WGN-TV Show Notes â€“ August 31, 2004
If you’re married, or have a family, life insurance is one of those things you have to have to protect the ones you love. But that doesn’t mean you have to pay through the nose for it.
If you look at the big world of life insurance, you might think you have to sort through a myriad of options. While there are about 1,500 companies that will sell you a life insurance policy, the truth is, it all boils down to two kinds: whole life and term life.
Whole life insurance, which is also known as universal life or universal variable life insurance is loved particularly by the agents who sell it. Why? The agent who sells it to you gets a huge commission — as much as one and a half times your annual premium.
The big selling point of a whole life policy is that you’re paying more than the actual cost of the insurance, so you’re saving money which gets invested for you. That’s known as the cash value part of the policy. One pitch you might hear is that you’re saving so much money that your premium will eventually vanish — but buyer beware — that promise isn’t guaranteed and may not happen.
To make whole life policies work, you should plan to keep them a minimum of 20 to 30 years. But the kicker is, you’re buying life insurance to protect the economic stability of those you love. Whole life policies are so expensive, the same premium will give you a much smaller death benefit than with term life, although you will also get any cash value that has built up.
Term life insurance works differently than whole life policies. For starters, you buy a new policy each year. If the policyholder dies in that time, the beneficiaries collect. If that seems like too much work, you can buy a policy that will allow you to have the same premium for 10, 20 or even 30 years which is known as a level load.
In other words, you’ll pay the same amount for the policy every year over the next 25 years. The good news for consumers is that due to the Internet and competition, term life insurance is 50 percent cheaper to buy than it was 10 years ago. A healthy 40-year-old non-smoking male can pay $40 per month and get term life policy that would pay a half million dollars when he died.
If you’re going to buy term life insurance, the place to go is the Internet. There, the top 300 or so companies compete for your business directly. Check out these sites, which are among the top-rated for term life insurance sales: www.accuquote.com, www.insurance.com, www.term4sale.com, and www.masterquote.com. I bought my last life insurance policy through one of these sites.
For more information, check out the Insurance Information Institute’s website.
Copyright Â© 2004, WGN-TV
Aug. 31, 2004.