice in how the life insurance company applies the premium. Okay, so when we talked about the premium for the first 5-10 years.

So decided. The thing is, the only way you get this money here is the cash value is to cancel the policy and surrender your policy so you lose the death benefit and then they cut you a check.

So you lose your insurance. That's the whole point of getting insurance, just to get your money back. It grew at a very poor rate, ranging from 1.5 to 2.2%. So it seems I'm talking a lot about whole life principles. There are several different benefits. The portion is not taxable as long as it does not exceed the total premium paid by you, OK. So if you pay, let's say 100 grand in premium, as long as this cash value is not above 100 grand, it is not taxable on top of that.

Just a quick recap of the pros of whole life insurance and then we'll do a quick recap of the cons and then I'll do a dollar to dollar comparison if you want. Hence the benefits of whole life insurance. Year 2030, as we say in the policy term, well, it is covered till the day of your death, isn't it. They can do this because again your family members aren't getting that cash value when you're gone that goes back into the insurance.

And the cash value is also non-taxable and you can actually take a loan against that cash value if you want. So we talk about non-taxable as long as it exceeds the amount owed against it.

I take out a loan against your cash value policy which is like going to a middle class payday lender. So if your cash value policy is the same, let's say it's 50 grand, if you take out a loan against it to cash out, you're paying a percentage. You're basically going to a loan shark, right? You are paying a percentage on your own money. Does it make sense? You save and save and contribute that fat premium every month.

ok So if it's a restaurant, I give it a $4 sign. After that it is very flexible. Again, we talked about not being able to choose where those premiums go. Again, this covers commission fees. Simulation is slow. Remember for the first five to 10 years, it's going towards the death benefit, not the cash value. And finally, the big kicker that I've mentioned a few times now is that the cash doesn't go to your family.