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Term Life vs Whole life insurance: Suze Orman's Stance
Finance / Investing Author: Evan Povich
Term Life vs Whole life insurance: Suze Orman's Stance
Suze Orman has the lowdown when it comes to Term Life vs Whole Life Insurance. Do you watch the Suze Orman Show? If so, you might have an idea of Suze's stance on Term Life vs Whole life insurance. Being a licensed life insurance agent herself in all states except Hawaii she has a very good idea of what she is talking about......and she's not there to take your money either.

Here is a conversation with a guest calling in which will shed some light on her thoughts on Term Life Insurance vs Whole Life Insurance.

Deepak: Hi Suze! We love your show. My wife and I watch it every week. It's such an honor to talk to you.

Suze Orman: Oh. Thank you! What can I do for you?

Deepak: Well Suze, a friend has recommended that we buy a whole life insurance policy as an investment.

Suze Orman: Stop! Stop! There isn't a friend in the world. Not one friend in the world that if it is a true friend that would recommend you buy a whole life insurance policy. A snook, somebody who wants to take you, somebody who in my opinion is not a friend maybe. But there is no way a friend would do it. Does that answer your question already?

Deepak: It gives me a good sense of what you are thinking.

Suze Orman: Alright, how old are you though Deepak?

Deepak: 31

Suze Orman: How much of an insurance policy? What was the death benefit?

Deepak: Um, I think 50...$500,000.

Suze Orman: $500,000? Alright how much was it per year?

Deepak: Fourteen

Suze Orman: Fourteen Hundred?

Deepak: $14,000

Suze Orman: Fourteen Thousand dollars a year?!?!

Deepak: ...and the idea was largely use it as an investment to put money away to save on taxes.

Suze Orman: Ok, just out of curiousity...made my nose itch. I have to tell you whenever my nose starts to run I feel like Samantha...where I wanna...you know on Bewitched? I don't know if you were even born back then where I want to twinkle my little and get that guy out or whoever that friend is and off the face of this Earth.Listen, insurance is not an investment. Does this friend of yours happen to sell whole life insurance?

Deepak: Boy it seems like you're reading my mind here.

Suze Orman: Oh sweetheart that's not a friend that a sn....I don't even know %#*#)$! You know, it gives me dandruff I think. Listen, you can get a half a million dollar term policy for 20 years at your age for approximately $25 or $30 per month. OK? That's $300 per year. Now, if you really want to make an investment you could take all those other $1000s of dollars and take that money and invest it where? In a retirement account, a piece of real estate, in stocks, bonds, whatever it may be where it absolutely makes sense to you.

Do you know that I am a licensed insurance agent? A life insurance agent and I am licensed in every single state in the United States except Hawaii because I don't want to go to Hawaii right now to take the exam.

So I have been licensed everywhere. Very few people can tell you that they have that type of insurance background. I can tell you that if you put $14,000 into a whole life insurance policy, my friend, how much commission do you think I or your friend would make off of that $14,000 deposit?

Deepak: Like atleast a thousand or two.

Suze Orman: Oh, are you sitting down?

Deepak: I am.

Suze Orman: Are you? What don't you try about $10,000. Ok?

Deepak: Wow.

Suze Orman: So yeah, he could buy you...just forget it. Here's the bottom line. Don't do it. Do what I said. Buy a term insurance policy. You can get a half million dollars that way. $300 a year and tell your friend why doesn't he go and make some real enemies.


 
Why doesn't Suze Orman like Whole Life Insurance (also known as Permanent Life Insurance / Variable Life / Universal Life)?

For the amount of death benefit one can purchase Whole Life, as life insurance is way overpriced.

$500,000 worth of Whole Life Coverage = $14,000 per year
$500,000 worth of Term Coverage = $300 per year

This a difference of $13,700 that you pay extra just to get Whole Life Coverage.

What is the difference between Term Life vs Whole Life Insurance?

Term Insurance is for a set term or time period from 1 year and usually up to 30 years.

Whole Life is life coverage for the rest of your life PLUS an "investment portion" held by the life ins company.

With Term Coverage there is no investment portion. Like car insurance it is pure insurance. That's it.

It does not make sense to try to combine life coverage with an investment but with whole life coverage it is sold as such. Why would insurers combine insurance and investing?

Permanent Coverage or Whole Life means exactly that. You are paying on premiums for the rest of your life.

1st thing's first. What do you need life coverage for?

It is for protecting your family that depends on you for income. If something happened to that income the family could no longer survive. If something happened to the breadwinner then the life insurance is there to protect the family financially.

After the children grow up and start working to make their own income they no longer need to depend on the parents and there won't be much need for that type of coverage anymore.

So why keep paying premiums for the rest of your life?

Do not fall into trap of making anyone rich by buying life insurance. It is not likely to happen but it is important to have. Your money is just being wasted. The right thing to do is to purchase term life coverage ONLY for the time period you need it for.

Keep in mind that the older you are the more expensive the premiums are going to be. Only get it when you need it.

Invest your money or just save it.

But what about the investment portion when you buy whole life insurance?

The agent will tell you that it is a benefit that will force you to save for retirement, a medical emergency, children's college or for education. You just have to request to borrow that money and later pay interest on it.

What is the reason for borrowing the money? It's not my own money?

It is not your money when you have an active policy. It stays with the insurer and you can only borrow it but you must pay it back. The investment is called "CASH VALUE" which sounds incredible?

Worst thing is that you have NO CASH VALUE from paying premiums for your first year. No doubt about it. You get nothing the 1st year of paying premiums. Majority of your 1st year premium payment goes to your life insurance agent. Is it really your money? Not really. Mainly their money.

BOTTOM LINE? Get Term Life Coverage when you need it (that is when you have children)

So when it comes to Term Life vs Whole Life Insurance make sure you take the money that you would save and put it into a retirement account which YOU CONTROL 100%. Make sure you have FULL CONTROL of your money to invest or save it anywhere you like. Keep a good distance between you and Variable Universal / Permanent / Whole Life / Universal Life Insurance or any life insurance that has you placing money into an investment as part of your policy.
Total Views: 667 | Approx word count : 1322 | 08/17/2010
Writers Resource: BaseQuotes.com is the online insurance quotes comparison site offering insurance rate comparison for all types of insurance: Instant Life Insurance, Instant Auto insurance, Health Insurance. Founded by former insurance agents who believed that the only way to get the instant life insurance rate for the customer was to build an insurance quote comparison site for customers and present multiple insurance quotes.





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